Mike Shedlock

Every day, the cost of a plane ticket out of Venezuela goes up. That assumes you can get a plane ticket, and you probably cannot, even if you booked three months ago. Delta Air Lines, American Airlines, and Lufthansa cut the number of flights. Air Canada stopped all service.

Economy class tickets to New York city cost as much as $3,000, if you can get them. And you probably can't. Instead, people take five-day rides to Lima, Peru as a means of escape. And that takes money as well.

The result is best described as Trapped in Venezuela

With the cash-strapped government holding back on releasing $3.8 billion in airline-ticket revenue because of strict currency controls, carriers have slashed service to Venezuela by half since January, adding another layer of frustration to daily life here.

The lack of flights is complicating family vacations, business trips and the evacuation plans of Venezuelans who want to leave the country, which is whipsawed by 60% inflation, crime, food shortages and diminishing job prospects. Steve H. Hanke, a Johns Hopkins University economics professor, says Venezuela tops his so-called "misery index," which takes into account inflation, unemployment, economic stagnation and other factors in 89 countries.

"In Venezuela, you have the sensation that you can't leave," says Virginia Hernández, a Venezuelan who is studying orthodontics in Argentina. During a recent trip to see family in Caracas, she wound up marooned. The Venezuelan state-run carrier Conviasa had no plane available to fly its scheduled Caracas-to-Buenos Aires route, and other airlines servicing Argentina had sold out their flights.

The Caracas polling company Datanalisis found that one in 10 citizens—most of them middle- and upper-class Venezuelans between 18 and 35—are seeking to leave the country, more than double the number who sought to abandon it in 2002, which was marked by an unsuccessful coup attempt against then President Hugo Chavez and a paralyzing oil strike.

Travel agents are swamped with requests but turn customers away because there are no tickets to sell. Some travelers are left taking the bus, with trips to Lima, Peru, a five-day journey, now packed with middle-class Venezuelans who used to fly.

Many Venezuelans who want to leave the country simply can't. Tickets for short flights to other transit hubs in the region, such as Panama City or Bogotá, are difficult to come by.

On top of that, stringent currency controls mean that Venezuelans have access to only $400 a year, making it nearly impossible to pay the high prices airlines demand for tickets on the Web.

"Just about all of my friends want to get out of here," said Roberto Villarroel, a 19-year-old university student who wants to move to Argentina. "I'm still looking for a ticket, though. The prices go up every day."

Some Venezuelans, particularly those who are affluent, are paying whatever price is required to leave.

Rafael Larrazabal, a 44-year-old businessman, could find only first-class tickets on Delta, and he purchased them months in advance. On a recent day, he, his wife and two young children boarded a flight to Atlanta and then Berlin, where they plan to start anew.

"What's the future here?" remarked Mr. Larrazabal at a tearful family send-off. "The country is not functioning. There's crime. I said, 'Let me see if I can get out of here alive and then see what happens.'"
Hyperinflation, Venezuela Style

That's hyperinflation folks, a complete collapse of faith in currency.

People think it's going to happen to the US. They are crazy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.
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