Venezuelan socialism: food fight - The Economist

SOMETHING is rotten in the state of Venezuela: over 2,300 container-loads (and counting) of decomposing food, imported by the government last year and never distributed. The scandal is particularly embarrassing for President Hugo Chávez, since it comes amid growing shortages of basic foodstuffs in state-run grocery chains. But rather than rethink his statist food and agriculture policy, the president has declared “economic war” on the private sector.

The cargoes came to light last month when state intelligence agents were investigating the theft of powdered milk. The government admits that 30,000 tonnes of food are rotting in the port of Puerto Cabello alone. Opposition media put the total so far at over 75,000 tonnes, or around a fifth of what PDVAL, the state company responsible, imported in 2009. The company’s former president, Luis Pulido, has been arrested for corruption and up to 20 other officials may suffer the same fate.

PDVAL is a subsidiary of Petróleos de Venezuela, the state oil giant. It was created in 2008, in an oblique recognition that another state-run food chain, Mercal, was failing to do its job. PDVAL’s grandiose objective is to achieve “full food sovereignty” and to stamp out what Mr Chávez claims is “hoarding and smuggling” by the private sector. Since 2003, the government has imposed price controls on many foodstuffs. In that year the government defeated a business-led strike which came close to paralysing the economy. The private sector has since faced mounting harassment.

The results have been persistent shortages and soaring inflation: the price of food and drink rose by 21% in the first five months of 2010, according to the Central Bank. Elías Jaua, the vice-president, this week blamed inflation on “speculators [linked to] political interests seeking destabilisation as part of a campaign strategy”, before a legislative election in September.

Basic goods are scarcer in Mercal and PDVAL shops than in private supermarkets, according to a survey by Datanálisis, a polling company. But the government is stepping up expropriations of farms, food manufacturers and distributors, in a bid to achieve what it calls state “hegemony” over the food supply. On June 7th it announced the takeover of 18 more food companies accused of violating regulations.

All eyes are now on Empresas Polar, a family-owned giant that is Venezuela’s biggest private food-and-drink company. Polar, which claims to generate almost 3% of the country’s non-oil GDP and has 19,000 employees, complains of harassment. It says its plants and offices were visited 220 times by government inspectors in the first five months of this year. In late May, the government confiscated 114 tonnes of food from a Polar warehouse, alleging hoarding (which the company denies).

Mr Chávez has often threatened Lorenzo Mendoza, Polar’s billionaire chairman, with expropriation. But as the rotting food shows, his government is better at destroying the existing order than at creating a viable alternative. Some 70% of Venezuela’s food is now imported, which generates ample opportunities for graft. Most of the farms and food companies the president has expropriated suffer from inflated payrolls, declining productivity and rampant inefficiency. His threats against Polar are rejected by a well-paid and loyal workforce. The company is one of the biggest remaining obstacles to the installation of Cuban-style communism in Venezuela. But to seize it now might well lose Mr Chávez the legislative election. As Venezuelans say “love, with hunger, doesn’t last.”

The Americas .