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Is hoarding causing Venezuela food shortages?

As bizarre as it may seem in a country with the world's largest oil reserves, all agree food hoarding is a real problem.

Last updated: 02 Mar 2014 13:51
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Amid food shortages, a sign reads '6 cans of tuna per person only. Thank you,' at a Caracas supermarket [EPA]

Valencia, Venezuela - These are tough times for small shop owners like Darwin Calero. Surveying jars of mayonnaise, canned tuna and eggs at his stall in a working-class market of Caracas, he's worried product shortages and ongoing demonstrations are ruining his already-struggling business.

"Cooking oil, corn flour, margarine, milk, soap and detergent are the hardest things to get," he said. "Distributors come here but sometimes they have no products to sell."

Shopping at a similar outdoor market in Valencia, the country's third-largest city, Aleimar Gimez is also fed up.  "I woke up at 7am to find the food I need and I just got one bag [of corn flour]," she said. "The situation is worse than ever."

Protesters barricading roads around the country frequently site shortages as a cause of their anger.

Like virtually all problems in Latin America's largest oil producer, rhetoric around shortages and alleged hoarding follows a divisive political binary. President Nicolas Maduro blames hoarders and speculators for taking food out of the mouths of the nation, while the opposition contends economic mismanagement underpins empty shelves.

The Correa family blames government mismanagement for shortages [Chris Arsenault/Al Jazeera]

Al Jazeera interviewed more than a dozen stakeholders with direct knowledge of the problem, including store owners, consumers, farmers, economists and officials on various sides of the political divide.

Trying to decipher rhetoric from reality is never easy, but there seem to be four key factors driving shortages: the lack of US dollars and other currency quagmires, price controls, food being moved abroad where it can be sold for higher prices, and problems in the supply chain.

The most basic of bread-and-butter issues, shortages are debated in the press, at street markets, online and in homes across the country.

'Economic war'

Drinking cold beers with a group of mates under a midday sun in his working-class neighbourhood, Francisco Luzon blames the country's entrenched elite for the problems. "There is some truth about the economic war from private entities, as they want to increase profits," he said.

"Distributors buy large quantities of products here and sell them in Colombia," said Luzon, who runs a business producing iron gates for houses. "Selling contraband is a serious problem. People here are taking large quantities of products meant for Venezuelans and selling them in Colombia."

His friend, local businessman Onexis Valdespino, agrees. "One pack of Arena Pan [corn flour] is 6 bolivars in Venezuela. Once you have made the exchange [accounting for the 800 percent currency difference on the black market] it's 200 bolivars in Colombia."  

Venezuela subsidises basic food products, making them cheap when they are available. State support for basic products, coupled with exchange-rate issues, entices black-marketers and hoarders to sell food outside the country.

An investigation by Reuters confirmed the beer-fuelled Friday morning allegations; residents of border states in Venezuela drive subsidised local food into Colombia to sell for a quick profit, exacerbating domestic shortages.

Despite talk about shortages, outright hunger is not considered an issue in today's Venezuela. It's a marked change from 1989, when politics of the belly pushed residents into the streets in a series of bloody riots.  

The caloric intake of the average Venezuelan rose by 50 percent during the first 12 years of socialist governance, according to the National Nutrition Institute.

The government gives no dollars to anyone, that's why the shortages are happening.

- Manuel Correa 

But that's not good enough for many residents of what should be a wealthy country. In a house near the market where Valdespino and Luzon spent their Friday, four generations of the Correa family and some friends gathered on the porch of their modest home.

"The government gives no dollars to anyone, that's why the shortages are happening," Manuel Correa said, sending one of his nephews to a nearby store to buy soda. "It takes three months to get dollars [to import products] and there are rumours the government is out of foreign currency."

Short on dollars

Venezuela has a controlled currency, distorting usual import patterns. Officially, one dollar is worth 11.3 bolivars, but on the black market, a dollar in cash will fetch 80 bolivars. Businesses must apply to the government to formally access dollars; sometimes those bureaucratic approvals take months or never come at all, leaving warehouses empty.

International bond markets back Correa's assertion about low-dollar reserves. Moody's and Standard and Poor's have downgraded Venezuela's debt to junk status, meaning the world's financial elites don't think there is much left in Caracas' piggy bank. 

"We used to produce food here, three or four years ago, we could produce a lot," Francisco Garcia said as others on the porch nodded. "Then the government started interfering in farms, expropriating them. Now they don't produce and everything is imported."

Venezuela's National Land Institute aims to expropriate 350,000 hectares this year. The government says most of this is idle land, and small farmers need access.

"We have gotten a lot of opportunities; the government is dissolving the holdings of big landowners," said Celecio Virguez, a bean farmer from Lara State as he marched with supporters of Maduro in Caracas. "They have given loans to producers, training and education."

