Chávez Destroying Venezuela’s Food Industry

The economic situation in Venezuela hasn’t much improved since Hugo Chávez imposed currency and price controls last January. Food shortages and shopping frenzies persist while government monopolies and restraints threaten to choke private enterprise.

The president’s policy so far has been a familiar one: blame the capitalists. In January he expropriated six Exito stores owned by the French Groupe Casino. One month later, he seized Cada, another Casino chain, with 35 supermarkets and eight distribution centers in Venezuela.

The food scarce is imperiling Chávez’ much cherished food-for-the-poor program. In the past years, he has not only expropriated stores but food processors and over six million acres of farm land and ranches, all the while propagating to his people that government is better equipped to feed the Venezuelan masses than the market can ever be. Yet production has suffered. Between 1999 and 2008, per capita, sugar cane dropped by 8 percent; fruit by 25 percent and beef production by so much as 38 percent.

While oil prices skyrocketed, Chávez was able to compensate for the decline in production rates with imports from neighboring Argentina and Brazil. During the aforementioned period, food imports rose from amounting to $1.3 billion to $7.5 billion; more than two-thirds of what Venezuelans consume.

When the price of oil went on the decline, the National Assembly reacted by enacting legislation that allows the president to expropriate virtually any enterprise that may be deemed to be of national interest. Exito’s alleged misdeed? Raising food prices following January’s currency devaluation. Then, in March, the government did allow stores to boost prices, by so much as 35 percent. Exito, unfortunately, couldn’t hold out that long.

Chávez announced that he intends to transform Exito’s outlets into “socialist megastores” that sell, besides food, appliances and clothing. “The measure is one further step in the Venezuelan state’s policy of transforming capitalism into socialism,” he said on one of his weekly televised addresses.

Few businessowners dare to speak out against the regime, fretful that their enterprise will fall victim to state expropriation next. Meanwhile, they have to compete with government-run groceries which sell basic goods at 40 percent lower prices and cope with intimidation and oversight. So-called “community councils,” which are neighborhood watch groups, can order “inspections” at any time. Tax authorities, the consumer protection agency, workplace safety inspectors, even the National Guard, regularly harass shopkeepers and have the power to shut them down for even the slightest offense.

Unsurprisingly, Chávez’ approval rating has plummeted throughout it all, down from 70 percent three years ago to barely 50 percent today. Although he doesn’t face reelection until 2012, Chávez does intend to maintain his party’s majority in parliament which is up for election next September. A majority of the people oppose the takeovers now, realizing that they aren’t doing any good. But, for the time being, the socialist dream marches on in Venezuela.

Chávez Shuts Down Shops

Until a few years ago, Venezuelan dictator Hugo Chávez was sometimes described as the benevolent kind but in recent years, his reign has grown ever more authoritarian. He abolished presidential term limits, withdrew Venezuela from both the World Bank and the International Monetary Fund in 2007, nationalized the oil industry and built relations with countries as Iran, Libya and Syria — not exactly the most friendly of nations.

In Venezuela, opposition against what may turn out be a president-for-life is mounting however. Protests are far from an unusual sight in the streets of Caracas. Tens of thousands of Venezuelans have already abandoned the country: artisans, engineers, lawyers, managers and scientists all fled socialism en masse last year. So much as one million people are estimated to have left the country since Chávez came to power. The exodus sabotages the country’s future and no industry is hit harder than oil on which the Venezuelan economy still thrives primarily.

Unsurprisingly, the voice of the opposition is silenced. Dozens of radio stations and two television networks have been pulled off the air already with Chávez attempting to pass legislation that will further penalize “media crimes.”

Last week, amid enduring economic hardship, Chávez devaluated the currency, cutting the exchange rate of the bolivar against the dollar by half for oil incomes and for goods deemed nonessential in order to bolster the state coffers. Currency controls have been imposed to prevent capital flight while inflation is likely to sour.

Earlier today, authorities backed by soldiers closed dozens of retail outlets for price gouging after a shopping frenzy had plagued the nation in reaction to the currency devaluation. Thousands of shoppers mobbed stores during the past week to snap up imported television sets and computers, worried that their savings would lose value soon. Chávez responded by sending troops to monitor prices in shopping districts. So much as seventy retailers were shuttered while raids continue this very day.

It is the typical cycle of government intervention at work: regulation is passed “for the common good”; the regulation fails, or works only temporarily; the private sector takes a beating; the economy turns down — at which point more regulation is proposed to save society from the supposed ills of the “free market.”

Chávez’ struggle against free-market capitalism and what he calls the “imperialism” of American businesses operating overseas is well recorded as are his numerous social programs. As is typical of any movement that begins by “redistributing” wealth, Caracas ends up distributing sacrifices these days. The industrialists were first to fall victim to the new regime. Then came the journalists and the independent thinkers, many of whom fled the country in response. Shopkeepers and entrepreneurs in general are next as today’s news amply demonstrates. In all likelihood, the persecution of his minority will fail however, finally undermining Chávez’ crusade against free enterprise because there are simply too many retailers.

Sadly, the Venezuelan people will bare the burden in the end as their country is internationally isolated and their standard of living declining sharply — all, Chávez insists, because of that evil, American capitalism.