A food fight for Hugo Chavez

July 31, 2012

Free Market Foundation

Venezuelan President Hugo Chávez’s response to his country’s food shortages: find a scapegoat, in this case supermarket owners. On Jan. 17, the mercurial leader expropriated six Exito stores, controlled by France’s Groupe Casino. A month later he seized Cada, another Casino chain, with 35 supermarkets and eight distribution centres.

Chávez’s efforts to transform his country into a Cuban-style socialist state are sputtering, says BusinessWeek:

With its vast oil wealth, Venezuela shouldn’t suffer from shortages, yet inefficient farms, government takeovers of supermarkets and a 50 per cent currency devaluation in January have thrown the food supply into disarray.

That’s bad news for Chávez, whose anti-capitalist message and ceaseless drive to undermine U.S. influence in Latin America have made him Washington’s biggest headache in the region.

Chávez’s approval rating among Venezuelans has dropped to about 45 per cent from 70 per cent three years ago.

Supplying low-cost food to the poor has been a centrepiece of Chávez’s presidency. He has expropriated food processors, stores, and more than 6 million acres of farms and ranches, convinced that the government can feed Venezuela better than the private sector does. Under state ownership, though, production has suffered. From 1999 to 2008, per capita, sugar cane production was off by 8 per cent, fruit declined by 25 per cent, and beef production dropped by 38 per cent, according to Carlos Machado, an expert in agriculture at the Institute of Higher Administrative Studies, a business school in Caracas. “The cooperatives have failed and our cattle ranching has been decimated,” Machado says.

While Chávez was flush with oil profits, it was easy to take up the slack with purchases of chicken from Brazil, beef from Argentina, and powdered milk from New Zealand:

Food imports jumped from $1.3 billion in 1999, when Chávez took office, to $7.5 billion in 2008 about 70 per cent of what Venezuelans eat.

But falling crude oil prices and last year’s 3.3 per cent contraction of the economy left Chávez with less money to buy food abroad, or to prop up poorly run state farms and food processors.

Source: Geri Smith, A Food Fight for Hugo Chávez; With his popularity sagging, Venezuela’s fiery President is seizing supermarkets from owners. But can he keep stores stocked? BusinessWeek, March 11, 2010.

For text: http://www.businessweek.com/magazine/content/10_12/b4171046603604.htm

For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26

First published by the National Center for Policy Analysis, Dallas and Washington, USA

FMF Policy Bulletin/ 23 March 2010