COHA in the Public ArenaVenezuela

Venezuela to end Cargill takeovers

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March 6, 2009

Venezuela has said it will not take over any more holdings of US food corporation Cargill having taken over the rice plant, demanding it produce cheaper rice.

The promise came on Thursday, a day after Chavez took over a local unit of Cargill, and also threatened to nationalise Polar, the country’s largest private company, less than three weeks after he won a referendum allowing him to run for re-election indefinitely.

Chavez is popular among many poorer Venezuelans for launching government initiatives to provide subsidised food to poor areas.

The Venezuelan president said he ordered the takeover because Cargill was avoiding controls by not producing the type of rice subject to restrictions.

With oil its primary source of income, the Venezuelan economy is struggling following falling oil prices due to the economic downturn.

Elias Jaua, the agriculture minister, said: “The measure only includes the rice plant,” adding the government has taken control of the mill.

Amicable agreement

He said Venezuela would seek an amicable agreement in its nationalisation of Cargill’s plant, which has 2,000 employees and 13 manufacturing plants around the country, adding the government has already taken control of it.

In recent days, Chavez also took control of some rice mills belonging to Polar, after accusing the food industry of skirting price controls and failing to produce enough cheap rice.

Polar is the country’s largest private sector employer and produces and distributes everything from beer to flour.

Having previously vowed to take legal action over the rice mill takeovers, Polar said the best way to increase food production is “dialogue and close collaboration between the government, agricultural producers … and consumers”.

Chavez said taking control of rice mills belonging to Polar was temporary but warned he could take over the whole company permanently if it insisted on disobeying him.

Chavez has a track record of persuing threats of nationalisation, and has in the past taken over oil, electricity, steel, cement and telecommunications companies, should they not yield to his demands.

Such moves are criticised by the private sector and some economists who say it could add to food shortages.

Larry Birns, director of the Washington-based think tank, the Council on Hemispheric Affairs, said: “I don’t think he [Chavez] particularly wants to do this. The problem is the country has a 31 per cent inflation rate. The poor are being edged out of the rice market.

“He can’t afford as a populist president, a situation where he is shown as not being concerned with feeding the nation.”

Chavez taking control of US companies comes at a time when he is trying to improve Venezuela’s relations with the US.

‘Poor edged out’

Birns continued: “He [Chavez] doesn’t do things well in terms of multi-tasking. One day he will … praise president [Barack] Obama, the next he will condemn him, saying he’s just like Bush, [that] they don’t like Latin American people.

“But it’s very important that he normalises relations with the new Obama administration. Particularly because the falling price of oil has changed all the rules. It means the government can’t buy its way out of problems. It doesn’t have excess cash around to do that.”

Cargill said it was “respectful” of the decision but wants talks to resolve the situation.