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May 1, 2015 | 21:26 GMT

3 mins read

Venezuela Considers Food Distribution Takeover

A customer picks a jar of mayonnaise manufactured by Empresas Polar.
(Photo by MIGUEL GUTIERREZ/AFP/Getty Images)

Unconfirmed reports say the Venezuelan government is planning a takeover of distribution networks belonging to Empresas Polar, the country's largest private food production and distribution firm. Polar CEO Lorenzo Mendoza sent an open letter to Venezuelan President Nicolas Maduro on April 30 saying the company was open to discussing Venezuela's food supply problems as well as possible solutions. According to one report, the Venezuelan Food Ministry may be planning to seize Polar's distribution networks, intending to redirect flows of food products to state-owned supermarkets, where such products are becoming increasingly scarce. Redirecting to these stores could temporarily provide food items to the poorest Venezuelan voters ahead of this year's legislative elections. While it is not entirely clear that Caracas has decided to take such measures, it is plausible given the government's needs.

If Venezuela's ruling party intends to take control of Polar's means of distribution, it is probably doing so for electoral purposes. The scarcity of food and other products seriously affects the poorest segments of Venezuelan society, which have historically voted for the ruling United Socialist Party of Venezuela. The current food shortages have lasted several years, persisting in part because of price controls in the thriving black market and impacted by smuggling operations to Colombia. Public stores selling food at heavily discounted prices have experienced major shortages, and many Venezuelans have turned to the black market to buy provisions.

But the markup on food items sold on the black market is significant. A month's worth of food bought on the black market can be several times more expensive than supplies bought at a state-owned store. Rampant inflation continues to drive that differential up, which strains the ability of poor Venezuelans to purchase certain food items. This could hurt Maduro's already low approval rating, which hovers between approximately 20 and 25 percent of voters. 

If Maduro's strategy is implemented, it could give him a boost in polling numbers, much like the redistribution of electronic and household goods did before the municipal elections of 2013. But any advantage would probably be short-lived. Venezuela's food scarcity is the product of long-standing economic distortions resulting from highly subsidized food prices that cannot be increased without incurring major political costs. Expropriations discourage private land cultivation and lower the yield of croplands that have been redistributed to private individuals, mainly because they lack the resources needed to raise productivity. If Caracas' intervention severely disrupts Polar's distribution networks, food scarcity could worsen in the long term. And consequently, if the acquisition does take place, it would only temporarily postpone the effects of shortages on the Venezuelan public.

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