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Venezuela Takes Over Coffee Manufacturers Suspected of Hoarding and Speculation

Caracas August 4, 2009 (venezuelanalysis.com) - The Venezuelan government temporarily occupied, for a period of three months, the processing plants of two of the largest coffee producers in Venezuela, Fama de America and Café Madrid, on Monday. The companies are suspected of hoarding, speculation and smuggling contraband coffee into neighbouring Colombia-where coffee farmers face record shortfalls-in order to avoid Venezuelan government price controls.

The two coffee processing plants, one located in the industrial area of La Yaguara, in Caracas, and the other in the industrial zone of Guaraca in Carabobo state, each process some 350,000 quintals of coffee per year, around 70% of Venezuela's total coffee production.

During the occupations, which were headed by Venezuelan Agriculture Minister Elias Jaua, Trade Minister Eduardo Samán, and Food Minister Félix Osoria, Jaua stated that the measure was necessary in order to ensure supply for Venezuelans.

Speaking from the Fama de America plant in Yaguara, Caracas, Jaua said "The Bolivarian government has occupied all the plants in the country belonging to Fama de América and Café Madrid to guarantee supply of this item to the Venezuelan people."

Jaua explained that the action was taken in response to recent announcements by the companies that the supply of raw coffee was guaranteed for only five days "despite the fact they have purchased in the market a quantity of raw materials in excess of what is normal annually."

Days earlier the vice president of the National Confederation of Associations of Agricultural Producers, Vicente Perez, warned that Venezuela would have to import coffee claiming there was a shortfall in coffee production.

However, Jaua responded, "It's the usual game...every year the coffee companies claim there is a shortage two months before the new crop is ready to force a price increase."

The companies have "sufficient raw material" to continue production as sixteen thousand quintals of coffee arrived at the Fama de America plant in Yaguara yesterday, enough to supply the internal market for two months, he assured.

The minister explained that the government would take control of the coffee plants for three months to investigate allegations of smuggling, hoarding and speculation.

"If at the end of the audit, we can show there has been smuggling, hoarding, disloyal and monopolistic practices, we will consider expropriating the companies," he said.

"The Venezuelan state will combat any action that is directed at messing with the right to food of the people; we will not allow this to happen, and if necessary, and if it is shown that irregularities exist, they will be expropriated," he reiterated.

Marcelo Rivero, company owner and producer of the brands Café Madrid, El Penon, and Aroma, denied the charges of smuggling yesterday, "The raw material is processed in our plant is wholly and exclusively acquired from hundreds of small and medium producers in the country. Once processed, it is placed exclusively in the Venezuelan domestic market," he said.

The president of the Venezuelan Coffee Industry, Nelson Moreno said Monday that the shortage of coffee on supermarket shelves in recent weeks was because "consumption is greater than the production of coffee in the countryside."

Moreno admitted that there was a problem with smuggling coffee over the border to Colombia but argued that "middlemen" were responsible, not coffee manufacturers.

However, José Montilla, a coffee farmer from Trujillo supported the government measure against Café Madrid saying "we know it has been part of smuggling and hoarding."

The National Superintendent of Silos, Storage and Agricultural Warehousing (SADA), Carlos Osorio, also accused Fama de America and Café Madrid, the two biggest purchasers of raw coffee, of engaging in monopolistic practises, using their purchasing power to buy and hoard raw materials and force small and medium coffee manufacturers out of the market.

The vice-minister of Agricultural Economics, Richard Canaan, said Monday from the Café Madrid processing plant located in Guacara, Carabobo state, ensured that the plants temporarily by the government would continue operating.

The Café Madrid plant in the region has a capacity has a processing capacity of between 30 and 50 thousand quintals per month. However, its storage facilities are completely empty according to a press release from the Agriculture Ministry.

Canaan said the biggest concern is speculation, "We believe it is a private war, it is not possible that the stores of this plant are completely empty at this time when we should have enough coffee to ensure we reach the next harvest in October," he said.

The government will restart the plant with an initial cargo of 400 quintals, equivalent to 18 tons of green coffee, from the Corporación Venezolana Agraria (CVA) and Café Venezuela, he said.

Caanan indicated that meetings would be held for workers to meet officials from the Institute for the Defense of the People in the Access to Goods and Services (INDEPABIS), SADA and Café Venezuela authorized to work in these plants, to ensure that raw coffee arrives to be processed and is not siphoned off into informal channels.

Jaua also affirmed that the Venezuelan government representatives had met with the employees of Fama de America.

"We met with the union at the company where we have found a great reception, and told them that this measure is intended to ensure the operation of this plant and their workplace rights," he said.

Published on Aug 4th 2009 at 10.49pm