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VED-dependent households have food consumption deficits

  • Remote Monitoring Report
  • Venezuela
  • August 2023
VED-dependent households have food consumption deficits

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  • Key Messages
  • Projected Outlook through January 2024
  • Key Messages
    • Informal dollarization of the Venezuelan economy remains key to avoiding worse levels of acute food insecurity for a large part of the population. However, high prices of food and other basic needs continue causing most poor households to struggle in order to meet adequate food consumption, thereby limiting the quality of their diet. More than 20 percent of the population in the Capital District and many states is estimated to experience Stressed (IPC Phase 2) or worse levels of acute food insecurity. 
    • The poorest households whose only source of income is in local currency (VED) will continue to experience gaps in their consumption or apply coping strategies to meet their food needs. The continued depreciation of the VED against the USD restricts their already limited purchasing power, especially for those whose access to the Social Protection Program benefits and international remittances is infrequent. These households, which are usually concentrated in peri-urban areas of the Capital District and the states bordering Colombia, are classified in Crisis (IPC Phase 3). Seasonal improvements in food availability from local harvests at the end of the year will benefit the rural population, slightly decreasing the number of households in Crisis (IPC Phase 3), while the vast majority in urban and peri-urban areas will not benefit directly. 
    • In July, the monthly cost of the simple diet and the diversified diet per person/day, both in VED and USD, remained stable compared to the previous five months. However, the cost of both diets remains approximately 400 percent higher in VED than in July 2022. Meanwhile, the cost in USD remained stable over the same period. During the rest of 2023, VED food prices are expected to remain above 2022 levels and above the five-year average. Price increases, especially of maize flour, rice, and pasta, will start in December due to high seasonal demand together with a seasonal rise in purchasing power. Local currency depreciation, inflation, and exchange rate fluctuations could further affect VED price variations.
    • During the outlook period, below-average rainfall and above-average temperatures will negatively affect soil moisture conditions for crop development. Although large- and medium-scale producers are expected to manage any effects thanks to irrigation systems, smallholder farmers are likely to see reduced crop yields. Some crops will be more affected than others, especially rice. Areas of concern for these impacts include the states bordering Colombia – such as Zulia, Táchira, and Apure – and crop-producing areas – such as Sucre, Barinas, Portuguesa, Cojedes, Lara, Mérida, and Guárico. However, since most of Venezuela's food supply is imported, the impacts on acute food insecurity will be highly localized.
    AreaCurrent anomaliesProjected anomalies
    • Generally favorable conditions have allowed local maize production to continue to recover, despite some erratic rainfall in production areas such as Sucre, Portuguesa, Lara, Anzoátegui, Aragua, and Guárico. 
    • In July, when prices usually show increases, high food prices for maize flour, pasta, cassava, and proteins remained stable in VED. At the same time, prices were stable or slightly lower in USD compared to the previous month. However, despite the recent harvest in June, the price of rice, taro, and squash increased up to 10 percent in VED due to excess rainfall that hindered the timely harvesting of crops. Prices continue to be higher than those in 2022 and pre-crisis levels, especially in VED. However, the price of maize flour in USD decreased 8.6 percent and the prices of cassava and eggs remained stable compared to July 2022. 
    • The cost in VED of the products in a minimum diet (carbohydrates and oil) continues to increase with respect to 2022, while remaining stable in USD. The cost in both currencies remained stable compared to last month. 
    • As of July, the price of diesel for the manufacturing industry was adjusted by the government of Venezuela, currently 3 VED/liter (0.10 USD/liter), according to Official Gazette No. 42,676. 
    • According to the USGS, below-average rainfall and above-average temperatures are expected in most of the country through the first quarter of 2024. National production is not expected to be affected due to irrigation systems. However, for the crop year 2023/2024, rice farmers expect a similar or up to 10 percent lower production than in the previous crop year, mainly due to reduced yields from irregular rainfall, shifting to other agricultural activities, and high maintenance costs. The states expected to be affected by irregular weather are Sucre, Barinas, and Portuguesa. 
    • The value of the local currency will progressively decrease over the outlook period. It will have halved its value against the USD between August 2023 and March 2024 due to the seasonal increase in public spending and the need for a greater influx of local currency.
    • In addition to the harvest of local products, markets will remain supplied due to stable pasta imports and expected increases in imported rice (19 percent) and wheat (8.3 percent) in the 2023/24 marketing year compared to the previous year. 
    • Maize, rice, and pasta flour prices will tend to increase seasonally from December 2023 to above the two-year average, but will remain stable for the rest of the period. The growth rate of inflation will exceed the projected increases in national maize production alongside stable imports. 
    • Between October and February, the monthly inflation rate is expected to remain between 8 and 20 percent, less than in 2022 and the beginning of 2023. Increased public spending to pay double salaries and Sistema de la Patria vouchers puts pressure on generating more local currency, causing it to lose value. Year-on-year inflation will be below 385 percent between August and January, higher than the second half of 2022, but lower than the first quarter of 2023. 

    Projected Outlook through January 2024

    Domestic and imported food supply: Markets will remain supplied throughout the outlook period. As of September, maize production will help supply markets, given it expects a 20 percent increase compared to the previous agricultural year. Rice production will be similar to last year and will cover 50 percent of national demand, according to FEVEARROZ. The harvest will improve food availability and consumption, especially for the poorest households in rural areas.

    Imports of rice and wheat will increase from the prior marketing year by 10 and 8.3 percent, respectively. Pasta will remain stable, while maize imports will drop by 11 percent due to the 19 percent increase in national production. 

