Venezuelan Government Winning Battle against Food Shortages

Mérida, 21^st June 2013 (Venezuelanalysis.com) – Following the implementation of measures to tackle shortages in some basic food and household items, both private Venezuelan media and the government report that the level of shortages is now decreasing.

Shortages hit their highest level in five years in April, provoking a flurry of international media criticism of the government and affecting the popularity of president Nicolas Maduro in the lead-up to the 14 April election.

Economists and Venezuela’s conservative opposition attribute the spike in shortages to the effects of government price controls and a lack of state-granted dollars given to companies for food imports and production.

Meanwhile, Maduro has blamed the private sector for engaging in an “economic war” against the government, causing scarcity through hoarding products and lowering production to hurt the government’s popularity and destabilise the country.

The shortages experienced in recent months have not meant empty shelves or the absolute absence of basic products, but the relative scarcity of products such as cornmeal flour, cooking oil, toothpaste and toilet paper, meaning that consumers have to visit several shops to find such items or wait for a number of days for these products to appear in stores.

However, official sources and private Venezuelan media confirm that shortages are decreasing, with government strategies to overcome scarcity implemented since April beginning to take effect.

“We’ve been attacking this issue [of shortages] with force,” said Land and Agriculture Minister Yvan Gil on Thursday in an interview with private TV channel Venevisión. “The population has begun to notice in this month and a half…how the distribution of products has begun to normalise”.

The minister said that the government had formed a plan for the distribution of each of the 53 items that make up Venezuela’s basic food basket, identifying problems with production, import or transport, and acting to deliver the sufficient supply of those products to stores.

Leading Venezuelan private newspaper Ultimas Noticias similarly reported today that “the supply of some products continues improving”, while also mentioning that consumers continue to compulsively buy items considered to be in short supply.

Further, Venezuelanalysis.com journalists in Mérida and the capital Caracas have observed an improved supply of toiletry items and staples such as rice, pasta, milk and cooking oil in stores.

Imports arriving

On Wednesday, 65,000 tons of pasta and powdered milk arrived in Venezuela from Ecuador. The products will be distributed to the population at regulated prices through state-owned stores, announced Manuel Barroso, a government official.

“Despite the economic war that sectors of the right-wing are trying to promote, [the people] can have confidence that in Venezuela a responsible government exists that does what is necessary to distribute goods that the population needs”, he said to state news agency AVN.

The deliveries are part of food import deals signed by the Maduro government with regional allies to overcome shortages. Authorities inform that more than 700,000 tons of food and basic household items will arrive in the country over the next six months.

The government is also introducing measures to raise national agricultural production such as direct investment in agriculture, removing income tax on primary agricultural production, introducing state subsidies for sugar production, and granting increased prices to sunflower oil producers.

Agriculture Minister Gil said in an interview on Thursday that under the Bolivarian government, national production of “almost all” agricultural goods had increased annually by 5-10%, but that in some areas this “is not enough” to meet rising consumption, requiring imports to cover the shortfall.

Addressing the backlog in dollar allocations

Meanwhile, the government is also addressing a backlog in the allocation of dollars to national importers and producers.

Currency controls have been in place in Venezuela since 2003 to prevent capital flight, with the official rate set at 6.3 bolivars to the dollar following the currency devaluation in February. Under the system, companies are allocated dollars by the government’s exchange commission CADIVI for the import of foodstuffs, materials and machinery into the country.

Earlier this week the president of Venezuela’s Central Bank (BCV), Armando Leon, confirmed that 100% of pending Cadivi dollar grants to small and medium companies had been processed.

He added that 70% of grants to larger companies had likewise been carried out, with priority given to food importers and producers.

In a telephone call with Bloomberg, the BCV president predicted that inflation, which spiked to 6.1% in May, would begin to decrease from June, and that the supply of foodstuffs and other goods in the economy would “normalise…in the next two months”.

The BCV’s scarcity index, which measures the national level of food shortages, dropped slightly from 21.3 in April to 20.6 in May.

Attacking speculation and hoarding

While trying to work with the private sector to overcome shortages, the government is taking a hard line against hoarding and price speculation, which it blames for worsening scarcity levels.

On Wednesday the Bolivarian National Guard (GNB) announced it had seized seven tons of basic food products hidden in two houses and a truck, which were destined to be smuggled to Colombia or sold for above-market prices to consumers.

“With these actions we’re striking hard against hoarding and speculation, at the same time as guaranteeing food security,” said Coronel Fabio Zavarse Pabon to state channel VTV.

Meanwhile, on Thursday the state’s consumer protection agency Indepabis was re-launched. The organisation monitors compliance with government price controls on basic foodstuffs in order to prevent price speculation or other abuses toward consumers. The price controls were implemented by the administration of Hugo Chavez to protect the population from inflation.

Indepabis’ new strategy includes an increased focus on companies that import products using Cadivi-granted dollars, ensuring that they use those dollars for the specified reasons, such as food production, and that their products are priced according to the official dollar rate.

The aim is to combat the illicit activity of companies receiving government-issued dollars and then selling those dollars at the black market rate (currently around 30 bolivars per dollar) to make a profit, or pricing imported products as if the company had bought these products at the black market dollar rate, likewise for profit.

Commerce Minister Alejandro Fleming said in a press conference on Thursday that Indepabis and Cadivi would work together to ensure that state-granted foreign currency was used for productive ends and didn’t fall into the hands of “parasites that swarm around it [dollar grants] and have turned it into a business”.

A key component of this strategy is that stores will have to specify exactly which products they sell are imported with state-granted dollars, and price-mark these products with that information.

Indepabis is also to adopt former President Hugo Chavez’s slogan “efficiency or nothing” by monitoring state companies as well as private ones, and better-incorporating grassroots “people’s power” into its activities.

The re-launch of Indepabis comes after an alleged extortion ring was discovered operating within the state body on 9 June. President Maduro sacked the organisation’s president and appointed former radical minister Eduardo Saman, who has since promised to price speculators that “the fun is over”.