♠ Posted by Emmanuel in Latin America at 3/05/2009 08:01:00 AMThe press wires are agog with the news that Hugo Chavez has decided to expropriate the Venezuelan operations of American food titan Cargill. Many including myself are fascinated with the secretive corporation--the largest privately held US concern with $120B in revenues. Its tightly held nature has made it regular fodder for activists, especially during the 2007-08 run-up in food prices. For more, see this recent backgrounder from the Minneapolis Star-Tribune. (There's more environmentally related stuff to get into regarding Cargill, from GM food to rainforest depletion that I won't get into here.)
Despite the recent modulation in food prices, not all concerned are happy, like Chavez. Recently buoyed by winning a referendum on enabling more term extensions--enabled by beating up student protesters among other things--he has returned to his usual business of expropriation. Via Reuters:
President Hugo Chavez seized a unit of American food giant Cargill on Wednesday and threatened to take over Venezuela's largest private company, renewing a nationalization drive as the OPEC nation's oil income plunges...Chavez wants Cargill to produce not just parboiled rice but also varieties covered by price controls to feed his Bolivarian revolution. Likely a money-losing enterprise, Cargill has not complied, hence the order. It seems Chavez's jihad on economics--circumventing market prices has not often worked--is resulting not in lower prices but in lower availability of goods. Unless the Venezuelan government is the world's most efficient producer of--let's do a quick count--food staples, oil, electricity, steel, cement and telecommunications services, I don't think improvements are in store for Juan Q. Publico. Talk about "political risk."
The moves to tighten the government's grip over the food supply were criticized by the private sector and many economists who say the state distorts the supply chain and contributes to food shortages. Chavez's clash with the food companies, demanding they produce cheaper rice, came less than three weeks after he won a referendum on allowing him to run for reelection and marked his first nationalization in seven months...
U.S. company Cargill, which operates one rice mill in Venezuela, said earlier in the week it was expecting a visit from officials even though it does not produce the type of rice that is at the center of the dispute.
Cargill said on Wednesday night it was "respectful" of the Venezuela decision but seeks talks to resolve the situation. "Cargill is committed to the production of food in Venezuela that complies with all laws and regulations," Cargill spokesman Mark Klein in Minneapolis, Minnesota, told Reuters. "Cargill expects the opportunity to clarify the situation with the government and is respectful of the Venezuelan government decision," Klein said. "The rice mill was designed exclusively to manufacture parboiled rice, which the company has done at this site for the last 7 years and elsewhere in the country for 13 years."
Chavez said he ordered the takeover because Cargill -- one of the largest privately owned U.S. companies -- avoids producing basic rice that is subject to government price controls. "Prepare the decree, we are going to expropriate Cargill. We are not going to tolerate this," Chavez said.
It was not clear if Cargill's other Venezuelan food units would be affected. Cargill has approximately 2,000 employees at 22 locations across Venezuela and operates 13 manufacturing plants including oilseed and animal feed processing...
Chavez has typically paid companies adequately after ordering their takeover. But several nationalizations last year have not been implemented and this year Chavez has said he would only pay for seizures with government debt paper.
While Chavez's nationalizations tend to be widely supported, periodic shortages of basic goods have hurt his popularity in recent years. Venezuelan shoppers have faced shortages of white rice sold at a low government-set price in recent weeks, while stores have ample supplies of parboiled rice which is not subject to price controls.
Venezuela's rice millers association blames the shortages on insufficient supplies of the grain, while the government says the mills are deliberately producing small quantities of white rice to skirt price controls.