Venezuela Experiencing Shortages of Many Basic Food Products as Dropping Profit Margins...

Venezuela Experiencing Shortages of Many Basic Food Products as Dropping Profit Margins Lead to Plant Closures

DUBLIN, Ireland--(Business Wire)--
Research and Markets
(http://www.researchandmarkets.com/reports/c88918) has announced the
addition of Venezuela Food and Drink Report Q2 2008 to their offering.

The Venezuela Food Drink Report provides independent forecasts and
competitive intelligence on Venezuelas food and drink industry.

The idiosyncratic food policies of Venezuela's president Hugo
Chavez show no signs of abating; indeed developments in 2008 suggest
that the government may actually be stepping up its policy of food
nationalisation. These policies have moved from threatening private
firms' profits to threatening their very existence, with Chavez making
worrying statements about the possible appropriation of assets. With
ongoing food shortages one of the main threats to Chavez's popularity,
Venezuela's president is unlikely to be satisfied until a large
percentage of food production is in the hands of the state.

In the oil driven economy, government and consumer spending is
rising on the back of bumper oil receipts. However, a disparity
between supply and demand has pushed inflation up to 22.5% in 2007 -
the highest level in Latin America. This is a considerable problem for
the low-earning majority, who have as yet not seen their incomes rise
in line with the country's rising GDP. To address this threat to his
popularity Chavez created Mercal, a new nationalised food retailer,
imposed a web of price controls and imposed export limits on many
foods. Government-set prices have hardly risen since they were
introduced in 2003, leading many producers, who are unable to operate
at a profit, to close down plants and reduce production levels. This
drop in production has led to shortages of many basic food products
including milk, eggs, meat, chicken and wheat flour.

Empty shelves are a big threat to the government's popularity and
in 2008 Venezuela's president has made several remarks that suggest he
is now considering drastic moves to shore up supplies. In February,
Chavez threatened to seize the assets of the country's milk producers,
singling out Italian-based dairy giant Parmalat and Swiss-based
Nestle. Chavez suggested that these firms may pressurise or blackmail
Venezuelan farmers to obtain their milk for export and claimed that
state-owned dairy firms were having difficulty sourcing milk because
the supplies had already been illegitimately secured by international
companies. This was followed up by a warning to the country's largest
food producer Empresas Polar. Chavez claimed that the company was
hoarding food and not abiding by price controls and called it a 'clear
example' of a business that could be taken over. The firm responded to
this attack by revealing that government price controls do not apply
to most of its products, and those that do have fixed prices are sold
wholesale to supermarkets, leaving the markets, not the company,
responsible for any overcharging. However, with Chavez anxious to take
his country further down the road towards socialism - and state owned
food production part of that ideal - logical arguments may not be
enough to counter the threat of nationalisation.

For more information visit
http://www.researchandmarkets.com/reports/c88918

Source: Business Monitor International

Research and Markets
Laura Wood
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