But critics say the government is destroying productive farms, and moving their supporters onto expropriated land.

Shop owner Darwin Calero can't buy basic products to sell in his store [Chris Arsenault/Al Jazeera]

"Now these farms are in the hands of the government, and look what's happening, everything is imported and it's too expensive," Garcia said.

There is no debate, however, that domestic food production has fallen in recent years.

Venezuela was, for example, a net rice exporter in 2006; by 2013 it imported more than 40 percent of its needs, according to the US Department of Agriculture.

Tensions over these shortages are reaching a boiling point in some communities. "Yesterday, two women in the supermarket got into a fight over a chicken," said Yestida Jimenez, an office assistant in Valencia. "The lines at supermarkets are ridiculous."

Hoarding 'evolving'

As bizarre as it may seem in a country boasting the world's largest oil reserves, serious observers on both sides of the political divide agree hoarding is a real problem.

"The idea of hoarding has been evolving," Katiuska Rodriguez, a journalist investigating shortages at El Nacional, a newspaper seen as pro-opposition. "First the government said businessmen were hoarding food. Then the line changed to saying people were hoarding food by buying too much at a time. Now they say that 40 percent of the food is disappearing from shelves because of bootlegging and sending it illegally to Colombia."

The government claims hoarding is part of an "economic war" launched by its capitalist opponents, but Rodriguez said the phenomenon is commercial, not political. Prices for basic products are regulated, she said, so traders prefer to sell on the black market for inflated prices, rather than to government stores or distributors.

"The last time I placed an order for flour, the distributor who deals directly with the factory didn't have any," said Marco Perez, a market vendor in Valencia. "So, I had to buy from informal distributors at higher prices. I have to pay a 100 percent markup on milk [compared to the official controlled price]."

The government and the big companies need to sit down and make a joint solution. They just better not run out of beer.

- Onexis Valdespino, pro-government businessman

Corruption in the distribution process involving "everyone from government officials to private firms" is a major problem, he said. "When you go to a big distributor, there are all kinds of people - Bolivarian Guard, National Police and others - who demand bribes. The government says everything is normal, but it's not."   

To try to combat hoarding and rampant inflation, running at 56 percent, Maduro's government issued the "law for fair prices" in January. Individuals selling products at a mark-up above 30 percent can face jail time.

"I support the new law," said Valdespino, the pro-government businessman. "They are just starting it now, so there hasn't been enforcement yet, but it seems like a good idea to me."

Large businesses see the situation differently. "Shortages are the result of attacks against industry, expropriations, freezing of prices, and now restrictions on currency purchases," Empresas Polar SA, a Venezuelan conglomerate, said in a statement last week.

Lorenzo Mendoza, Polar's boss and a billionaire tycoon, has been accused of hoarding and profiteering by pro-government activists. But that didn't stop Valdespino and his friends from downing beers produced by the firm.

Unlike leading opposition politicians, Mendoza sat down with President Maduro and other government officials at a national peace conference last week to try and address problems facing the country.

The fair prices law isn't the first time the government has tried to legislate products onto shelves, and many analysts don't think threats can fix problems with supply and demand.

"The private sector says one of the reasons for the scarcity is that the government isn't dealing properly with inflation," Rodriguez, the business journalist, said. "Some products [which have controlled prices] haven't seen price rises for two years."

Inflationary pressure

Monaca, a large firm producing corn flour, for example, has said prices are too low to make a profit. Its factories are also facing an ongoing expropriation process and demands from unionised workers for higher wages, increasing inflationary pressures.

A woman buys meat in a supermarket in Caracas [EPA]

Proctor and Gamble, the world's largest and most profitable consumer products company, says it's operating at a loss in Venezuela. The firm keeps producing, analysts said, because it has a large market share and hopes the situation will improve.

"Companies are saying they have raw materials to produce until March," Rodriguez said. "The government is trying to speed up the granting process for dollars. If that doesn't happen, companies will continue importing in the parallel market [where the exchange rate is far worse] at a loss."

Neighbouring Colombia and Brazil, which should be far-poorer countries per capita than Venezuela, do not have supply problems. But significant portions of both populations can't afford much of what's on the shelves. In any case, Maduro holds power in Venezuela and with tens of billions in oil rents still flowing into the country, the buck for basic shortages invariably stops with the president, regardless of what factors are driving scarcity.

Short on dollars, dependent on imports, and alienated from global debt markets, Maduro's government has boxed itself into a corner, regardless of which political or business actors hold direct responsibility for empty shelves. And until that's fixed, protesters are likely to stay on the streets.

"The government and the big companies need to sit down and make a joint solution," Valdespino said, his friends nodding in agreement as bustling shoppers bought melons, clothes and corn at the market.

"They just better not run out of beer."

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