    Households will depend on markets supplied with imported products through September, when the lean season ends. With below-average rainfall and above-average temperatures forecast through the first quarter of 2024 due to El Niño conditions, low soil moisture during the planting season could affect smallholder farmers who do not have irrigation systems. Medium- and large-scale producers of maize will not be affected, while rice producers expect similar harvests to 2022 or up to 10 percent below due to the high humidity requirement for this crop, according to USDA FAS. The rice-producing states that may be affected are Sucre, Barinas, Portuguesa, and Cojedes. 

    Macroeconomic context and food prices: In July, monthly inflation increased 6.2 percent due to the depreciation of the local currency against the USD, originating from the increase in public spending and the reduction in the collection of non-oil derived taxes. Public revenues continue to be exceedingly dependent on oil. However, oil production in Venezuela has continued to increase since March, showing the highest value in August 2023 (772,000 barrels/day) since April 2022, according to OPEC. However, it remains 65 percent below 2013 production. 

    Figure 1

    Cost of simple diet and diversified diet in USD and VED, May 2019 – August 2023
    Cost of simple diet and diversified diet in USD and VED, May 2019 – August 2023.

    Source: Síntesis Financiera, CENDAS, and FEWS NET calculations

    Food prices in VED increased by 5.5 percent, according to the Central Bank of Venezuela (Banco Central de Venezuela, BCV). The devaluation of the VED against the USD will continue to be affected by the need for local currency to cover public spending in view of the seasonal increase at the end of the year, the deceleration of tax revenues in non-oil related activities, and a more moderate intervention of the BCV in the foreign exchange market. The loss in value of the VED is expected to cause an increase in monthly inflation, between 8 and 20 percent from September to February, which will affect the purchasing power of the poorest households whose income is in local currency. The increase in prices and demand for products also contributes to the increase in inflation during the end-of-year period; inflation will decline slightly thereafter but will remain above last year and the five-year average. Although at least 60 percent of retail transactions are estimated to be in USD, it is expected that even food prices in USD will reach higher levels during the outlook period, especially between December and February. 

    Income sources and social protection programs: The poorest households do not have access to remittances and their income is mostly in local currency. They depend on vouchers provided by the Sistema de la Patria program. According to information on the ground, the increase in the Cesta ticket and the Bono Contra la Guerra Económica have been distributed. Household income is expected to improve between October and January as public and private sector workers receive double salaries. However, strong demand coupled with the seasonal influx of funds will cause a rise in prices. This will decrease the purchasing power of the poorest households and restrict their access to staple foods. 

    By June 2023, the average salary in the trade and services industry, which employs more than 60 percent of the workers in the Caracas Metropolitan Area, reached 161 USD per month, an increase of 13.4 percent over the previous quarter, according to an analysis carried out by the Venezuelan Finance Observatory (Observatorio Venezolano de Finanzas, OVF). However, the poorest households report an income of 50 USD/month, which is half the cost of the simple diet of grains and oil. In most households, two people work or there is more than one source of income, supplemented by the Local Committees for Production and Supply (Comités Locales de Abastecimiento y Producción, CLAP) and vouchers, allowing them to meet their basic food needs. 

    According to field information, CLAP distribution and frequency decreased at the end of 2022. Typically, households in the Capital District receive one CLAP per month, while households in the rest of the country receive one CLAP every two months. Recently, however, distributions have declined to once every three months in the eastern part of Venezuela, including Apure, Guárico, and areas along the Colombian-Venezuelan border. In recent months, the CLAP has only covered 15-18 percent of monthly kilocalorie needs for the average household, with products including maize flour, rice, oil, sugar, a variety of grains (beans or lentils), and Nutrichicha. Looking forward, though, it is expected that the typical seasonal increase in CLAP coverage will occur through the end of this year, including more regular distributions, higher kilocalorie amounts, and double CLAP distributions in the month of December, with improved frequency and quality of protein.

    Projected food security outcomes: Local currency depreciation against the USD and inflation continue to constrain the purchasing power of the poorest households, who depend on income in VED while food prices remain high. For households located in peri-urban areas of the Capital District and the border region with Colombia in particular, the poorest households whose income is in VED are unlikely to see improvement in their macroeconomic conditions as long as the VED continues to lose value. The increase in public spending for the payment of vouchers and extra year-end salaries is expected to continue, triggering the generation of local currency that further weakens its value, thereby causing inflation and higher food prices. 

    Together, vouchers, CLAP (especially in urban areas), and wages will cover the cost of the simple diet of grains and oil, fulfilling the minimum caloric requirement for the poorest rural and urban households. As a result, most Venezuelan households will remain in Stressed (IPC Phase 2) food insecurity. However, households receiving salaries in VED and without access to the social protection system and remittances, especially in the Capital District and the region bordering Colombia, will show Crisis (IPC Phase 3) outcomes through September. An improvement is expected between October and January for rural and urban households employed in the private or public sector as they will receive double salaries. However, the rise in food prices will keep their purchasing power limited. At the end of the year, remittance inflows and social programs will increase seasonally, placing most households in Stressed (IPC Phase 2). Poor households that do not have access to the monthly CLAP distribution or other sources of income and receive their salaries in VED will continue to face Crisis (IPC Phase 3) outcomes. The VED will continue to deteriorate with inflation.

    Recommended citation: FEWS NET. Venezuela Remote Monitoring Report August 2023: VED-dependent households have food consumption deficits, 2023.

    In remote monitoring, a coordinator typically works from a nearby regional office. Relying on partners for data, the coordinator uses scenario development to conduct analysis and produce monthly reports. As less data may be available, remote monitoring reports may have less detail than those from countries with FEWS NET offices. Learn more about our work here.

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