Chavez tightens control over food sector

CARACAS, Venezuela - President Hugo Chavez's government has nationalized two coffee processors and is planning to purchase a majority stake in a third as it moves to assert greater control over Venezuela's strictly regulated food sector.

Presidential decrees published in the Official Gazette on Wednesday ordered the takeover of Fama de America and Cafea. Government officials have said they also hope to purchase a majority stake in a third company, Cafe Madrid — guaranteeing Chavez's government control over more than half of Venezuela's coffee industry.

Company executives have not been available to comment on the announcements, and it was not clear whether they would be compensated.

In addition to nationalizations in the electricity, cement and oil sectors, Chavez's government has nationalized some 2.5 million hectares of land considered to be idle or whose titles were in doubt. In the past two years, the government has also purchased a major dairy company and expropriated a rice processing plant owned by U.S. food giant Cargill Inc.

It is now asserting control over coffee companies it accuses of acting as monopolies and flouting price controls by smuggling coffee into Colombia — allegations the companies deny.

Price controls are among the dozens of laws and regulations that Chavez's government has imposed on the food sector. The government says the controls are necessary to guarantee affordable supply in the face of 27 percent annual inflation. But food prices have increased 26.5 percent in the last twelve months despite the regulations.

Former agriculture minister Hiram Gaviria told The Associated Press that the government's policy of nationalizations and strict price controls have reigned in investment in agriculture, causing production to fall and obliging the government to boost food imports to meet a rising local demand.

He said the government is hoping the coffee takeovers will end shortages, estimated to require imports of nearly 51 million pounds (23 million kilograms) of coffee this year. Venezuela is importing the product, a staple of the Venezuelan diet, "for the first time in 200 years," Gaviria said.

But Rosa Santoromita, a coffee growers' union leader in southwestern Merida state, said she doubts the recent takeovers will resolve problems caused by price controls.

The government-fixed price of $2.68 a pound ($5.90 a kilogram) of raw coffee beans doesn't cover the cost of production, estimated at more than $3.77 a pound ($8.30 a kilogram), Santoromita said. And as long as prices remain low, producers don't have any motivation to expand their crops, she said.

While the government has said it will guarantee the rights of workers at the nationalized companies, Yeni Pena, an administrative employee at Fama de America, told The Associated Press that "you only have to watch the news to know this is a lie."

"They're suggesting that the more than 400 workers are in agreement, and this is totally false. The ones in the union are in agreement," she said. "Many people are very worried and very sad."

Gustavo Martinez, a union leader at Fama de America, told the state-run National Radio of Venezuela that the company's workers were willing to work with the state.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.