Chavez Challenges U.S.-based Cargill Inc. on Rice Prices

State Control in Food Sector
By Fabiola Sanchez
The Associated Press
March 5, 2009

President Hugo Chavez boosted state control over Venezuela's economy, ordering the expropriation of a U.S.-owned rice plant and threatening to seize food companies that don't sell enough products at official prices that are meant to stem inflation.

Chavez accused U.S.-based Cargill Inc. and other companies of flouting price caps on basic foodstuffs by producing less of those products, or even by adding seasonings to foods so they won't qualify as the basic items eligible for caps.

"I'm calling on Venezuela's private sector to understand that a socialist revolution has arrived," Chavez said a day after announcing plans to expropriate a Cargill rice processing plant and threatening to nationalize Empresas Polar, Venezuela's largest food producer.

If he were to follow through on that threat, his government would become the biggest player in Venezuela's food industry -- potentially a key step in his plan to institute socialism.

Chavez accused Cargill of failing to comply with regulations that took effect Tuesday, requiring food companies to ensure that price-controlled items comprise at least 70 percent of their output. The rules aim to slow inflation, cutting food prices and preventing companies from producing uncapped food products instead in order to avoid controls.Food prices have soared 40.1 percent in Caracas in the past year, driving 30 percent annual inflation, the highest in Latin America. Venezuela's minimum wage, now equal to $372 a month, lost 3.7 percent of its buying power between January and November, according to the Central Bank.

But business leaders and analysts warn that price controls on rice, milk, chicken and other products are already squeezing profits and could force some food producers out of business.

"They're playing with fire because any event that affects the capacity of private production is going to leave the country with shortages," said Luis Vicente Leon, a Caracas-based economist and pollster.

Chavez says he has targeted the rice industry after repeated public complaints that white rice is hard to find in stores. Officials and National Guard troops have already occupied at least two rice plants, where officials are performing 90-day inspections to make sure that the required amounts of price-controlled foods are produced.

"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.

Agriculture Minister Elias Jaua meanwhile warned the government would "occupy" the property of any private company that halts food production and said it plans to expropriate Cargill's rice plant in Portuguesa state as soon as possible.

Cargill and Polar said Thursday that they've always complied with Venezuelan laws and regulations.

"Cargill is awaiting the opportunity to clear up its situation before the Venezuelan government, and is respectful of its decisions," Minneapolis-based Cargill said in a statement.

Its rice plant is one of about a dozen Cargill facilities in Venezuela, including factories that produce oil, pasta, flour, juice and animal food.

Chavez, who won a Feb. 15 referendum letting him run for re-election in 2012 and beyond, has already nationalized the country's biggest telephone, electricity and cement companies. New steps to boost state holdings would saddle his government with a heavy financial burden as oil earnings slump, and he has said some expropriations may be financed with government bonds instead of cash.

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