Venezuelan Government Takes Control of Rice Plants that Evade Regulated Prices

Mérida, March 2nd 2009 (Venezuelanalysis.com) – As of last Saturday, the Venezuelan government has temporarily taken over the administration of a rice processing plant in Guárico state that is owned by Venezuela’s largest food producer, Polar.

Inspections by the National Institute in Defense of People’s Access to Goods and Services (INDEPABIS) last week revealed that the plant was operating at half its capacity and adding artificial flavoring to 90% of its rice in order to evade government price controls, which only apply to essential, unenhanced food items.

In a press conference on the floor of the plant Monday afternoon, INDEPABIS Director Eduardo Samán announced that the workers had begun processing 100% unmodified rice at the plant, disproving the claims of Polar executives that state intervention would paralyze production.

“The Venezuelan people with the patriotic and valiant workers at Polar have won the battle… the plant is functioning and producing quality rice, cultivated and packaged by Venezuelan workers, to be sold at regulated prices,” said Samán, with machines roaring in the background.

Government officials will administer the plant for up to 90 days and hold discussions with private owners and the workers to resolve the production problems. The government plans to inspect two large rice processing plants in Portugesa state this week.

On his weekly presidential talk show Sunday, Venezuelan President Hugo Chávez warned that if rice processers attempt to shutdown their plants to protest the state’s intervention, “we will expropriate all of their plants, and convert them from private property into social property.” The Venezuelan constitution guarantees indemnity in the case of expropriation.

Chávez had previously threatened to intervene in private food production facilities in early 2008, on suspicion that Polar and others were hoarding food with the intention of causing political instability through food shortages and price hikes.

In a press conference Monday, Polar Chief of Operations Jesús Carmona admitted that the plant was diverting 90% of its rice to artificially flavored products. He said Polar had chosen this route because the actual cost of rice production is more than four bolivars per kilogram, nearly twice the regulated price of 2.33 bolivars per kilogram.

Carmona also said the plant was operating at half its capacity because of a shortage of rice on the market.

In rebuttal, Samán reported that INDEPABIS officials had found more than 16,000 tons of unpackaged, un-modified rice stored at the plant, which is what the workers began packaging on Monday. Juán Serrano, a spokesperson for the labor union at the plant, confirmed that the stored rice is enough to sustain production for two months if the plant operates at its maximum capacity.

In addition, Agriculture and Land Minister Elías Jaua said that nation-wide there are now 300,000 tons of stored rice, with the dry season harvest underway, so Venezuela’s monthly demand of 90,000 tons of rice should be satisfied if processers and packagers comply with the government’s food security laws.  

“If there were a shortage of raw material [rice] on the market, then they would not be able to produce powdered or flavor-enhanced rice,” said Jaua on Monday.

Statistics from the Agriculture and Land Ministry show that Venezuela increased its rice production by 94% since Chávez took office a decade ago, and produced 1.36 million tons of rice last year.

Venezuela’s National Federation of Chambers of Commerce (FEDECAMARAS), one of the most powerful and anti-Chávez private sector associations in the country, challenged this statistic, and suggested that 1.05 million tons is a more accurate figure for 2008.

The government implemented price controls on a basket of essential food items more than five years ago and built a network of state-owned food producers and distributors to sell food at regulated or subsidized prices. In the last two years, it has adjusted prices to be in line with inflation without permitting excessive profit margins through price speculation.

The Chávez administration has invested heavily in agricultural production to diversify Venezuela’s oil-dependent economy. The government has also nationalized or purchased a controlling share of several strategic sectors of the economy over the past two years, including electricity, steel, cement, and oil.