El Bachaqueo and the Striving Venezuelan Black Market for Tissue and Hygiene Products

El Bachaqueo and the Striving Venezuelan Black Market for Tissue and Hygiene Products

El Bachaqueo and the Striving Venezuelan Black Market for Tissue and Hygiene Products

Adriana Rangel

Analyst Insight by Adriana Rangel – Contributing Analyst

The term bachaquero derives from the word bachaco, a large ant common to the Amazon region of South America. It refers to the leafcutters – hard workers, carrying loads on their backs day and night in order to build their nests. For some years now, this term has been used to describe people who have illegally passed through border controls in the Venezuelan states of Zulia and Táchira, without declaring anything, in order to sell goods at a higher price in Colombia. Similar to a colony of bachaco ants, an increasing number of Venezuelans are working together in purchasing and stockpiling scarce, price-controlled items, and then loading them up, in a seemingly uninterrupted march towards the border, in order to resell them for a profit.

In 2015 the activity continues to grow, not only on the borders but throughout Venezuela, as the bachaqueo has developed as a genuinely profitable business, in an economy with profit stifling price controls and scarcity. Housewives, low-wage workers, and the jobless were some of the first to realise the opportunity in front of them. What was once simply a monotonous chore of going to the supermarket or government run markets (Misión Alimentación) for food, toilet paper, or personal care products became a daily stockpiling. Once one’s own household needs were met, a bachaquero’s first clients might be their own neighbours or friends, those unable or unwilling to wait in the increasingly long lines. The profit margins for a bachaquero – for withstanding the heat, the rain, as well as the pushing and shoving upon finally entering a store – are not marginal, either. Items such as deodorant, shampoo, and dryer sheets can fetch up to six times the official price.

Inflated sales in official channels and striving black market business

In 2014, Venezuela’s retail tissue market saw an 11% increase in volume terms, following a decline of 5% in 2013. While this might seem like good news for the industry, the reality is in fact quite the opposite. The spike in sales came as a result of inefficient government policies, which gave rise to bulk purchases for re-sale on the black market.

Venezuela retail tissue: % year-on-year growth

Y-o-y-growth

Source: Euromonitor International

The black market for tissue and hygiene has grown with a simple network involving neighbours, family, friends, and other acquaintances. The new form of commerce has not gone unnoticed by the government though. In order to discourage the stockpiling of goods and the resulting black market, the government has begun implementing controls. In March 2014, the PDVAL (the Venezuelan nationwide food supply network created by former President Chavez) announced weekly quotas for basic goods. The checkout at a supermarket would require the entry of your Venezuelan ID number before making a purchase. Shortly thereafter, current President Nicolás Maduro announced the creation of a “secure digitised supply system”, for use in the form of an electronic debit card for anyone that receives government assistance. The card was designed to limit the purchase of specific products and thus to control shelves being emptied in a matter of hours. The bachaqueros, however, have been creative in getting around these deterrents to their business.

The most basic strategy was that of a typical housewife, organising themselves alongside their sisters and cousins. Each woman would be responsible for a different set of supermarkets and each, by carrying the ID card of their children, nephews, elders, or any friend or relative interested in participating would be able to purchase as much as their pooled income would allow. On the other hand, the more organised and ambitious schemes involved hiring the unemployed or even young children with identity cards to wait in lines at various stores, paying them a daily wage for their time. In October of 2014, Ecoanalítica, a Venezuelan consulting firm estimated that two thirds of people waiting in line at a supermarket will re-sell the goods in the black market.

The expansion of the bachaqueo has much to do with its most frequent clients – those in the middle and upper income tiers that are unwilling or unable to spend hours waiting in lines but that are willing and able to pay inflated prices for basic goods. Aside from tissue products, nappies/diapers and baby formula are quick sellers and command some of the highest price margins. The alarming inflation rates in Venezuela are another reason middle class Venezuelans are taking advantage of the bachaqueo.

What will be the future of this new “channel”?

The Venezuelan Government has recently announced an additional control regarding the bachaqueo and the general hoarding of products in the country – the implementation of some 20,000 fingerprint scanners in supermarkets and hypermarkets. The measure was initially put into practice at state-run supermarkets along the border of Colombia, but President Maduro has encouraged a more nationwide effort. Few, however, expect the additional measure to be successful in reigning in the blossoming black market, or the entrepreneurial bachaqueros. The price controls will continue to distort the actual level of supply and demand in the market, while the exchange rate for the bolivar in the black market (30 times lower than the official rate for importing food and medicine which is 6.3 VEF per US dollar) means that the potential profit margin for these goods both inside and outside of Venezuela should be sufficient motivation for the bachaqueros to continue.

A path out of the black market would involve reaching an agreement with the private sector to relax the control of foreign currency. A business that is able to buy dollars would be able to ease shortages by increasing inventories of raw materials or finished products. The removal of fixed prices would be a first step to restoring order (and supply) to grocery store shelves. While the Venezuelan Government continues to postpone making these changes to economic policy, the bachaqueo will continue to be the modus vivendi for many Venezuelan families. The supermarket lines will continue to be long, and the shelves empty.

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