On Venezuela’s Shortages

Q&A from the Inter-American Dialogue's Latin America Advisor

March 30, 2009

Ambassador Otto J. Reich

Venezuelan President Hugo Chavez on March 4 ordered the expropriation of
a Cargill rice processing plant after demanding that food companies
produce cheaper rice. He has also threatened to nationalize the
operations of the country's largest food company, Empresas Polar. What
is motivating Chavez's desires to seize these businesses? What will be
the consequences of Chavez's pledge to pay for expropriations in bonds
instead of cash? How will these actions affect domestic and
international businesses currently operating in Venezuela?

Otto Reich: "When authoritarian governments make
mistakes, they often compound them with more serious errors. For
example, in 1982 the Argentine military dictatorship attempted to
distract the people from its incompetent and unpopular rule by invading
the British-held Falkland Islands, a popular, nationalistic blunder. The
silver lining of that invasion was the end of military rule after the
Argentine defeat. Hugo Chavez now provides the latest illustration of
the demagogues' art. After creating food shortages by forcing
artificially low prices on producers, Chavez blames the victim, the
producers. Chavez, the man who has presided over the dismemberment of
the goose that laid the golden Venezuelan egg-the national oil company,
PDVSA-is applying his mentor Fidel Castro's proven method of destroying
a national economy. PDVSA today is producing only two barrels of oil for
every three it generated before Chavez, and production continues to
fall. The seizure of the Cargill plant is only the latest Chavez muddle
that will further reduce Venezuela's wealth. With oil income at a
fraction of last year's, Chavez should be encouraging private
enterprise, not strangling it. But Chavez's ideology blinds him to the
disaster that his 21st-century socialism foretells. He only need examine
Cuban food production statistics of the 20th century to see that under
'socialism,' Cuba dropped from the top three Latin American per capita
protein consumers in the 1950's to the bottom three today. Let Chavez
continue to distract; there may be a silver lining in the Venezuelan clouds."


P: +1. 202.333.1360

E: [email protected]

A: 1101 30th Street NW Suite 500 Washington, DC 20007