Captains of industry vilify him, the poor worship him, either way, Venezuela‘s de facto Godfather, President Hugo ChÃ¡vez, has made food companies an offer they can’t refuse expropriation. On Wednesday last, ChÃ¡vez seized operations of U.S. grain producer Cargill Inc. and temporarily occupied rice mills owned by food manufacturer, Polar, Venezuela’s largest private company, according to Reuters.
In 2008 food costs soared by almost fifty percent while telephone and electric rates stayed the same due to price controls. That’s because ChÃ¡vez nationalized everything in the country from oil and telecommunications to power, cement, steel and finance, all that remained was the country’s food supply.
According to ChÃ¡vez, food shortages are a matter of national security. “Any producer that doesn’t sell their milk to the nation will be treated as a traitor,” ChÃ¡vez said last year. Now there’s a battle between the state and private food companies over price controls which has caused shortages of staple items like milk and rice. ChÃ¡vez commanded his army to seize privately owned rice mills because the public has complained of the scarcity of white rice.
“We have state officials in our company now, observing production,” said sales and marketing manager for Arroz Mary, a rice company in Venezuela. “So far, government representatives aren’t making any production decisions”
“The government doesn’t intend to take away private businesses, but if their owners don’t want to comply … we will continue with the expropriations,” said Col. Carlos Osorio, an army official in charge of food distribution.
ChÃ¡vez is forcing food companies to concentrate production of foods that are in short supply as well as reduce their prices; he faults company greed while businesses complain prices are fixed too low for them to earn enough surplus to survive.
”It costs me 11.3 bolivares per kilo to buy meat ($5.40 USD),” said a meat company owner. “The government requires us to sell this for 11.9 bolivares per kilo($5.60 USD). I can’t make money doing that. So I sell only 10 percent of the meat to the public and sell the rest to restaurants that pay me 18 bolivares per kilo. As a result, customers here can’t find the meat they want.”
ChÃ¡vez may have won the latest referendum permitting him to run for re-election indefinitely, but in the meantime, his country faces thirty percent annual inflation, the highest in Latin America, as well as state budget shortfalls from the falling price of oil, which Venezuela relies on for almost all of its revenue. There’s no doubt price controls on food is how ChÃ¡vez has decided to curb inflation.
Nevertheless, price controls invariably spawn the creation of a black market or slick company tricks to escape price fixing. For instance, some rice companies simply produce less or make flavored rice to avoid state price controls on plain white rice. Another consequence of price restrictions is that it forces Venezuela to become more dependent on imports because local farmers see no advantage in supplying official state food staples at fixed state prices.
”The food sellers are the problem,” said a Venezuelan shopper. “They are multi-millionaires. ChÃ¡vez is the only one who cares about the poor.”
”The situation here is good, thanks to Comandante ChÃ¡vez,” said real estate broker John FernÃ¡ndez. “Thanks to him, the poor eat three times a day. I hope he stays in power a long time.”
According to McClatchy News Service, the percentage of Venezuelans living in extreme poverty has been halved under ChÃ¡vez, who also spent billions on free education and healthcare as well as food to the poor at below-market prices from the revenue of once record-high oil prices. Now that the U.S. body politicwho previously chided ChÃ¡vez for his disgraceful embrace of socialismis in the process of nationalizing all their banks, they have little room to furl an unapproving eyebrow.