Mérida, May 20th 2010 (Venezuelanalysis.com) – To guarantee access to essential foods amidst price inflation and supply shortages in some items, the Venezuelan government recently nationalized a major flour producer, granted low-interest credits to small and medium-sized producers, opened new subsidized food markets, sanctioned price speculators and hoarders, and is in the process of reforming the Land Law.
After months of investigations of the flour and tortilla producer Monaca for allegedly decreasing production during a time of national shortage, government officials announced that the state will take over all of the company’s operations and facilities.
The state will acquire “a broad structure for the processing, marketing, and distribution” of cereals and related products such as wheat and corn flour, pasta, rice, and oatmeal. This will be controlled by the state-owned Venezuelan Agricultural Corporation (CVA) with participation of worker unions, cooperatives, and community councils, according to the nationalization order.
Formal price negotiations have yet to begin. A company statement said, “It is our intention to cooperate with the Venezuelan government during the negotiations for the acquisition of Monaca,” and also demanded “quick, appropriate, and effective” indemnity.
Monaca is a subsidiary of the Mexican multi-national Gruma, which operates in the U.S., Mexico, Central America, Venezuela, and Europe and is the world’s largest tortilla and corn flour producer. Gruma is the second largest flour producer in Venezuela, and 10% of its revenues come from here, according to Reuters.
Gruma controls 70% of the Mexican market and has used this power to more than double flour prices even as corn and wheat prices dropped, according to a 2003 Oxfam report. Gruma, a major beneficiary of the 1994 North American Free Trade Agreement (NAFTA), is also credited with having stripped the corn tortilla, a traditional Mexican food, of most of its calcium, dietary fiber, and other nutritional and cultural value.
The Venezuelan National Assembly is set to pass a reform to the controversial Land Law that will further facilitate land redistribution. Since the law was passed in 2001, 2.5 million hectares (6.2 million acres) of idle privately owned land have been confiscated and either turned over to small farmers or used for state farms and research laboratories. The law was one of the causes of a two-day right wing coup against Chavez in 2002, and the law’s opponents have murdered more than 220 peasant organizers.
The reform will limit the ability of private landowners to contract out the cultivation of their lands to third parties. The law says such contracting procures “evasion of just labor relations” and is remnant of “feudal slave exploitation.” Such contracting will also be prohibited on public lands and for state-owned companies except with express permission of INTI (the National Land Institute).
Farmers who have worked as tenants on someone else’s land for three years will be prioritized by INTI for redistribution, particularly if they show they have “a willingness and ability for agricultural production in harmony with the agrarian plans and programs of the national executive.”
The law reform upholds the principle that “the land is for those who work it,” according to Agriculture and Lands Minister Elias Jaua, and includes provisions that increase the state’s ability to take control of “lands whose use is contrary to the National Plan for Agricultural Production.”
Credits for Producers
On Wednesday, President Hugo Chavez presided over a ceremony to grant a total of 2.6 billion bolivars in low-interest loans to small and medium-sized producers nation-wide.
The credits were granted by the Bicentenary Fund, which the government established following a spate of bank nationalizations in late 2009 with the aim of re-orienting the financial sector toward production and away from speculation.
Chavez said small and medium-sized businesses that opt to form mixed enterprises with the state and function in alignment with the plan to build a “socialist” economy will have access to special interest rates of between two and six percent. They will have a guaranteed supply of imported raw materials at the preferential dollar conversion rate, 2.6 bolivars to the dollar, while the standard rate is 4.3 bolivars to the dollar.
Subsidized Food Markets
The government also increased its participation in food distribution this week by spending 33 million bolivars to open 80 new Mercal subsidized food markets and four new “super-Mercals.”
Meanwhile, ongoing mobile Mercal markets, which travel from town to town and sell out of the backs of delivery trucks in community streets and basketball courts, distribute between 400 and 1,500 tons of food daily, including rice, rice, chicken, flour, lentils, oil, sugar, canned goods, and milk.
The Mercal markets have been established nation-wide over the past six years with the aim of combating inflation and making food available to the all. The average savings for consumers in these markets are 46% compared to official regulated prices and 57% compared to prices in the private sector, according to the Food Ministry.
On Wednesday, President Chavez encouraged small and medium-sized businesses that received Bicentenary Fund credits to connect directly with the state-run distributors in order to eliminate the speculative chain of intermediaries. “We must create mechanisms of distribution beyond the market,” said Chavez.
Over the past month, the National Institute in Defense of People’s Access to Goods and Services (INDEPABIS), along with the Bicentenary Women’s Front (an arm of the Women’s Ministry), and other government officials have carried out ongoing inspections of slaughterhouses, meat storage facilities, and butcher shops to root out price speculation and hoarding. The inspections led to sanctions against nearly 50 meat businesses, according to ABN.
Anahí Arizmendi of the Bicentenary Women’s Front said many butchers had denounced the meat distributors for marking up prices, and said this has also happened with cheese.
“We are proposing that the sellers organize working groups among the meat industry, the Bicentenary Women’s Front, the community councils, and INDEPABIS to resolve the situation and follow-up on distributors to avoid speculation,” said Arizmendi.
The National Association of Cattle Ranchers (FEDENAGA) says 58% of Venezuela’s meat was imported in 2009, and the country faced temporary shortages, with prices far exceeding government-controlled price caps.
This week FEDENAGA President Manuel Cipriano Heredia demanded that the government increase controlled prices by 30-40%. Meat Processors Association (ASOFRIGO) President Gonzalo Azuaje said a drought was responsible for recent meat shortages this year, not hoarding.
Private Property and Socialism
During the credit-granting ceremony on Wednesday, President Chavez said private enterprise is welcome in the “21st Century Socialism” heralded by his government, as long as it serves a social purpose and is not monopolistic.
Chavez said his administration, in line with the national constitution, accommodates “private property, whenever it serves to produce goods and services that satisfy needs and its surplus does not fall into the hands of a monopoly or contribute to the concentration of capital in few hands, exploiting consumers and workers.”
“If you treat workers like human beings and pay them what you should, and your product is the result of your work and that of the workers and it does not enter into the capitalist distribution networks that make it ten times more expensive, those private enterprises can exist in socialism,” said Chavez.