The army has been ordered to intervene in all rice factories in the Latin American nation.

'Violating laws'

Elias Jaua, the agriculture minister, said that Empresas Polar, Venezuela's largest food producer will be affected.

Jaua said that occupation of factories will be the first move beginning with Primor rice, owned by Empresas Polar.

"It is violating the laws and rules of the nation," Jaua said.

Such allegations were denied by Guillermo Bolinaga, Polar's legal director, on Friday.

He said that the accusations were "illegal and arbitrary".

Cargill, the US food giant which owns plants in Venezuela, could therefore be affected.

Nationalisation threat

Chavez said that some firms had threatened to paralyse production, but that any doing so would be taken over by the government.

"I don't have any problem expropriating," Chavez said.

"And I'll pay them with paper, too. Don't think I'll pay them with hard cash."

Venezuela has price controls on many basic products to combat inflation which hit more than 30 per cent last year.

Chavez raised the price of rice in 2008 to just over US$1 per kilogramme.

He has previously accused suppliers of hording rice to raise prices.