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VENEZUELA
Food shortage
Andrés Cañizález, Elsa Piña
3/13/2008
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Price controls and currency change spark crisis.

Even though oil costs around US$100 per barrel, and the Venezuelan capital of Caracas is full of latest model cars — many of them luxury vehicles — finding milk, eggs and other basic food products are increasingly difficult. Local markets sell a variety of imported olive oils, but no domestically-produced vegetable, corn or soy oil.

According to the Venezuelan Teachers Federation’s statistics unit, the first problems with food distribution in the country began in late 2006.

Luis Rodríguez, executive director of the National Supermarket Association, says that the issue is a structural problem, a result of price controls and the currency parity that President Hugo Chávez established in February 2003.

The products that are now in shortage have had the same price as they did five years ago. The US dollar is blocked in 2.15 bolivars. For many industries, there is no logic for the products to continue to be fixed with prices from five years ago, but the government refuses to raise them.

“On top of this we have government threats against the private companies,” Rodríguez said. “It’s a situation that has demotivated the industry.”

Venezuela is also experiencing rampant inflation. From 2003 to 2007, the cost of life doubled.

On Jan. 1, in an attempt to control inflation that last year reached 22.7 percent, the government revalued the national currency to eliminate three zeroes in the denominations.

“In the last two years, the minimum wage has significantly increased, which has given buying power to the poorest classes, but the private sector was not prepared for that,” added Rodríguez.

While for many, the key is increasing national production, Eduardo Gómez Sigala, president of the Venezuelan Industry Confederation, pointed out that there are only 7,000 food companies in the country, 5,000 fewer than in February 1999, when Chávez first assumed the presidency.

Importing country
Venezuela is a large importer. During the first oil boom in the 1970s, it became even more so, and now 80 percent of the food products consumed in Venezuela are imported or are produced with imported ingredients.

Meanwhile, the government blames the private sector for the shortages.
Director of the government-run National Consumers’ Defense and Education Institute, Samuel Ruh, said in a Feb. 15 press conference that there “are sectors that want to destabilize the country, making people believe that there is a food shortage, when in reality, the supply is guaranteed. The institution fined 3,000 businesses over the last three months for price speculation.

According to Ruh, “the country can be satisfied because the government is taking steps against speculation.” Despite his statements, however, Ruh was fired on Feb. 18, three days later, from the position he held for nine years.

There seems to be an alternate reality. According to surveys by the pollster Datanálisis, half of Venezuelans blame the government for food shortages, a significant change from November when only one-third of respondents blamed the government.

On the other hand, the government has tacitly recognized that its previous initiatives for popular food supply failed, since in January it tapped the state oil company Petróleos de Venezuela (PDVSA) to intervene in the food market. With an initial investment of $150 millions, they will import — mainly from Argentina and Brazil — basic food products.

The government says the distribution network, named the Venezuelan Food Production and Distribution, will sell the products at government-regulated prices, targeting the middle class. Since 2004, the Food Markets network, or Mercal, has operated, which sells subsidized products, but is known for its monstrous lines.

Demand trumps supply
The new distribution network announced it will distribute 24,000 metric tons of food a month, and Mercal says it will increase its supply from 130,000 to 160,000 metric tons soon. But the demand is much more, estimated at some 900,000 metric tons a month to meet the country’s needs.

For Elizabeth Borges, a 46-year-old cleaner and the head of her household, the shortage has become tortuous. About 70 percent of her monthly income of just over $400 goes to food for her and her two children, aged 11 and 14.

Previously, she would do a food shopping once a month, but she now spends more time to buy food, visiting several stores to compare prices. She has paid $16 for a kilogram of powdered milk, three times the regulated prices, “because my children needed it.”

Felicia Barrera, a 42-year-old administrator, complains that her food expenses, for her, her husband and two children — aged 4 and 9 — by January, came to $465.

“To do the shopping now is a whole operation, to go from one place to another, looking for products that are needed. You call your friends and relatives to get information about where to find something,” she said. “Never in my life have I been in such a situation.”


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