Venezuela: Government and communities organize to ensure food distribution

Merida, February 27, 2008 (venezuelanalysis.com) – Over the
course of last week, the Venezuelan government's subsidized food system,
Mercal, along with the new PDVAL markets run by the state oil company PDVSA,
which sell products at nationally regulated prices, distributed 3,300 tons of
basic foods through 666 special operations in 20 of Venezuela's 23 states,
according to National Food Minister Félix Osorio.

Last Saturday alone, 454 small-scale, mobile food markets
distributed 1,647 tons of food to local communities with the intention of
serving "only those most in need," Osorio reported.

Reports in local and regional news last week documented the
arrival of Mercal and PDVAL to local communities. For example, 150 tons of milk
and 10 tons of food were sold in the island state of Nueva Esparta, 480 tons of
food in the western state of Zulia, 300 tons of food in the state of Carabobo,
50,000 tons of food in distinct operations all over Caracas, 80 tons of food in
10 "little Mercals" in the state of Anzoátegui, 13 tons of powdered milk along
with 9 tons of liquid milk by PDVAL in the city of Valencia, and 2.8 tons of
powdered milk by PDVAL in the Portuguesa state capital Guanare.

The food minister explained that products are sold at
regulated prices, but "we are conscious that the cost structures have their
prices," assuring that prices are under evaluation and may be increased in the
coming weeks depending on the results of investigations of each product's
supply chain.

Last week's surge was a step toward the goal 74,000 tons of
food that PDVAL aims to distribute during its second month, which began
February 21.

In its first month, PDVAL sold a total of 2,300 tons of
eight essential foods (rice, beans, oil, chicken, other meats, milk, and
powdered milk). This "modest" start is projected to increase to 150,000 tons
and 27 essential food products within two months, according to last week's assessment
by PDVSA's Vice President of Commercial Refining and Provisioning, Asdrúbal
Chávez.

To fulfill the goal, PDVAL will import 160,000 tons and
Mercal will import 150,000 tons of food in coming weeks, Deputy Mario Isea,
president of the food committee in the National Assembly, announced last
Thursday. Over the course of the past month, the Food and Agricultural Services
Corporation (CASA), the brand created by the government in 2003 to supply
Mercal, imported over 186,000 tons of beef, chicken, margarine, powdered milk,
and pasta.

Isea commented that PDVAL and Mercal provisions would cover
a third of the national demand, which stands at 900,000 tons per month. Mercal
satisfied 22% of national demand before PDVAL was created.

"There is no supply shortage in Venezuela, in any case there
are specific food scarcities of some items, for which PDVAL and Mercal are a
remedy, along with the communal councils, which exercise public vigilance of
the food distribution chain," Isea asserted.

The myth of supply shortages propounded by what he called
the "media matrix" would be proven false by the state's newest measures to
combat poor distribution, he added.

Mercal and PDVAL's new mobile distribution outfits are
monitored by the "Integral Food Control System" created by the government after
the management-led industry shutdown five years ago, to make sure food
distribution is proportional to regional population.

"We did an evaluation of food smuggling in the border zone
and found anomalies, because in reality a large part of food distribution is in
private hands, with a capitalist motive," reported the national superintendent
of Silos, Storage, and Agricultural Warehouses (SADA), Carlos Osorio Zambrano,
who coordinates the Integral Food Control System.

Mercal's Internal
Challenges

Uneven distribution remains a serious obstacle for Mercal in
many areas of the country. In the municipality of Mara, a mostly indigenous
population in western Zulia state, 150 Mercal stores are reportedly only able
to open once per week, because the half-ton of food they received weekly is
sold in less than three hours.

A Mercal worker in Mara, Aurelio Avilez, claimed that those
who run Mercal "are all corrupt, they have business deals with certain
authorities or they just take the food on the road."

Luis Fernández, the vice president of Mercal, announced
earlier this month that corruption cases in the subsidized market chain
increased by 51% between 2006 and 2007. Of the 397 cases during that time span,
the majority had to do with stealing and breaking of purchase quotas.

However, food hoarding does not take place in Mercal,
Fernández insisted, making clear that foods are not re-routed away from Mercal
stores. Instead, "the foods always arrive to their markets, but they do not last
because of high demand."

Small-scale distributors such as those contracted by the
Metropolitan Clinic in Caracas also illegally obtain and re-sell Mercal
products at speculated prices, as they did with over a ton of food on February
16, Fernández pointed out.

On top of that, a large Mercal store and warehouse in
Barinas state was sacked two weeks ago by an unidentified group of people.
Local resident José López Murillo commented that, although he was not part of
the pilfering, he thought that the reason for the action was the scarcity in
basic, essential food items.

Investigations carried out by the office of the local mayor,
Aníbal Chávez, determined that the actions were led by leaders of opposition
political groups seeking to increase tension regarding food scarcities.

Community Responses

Internal investigations in Mercal have resulted in 1,300
dismissals for violation of food distribution norms, including 30 cases of
corruption that are currently pending and could result in jail time for those
under investigation.

External monitoring by local communal councils in team with
the Integral National Customs and Tributary Service (SENIAT) and the national
Consumer Defense Institute (INDECU) have also been amplified in several states,
including the capital Miranda, Zulia, and the Andean state of Mérida.

Representative Isea explained that the aim of this effort is
the joint articulation of policy among the Executive, Legislative, and Popular
Power branches of the national government, and to be "a meeting place to listen
to all sectors of the supply chain including private guilds, consumers, and
others."

In a statement in early February, Isea reminded the public
that communal councils are "completely qualified to exercise this
surveillance," because the law on food hoarding and boycotts specifies it as
one of their functions.

Articles 1, 6, 17, 19, and 31 of the law mandate that
communal councils can participate directly in the national government's
regulation of price controls, and "promote in the community the defense of its
rights."

When the manager of a "MegaMercal" in the city of Mérida
arbitrarily closed the store three weeks ago, leaving long lines of local
residents empty-handed outside, residents of the local barrio called Campo de
Oro denounced the act on a prominent local community radio station, Radio Ecos
93.9 FM: "Thanks to the behavior of an official who never knew how to value the
citizens who remained waiting for hours anticipating…he decided to close and
[expletive] the People."

The communities demanded federal government intervention and
more Mercal stores to be constructed in Mérida.

Beyond surveillance, five Caracas community councils
organized ambulatory distribution chains to bring 12,000 liters of milk to
their communities, according to news reports on February 14. The milk was
produced by the Social Production Enterprise (EPS, a new type of cooperative
business promoted by the government) Los Llanos Milk Products (Prollaca).

The Bolivarian Federation of Cattle and Agriculture Farmers
of Venezuela (FEGAVEN) also collaborated with the transport, and the innovative
supply chain participants are now seeking government foundation support and
anticipate sharing PDVAL's coming refrigerator system.

While Mercal and PDVAL accelerate their activities,
community councils must observe the functioning of the systems in each locality
with "their eyes peeled," Food Minister Osorio commented last week.