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.