Empresas Polar SA, Venezuela’s largest privately-held company, said food production is at risk from record delays in the release of foreign currency by the government, fueling shortages of goods such as rice and milk.
Polar, which produces everything from beer to corn flour, can’t import more raw materials, equipment and packaging, the company said in an e-mailed statement today. Dollar shortages have increased the company’s debt with foreign suppliers by 194 percent in the past two years to $463 million, the Caracas-based company said.
Foreign currency reserves have fallen to a 10-year low in Venezuela, which imports about 70 percent of the goods it consumes. The government stopped publishing scarcity statistics in November, after the previous month’s data showed about one in five basic goods was out of stock at any given time.
President Nicolas Maduro and his late predecessor Hugo Chavez have accused Polar’s billionaire owner Lorenzo Mendoza of worsening shortages by artificially cutting production. Mendoza said the company is producing all it can and that food should not be politicized, after he met Maduro in May.
Venezuela’s foreign reserves have more than halved since 2008 to $20.5 billion this week.
Companies that can’t get dollars at the official rate of 6.3 bolivars per dollar have to pay about 73 bolivars on the black market, according to dolartoday.com, which tracks the rate at exchange houses on the Colombian border.
In the State of the Nation address on Jan. 15, Maduro said Venezuela will maintain the 6.3 bolivar rate this year, while strengthening alternative currency distribution mechanisms.
Venezuela About To Run Out Of Food Despite Fresh All Time High In Its Stock Market
Venezuela can be proud: while the US stock market has gone exactly nowhere in 2014, the Caracas stock exchange of the socialist paradise has continued kicking ass and taking names, just today printing a fresh all time high.
.. And the performance over the past year has been nothing short of breathtaking.
However, as everyone knows, there are trade offs to soaring stock markets in all socialist countries, be they paradises or not. By now everyone knows that Venezuela has had a rather systemic issue when it comes to procuring toilet paper, and from what we understand, the local population is still forced at times to wipe with stock certificates.
Alas, things are about to get worse. As a result of Maduro's recent policies which have Lenin, Stalin and Engels positive beaming from the grave, the country may soon add another shortage to its growing list of daily product in short, or no, supply. Food.
Bloomberg reports that Empresas Polar SA, Venezuela’s largest privately-held company, said in an e-mailed statement that foreign suppliers of food, packaging, and equipment have closed credit lines because of the government’s delays in giving the company dollars at official rate. Empresas added that dollar delays are now the longest since the introduction of currency controls in Feb. 2003.
In other words, with the country doing everything in its power to allocate dollars "fairly" (while making sure nobody has profit margins higher than 30%), very soon the biggest distributors of staples are about to run empty.
Oh well, at least they have their stock market and the "wealth effect"...
And now, in praise of socialist paradises everywhere, let's all sing along:
Venezuela President Nicolas Maduro accused billionaire Lorenzo Mendoza, the owner of the nation’s largest privately-held company, of exacerbating the worst shortages in at least four years and fueling inflation.
Empresas Polar SA, which produces everything from beer to rice, has cut output to make the economic situation worse, Maduro said yesterday, resuming a conflict with a company often rebuked by former leader Hugo Chavez.
“We have many signs that Polar has been cutting production and hiding products, pretending that nothing is happening, to create shortages of products such as pre-cooked corn flour,” Maduro said on state television. Corn flour is used to make arepas, or patties, a breakfast staple in the South American nation.
Venezuela’s scarcity index, which measures the amount of goods that are out of stock in the market, rose to 21.3 percent last month, the highest since the central bank started tracking the measure in April 2009. As shortages mount, inflation has accelerated, reaching 29.4 percent last month from 18 percent in November last year.
Brazil is studying emergency food sales to Venezuela, Marco Aurelio Garcia, foreign policy adviser to PresidentDilma Rousseff, said on May 9. Maduro this week visited Uruguay, Argentina and Brazil.
Maduro said he wanted to work with Polar to resolve the situation, while warning it to leave governing the country to him. He told Vice President Jorge Arreaza to arrange a meeting.
Polar said that it would attend the meeting and that it is willing “to cooperate with the search for solutions that favor the Venezuelan people,” according to a statement posted on its Facebook page.
Chavez repeatedly clashed with Polar during his 14 years in power. In 2010, he threatened to nationalize the company, saying that it and Mendoza were waging a campaign to undermine his government. Mendoza and his family are worth about $4 billion according to Forbes magazine. Polar isn’t “indispensable,” Chavez said.
By the time Chavez died of an undisclosed type of cancer on March 5, his government had nationalized more than 1,000 companies or their assets.
Venezuela’s mounting economic problems come after Maduro won the April 14 presidential election by 1.49 percentage points, the narrowest margin in 45 years. Opposition leader Henrique Capriles Radonski is contesting the result in the Supreme Court, while the electoral council finishes an audit of the votes.
After devaluing the bolivar by 32 percent in February, the new government has limited the supply of dollars to importers, deepening the shortages and pushing up the cost of goods that are available.
The authorities have only held one auction of foreign currency since introducing a new exchange system on March 27.
The bolivar has declined about 33 percent on the black market this year, according to Dolar Today, a website that tracks the exchange rate on the Venezuelan border with Colombia. The currency currently trades at about 26 per dollar on the black market, compared with 6.3 on the Cadivi system reserved for importers of essential items, such as medicine.
“I’ve got the precise information and demands so he gets on the ball, so he comes out to distribute the products, so he gets to producing,” Maduro said last night in an interview on the Telesur network. “You’ve got plenty of dollars, Mr. Lorenzo Mendoza, in case at some point there is some delay you have ways to cover it.”