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Venezuela Food and Drink Report Q3 2009
Business Monitor International, July 2009, Pages: 70
The Venezuela Food and Drink Report provides industry professionals and strategists, corporate analysts, food and drink associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Venezuela's food and drink industry
The ongoing contraction in investment in Venezuela and slowdown in private consumption support the publishers view that the country’s economy will now contract by 5.6% in 2009 and 1.7% in 2010. The economy is beginning to slow owing to declining oil production, growing structural problems, declining private investment and of course the global economic crisis. The local business environment is now deteriorating rapidly, and the recent success of President Hugo Chávez's constitutional amendment referendum bid looks likely to further exacerbate the alienation of private enterprise. Indeed, in US dollar terms, per capita consumption of food is now expected to contract by 6.6% this year, by 22.6% in 2010and by 4.4% in 2011, before starting to grow again in 2012, reaching US$522.2 in 2013, only then reaching a level seen back in 2006.
Chávez has recently made nationalisation of food production a priority. The government has already nationalised a rice processing mill belonging to US food giant Cargill and seized control of a plant belonging to Empresas Polar, accusing private producers of 'mocking' the Venezuelan people by hoarding rice to evade government-imposed price caps, which caused food shortages. Polar has called for talks with the government after Chávez threatened to take over the firm, on charges the company was not producing enough grain at government-regulated prices. In response to the threat, Polar issued the following statement: ‘We have maintained that the best way to increase Venezuela's food (production) is through dialogue and close collaboration between the government, agricultural producers ... and consumers.’ This was followed by an order to seize control of 1,500 hectares (3,700 acres) of land owned by Ireland-based packaging giant Smurfit Kappa Group, with the government insisting that the plot should be used to produce food rather than paper.
In mid-March, Chávez gave Coca-Cola Femsa two weeks to vacate a plot of land which the government wishes to use for social housing. The plot is in Western Caracas and is currently used by the firm as a parking lot from which it delivers products to around 9,000 customers. The Coca-Cola bottler has said it is willing to negotiate over relocation, but will be worried that the move could set a precedent at a time when the Venezuelan president is stepping up his drive to nationalise the country's system of food production. Mexico-based Femsa will be particularly concerned by the latest development, as the firm has had a strained relationship with the Venezuelan administration ever since it entered the market. Several National Assembly legislators have previously suggested that the government should confiscate Femsa's Venezuelan bottling plants and produce 'Venezuelan soft drinks' if the company does not comply with worker demands. With food nationalisation a government priority, and anti-US sentiment as strong as ever, the prospect cannot be completely discounted.
Given that this sort of assault on private enterprise looks likely to continue, a much sharper decline in investment spending in Venezuela cannot be ruled out. The uncertain inflation outlook for the country will also undermine long-term investment projects.
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