Is Venezuela on the 'Short Road to Disaster'?

/ Source: CNBC.com

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Venezuela's supermarkets are to install fingerprint scanners at the tills to stop food hoarding and panic-buying, in the latest sign that the hard-line socialist country is heading for economic ruin and further isolation from the West.

At the inauguration of a large supermarket on Saturday, President Nicolas Maduro—successor to revolutionary leader Hugo Chavez—announced that thousands of fingerprint scanners would be installed in food providers across the country in a bid to ration food.

He said that he had met with representatives from seven major supermarket chains, who had agreed "voluntarily" to install the scanners in their branches, and that these would be rolled out from Monday.

"We will establish 20,000 fingerprint readers throughout the socialist system to guarantee the people their food. And also (there) has been a meeting today with the seven major private channels and all voluntarily join the establishment of the secure supply system," said the president, in an announcement translated from Spanish on his website.

The announcement follows other recent policy moves by Maduro that have dashed hopes that a free-market element could be introduced to the economy.

The country had been showing signs of adopting a less-controlled economy. Last month, the country's foreign exchange rate system was loosened to allow bolivars to be exchanged for U.S. dollars at a rate closer to the unofficial black market one.

"There is no sign whatsoever that the policy mix is changing, so things are just going to get worse," David Rees, emerging markets economist at Capital Economics, told CNBC on Monday.

"Venezuela is on the long road—or probably the short road—to disaster."

Regarding the fingerprint scanners, Rees said: "This is something that does not work."

World's most miserable economy?

Last month, Bloomberg rated Venezuela the world's most depressing economy in its annual "misery index," which is calculated combining a country's unemployment rate and consumer price index.

Inflation is seen remaining above 60 percent this year in Venezuela, after prices rose by a staggering 64.3 percent in 2014. The International Monetary Fund sees unemployment topping 10 percent in 2015.

As a major oil producer, the country has been hit hard by low energy prices, and is also at risk of a defaulting on its sovereign debt this year.

More from CNBC: Moody's cuts Venezuela's debt rating

"There is a very strong chance they going to default later this year," Rees told CNBC. "There is a big hump in payments due around October/November; I think there are going to struggle to make those payments."

However, Latin American analysts at Barclays noted that despite the decline in oil prices, Venezuela's international reserves had increased this year.

"Although we expect the government to need to make use of its assets to cover its financing needs, the measures it has taken so far this year are containing the deterioration of liquidity," Alejandro Arreaza and Alejandro Grisanti said in a research note last week.

More from CNBC: How much things cost in Venezuela now

Other than rationing, Venezuela has responded to its straits in what Rees called "classic Chavista" style by levying accusation that the U.S. and right-wing opponents in Venezuela were waging "economic war."

The President declared Saturday: "Venezuela is standing up to an economic boycott that has affected the proper distribution of food, one of the many facets of the economic war that the Venezuelan Right deployed in the country."

Several critics of the president have been imprisoned, including opposition leader and Caracas metropolitan mayor, Antonio Ledezma, who was arrested in February for his involvement in an alleged coup plot.

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