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Venezuelan government seizes Cargill pasta plant

By Caroline Scott-Thomas , 18-May-2009

The Venezuelan government temporarily seized a Cargill pasta processing plant on Friday, claiming that the food giant has broken regulations governing food pricing, according to the Associated Press.

The Chavez government has imposed price checks on a number of staple food items in Venezuela – a move it says is necessary to ensure its poorest citizens have access to basic foods and to curb inflation levels, which reached 28.3 percent last month, the highest in Latin America. Businesses have complained however that the cheap prices make it difficult to make a profit and the price checks are off-putting to outside investors.

The government has said it will run the US-owned Cargill plant for the next 90 days to oversee operations and make sure that it meets the government-imposed threshold of producing at least 70 percent of its pasta at approved prices.

Speaking from Cargill’s plant in the coastal state of Vargas on Friday, deputy food minister Rafael Coronado was reported as saying "there was a clear transgression of the law,” in a television conference in which he appeared flanked by soldiers. He added that the government could choose to take further action against Cargill after the 90 day period.

Cargill has so far declined to comment.

Rice plant seizure

The takeover follows a similar so-called temporary move in March, when the government seized a Cargill rice plant producing parboiled rice which it was selling for more than the approved price for basic white rice. The company’s rice plant was nationalized a week later. Cargill said that it had not broken government pricing rules because it was not producing the type of rice that was subject to the regulations.

Chavez has also threatened to take over food processor and brewer Polar, Venezuela’s largest private employer, and has seized several oil service companies in the past week. Chavez is backed by high approval ratings in Venezuela of above 60 percent and won a referendum in February allowing him unlimited terms in office as long as he continues to win elections.

‘Unattractive market’

In a recent report on investment opportunities for food manufacturers in Latin America, specialist market research organization Leatherhead Food International said that Venezuela is “perhaps the only unattractive market within the region”. Although the country has a relatively high per capita gross national income of $11,920, Leatherhead based its assertion on the continuing government conflict with business, and evidence of large-scale nationalization.

Cargill employs around 2,000 people in Venezuela where it has 12 food processing plants.

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