UPDATE 4-Venezuela's Chavez seizes U.S. food giant unit

Wed Mar 4, 2009 11:07pm EST

* Cargill takeover renews Chavez nationalization drive

* Tightening control over food comes after some shortages

* Chavez emboldened after referendum victory last month

* Cargill "respectful," seeks talks to resolve situation

(Adds Cargill statement, background, paragraphs 8-10, 13)

By Patricia Rondon

CARACAS, March 4 (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'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.

"I warn you this revolution means business," said Chavez, whose government has struggled with lower oil income and minor food shortages this year.

The anti-U.S. president, who has nationalized swaths of the economy, is popular among the poor for pressuring companies to produce cheap goods and for government programs that provide subsidized food in city slums.

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, an ally of communist Cuba, recently seized some rice mills belonging to Polar, Venezuela's largest private business, after accusing the food industry of skirting his price controls and failing to produce enough cheap rice.

U.S. company Cargill [CARG.UL], 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.

Polar, one of Venezuela's best-known companies that produces many its most popular food and drink brands -- including its top-selling beer -- has vowed to take legal action over the rice mill takeovers.

NATIONALIZATION

Chavez has often followed through on his nationalization threats, taking over oil, electricity, steel, cement and telecommunications companies. Sometimes, however, threatened companies have averted seizures by bowing to Chavez's demands.

On Wednesday, he warned Polar to back down.

"If they get funny with us ... we will go for expropriation and pay them with debt bonds," Chavez said during a televised Cabinet meeting.

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.

On Wednesday, Chavez also ordered his ministers to inspect companies producing goods ranging from toilet paper to cars,which have been hard to buy at times in Venezuela.

Venezuela is the third-largest buyer of U.S. rice. (Writing by Saul Hudson, Editing by Frank Jack Daniel and Eric Walsh)

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