Tuesday, February 19, 2008

Why there are food shortages in Venezuela

This blog has reported often on the erratic supplies that one can find at any Venezuelan grocery store for now two years. The reasons are of course bad agricultural policies that result in a dearth of investments in the country side. The situation IS NOT created by an increase of purchasing power of the population through the Misiones handouts. These exacerbate the problem, they do not create it, I repeat.

Today there are a few recent articles worth noting in El Universal. The first one tells us that the very own government numbers speak of a 0.2% growth in the agricultural PIB for 2005-2006. This at a time where the economy was growing by a 10%, courtesy of the import boom due to high oil prices. That is, as it has been pointed out often enough in this page, the economy grew because imports grew and had to be distributed around the country, NOT because production grew. Currently most industries are working at full capacity but very few new industries are being built. While the population keeps growing.... That article also cites the following number: in 2003 Venezuela imported 1.5 billion USD in food; the number for 2007 is 5.5 billion... That is, all the increase in food consumption has been done on food import, not food production. We are eating the oil we produce and export instead of investing it for our future. You do not need to be a rocket scientist to imagine the long term consequences of these numbers.

Amazingly, in 2005-2006, the loans for agricultural production from banks have increased and yet production has gone down! In 2006 Bs 2.54 billions were loaned by the banks (by law Venezuelan banks are obliged to loan a certain percentage of their loans to agricultural activities). The 2005 number was Bs. 1,53 billions. Yet that 66% increase in financing translated into a 6.1% reduction in agricultural production volume.

Why is the production failing to grow? Some of the causes are seen in the other recent articles.

Producers are harassed and threatened all the time. Why should they invest and risk their own money when the state after any stupid utterance from Chavez could seize your business? This week, Polar the main giant feeding Venezuela was once again threatened as it was accused of hoarding. Polar quickly pointed out that it is not in the business of producing sugar, nor milk, meat or poultry, not even coffee or eggs which are all the most notorious missing products whereas the supply of Polar made products is more regular. But see, chavismo needs a scapegoat for its incompetence and even if Polar does not produce a single gallon of milk, let's accuse them anyway. I let you imagine the morale of the Polar personnel after such attacks, and the plans of expansion that will be duly shelved.

That governmental inefficiency is, by the way, aggravated by corruption. Mercal, the government distributing system reports 397 cases of corruption under study. Obviously when you must import so much food in such a hurry, you create a prime field for corruption to bloom. Besides, when it is so easy to import why should Mercal directors visit hot sunny production facilities to promote local goods production where they will sweat profusely when they can order a container of beans from the comfort of their AC office?

I could find many more articles and many more ways to explain the government failure in promoting production, but El Universal this Sunday nailed the coffin reporting on El Charcote abandon. Long time readers of this blog might remember a long study I made in 2005 where I discussed the policies of land seizure in Venezuela, including the famous productive cattle ranch of El Charcote (many other articles on this subject appear if you use Charcote as a search word for this blog). I could say again that I was sort of prophetic as all the land seizures of 2004 and 2005 only resulted in a drop of agricultural production. El Charcote stands now mostly idle, the farmers brought to cultivate the seized land having left or limited themselves to put up a shack where to live and hold their assigned land in case they can sell it someday.

I can assure you of one thing because it is my line of work: some agricultural sectors have prospered under chavismo, and they are all the ones linked to some agribusiness ventures in the hands of private investors. Such is Polar working full time or other sectors such as the poultry industry, in spite of price controls or such as corn growing associated with these agribusiness and that the government has not dared to touch yet. The global meager result is due to those policies of land seizure who have destroyed cattle ranching, meat and milk production, and sugar cane fields (among others). But do not hold your breath expecting Chavez to recognize his grievous mistakes, a true betrayal to the country of even worse consequences than the one he is perpetrating with PDVSA: soon we will not have enough oil to but all the food that we will need to import.

-The end-

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