Venezuela: Price regulation, food scarcity,
speculation and socialism

By Erik Demeester in Caracas

Wednesday, 16 May 2007

http://www.marxist.com/venezuela-scarcity-speculation-socialism160507.htm

Reading Lenin, who made a call to the Russian people to struggle against the scarcity of meat and bread, we notice the same method; a hundred years have passed but they did the same with the Russian people; the old capitalist state is still alive... I'm not referring to the State but to the capitalist situation, the system, above all in the economic field and this is another part of the subject, socialism needs to enter in the economic arena, if it doesn't it will not be socialism that we are building, it will not be a revolution we are making." (Extract from Hugo Chavez's speech at the first meeting of the "Propulsores" of the Partido Socialisto Unido - United Socialist Party - on March 24, 2007.

Regular shortages of basic foodstuffs (eggs, milk, sugar, meat, chicken, cooking oil, etc) both in public and private markets and supermarkets are part of the low intensity economic war going on against the Bolivarian revolution. The oligarchy, especially in the agro-business sector, is organising this open economic sabotage. This is not new, but since the beginning of the year the intensity and regularity of "organised scarcity" has clearly increased. It is a real tug-of-war between revolution and counter-revolution on the strategic terrain of food supplies. This confrontation is undermining the efforts of the government to guarantee food supplies. It is also a field where some weaknesses of the revolution come to the fore. The mere fact that the main food processing plants, transport and distribution networks are still in private hands - that is, in capitalist hands - is a serious threat against the revolution.

Price controls threaten profit margins

One of the measures taken by the government, price regulation of food to combat high prices, is the explanation given by the bosses in agro industry and trade for those shortages.

"Traders in the public markets of Guaicaipuro and Quinta Crespo are forced to sell thirty eggs at the regulated price of 8,302 bolivars. However, those same thirty eggs have been bought for 7,830 bolivars, which leaves a margin of 500 bolivars. Giovanni Balducci, president of the Asociación de Concesionarios del Mercado de Guaicaipuro, points out that the problem comes from the fact that the food industry does not respect the price regulation which imposes a price of 89,000 bolivars for 360 eggs. In practice we buy the eggs at 94,000 bolivars. The eggs are sold at the correct price but they add new bills so that the final price increases." (El Universal, April 18, 2007)

A similar pattern can be seen in the sale of meat whose availability on the markets is irregular and is at prices above the official price established by the government.

Some argue that increased demand is causing those shortages. "In the past we consumed 21kgs of chicken per capita now it is 35kgs per capita. The same is taking place with eggs. In the past we consumed 115 eggs a year, now it is 136. Again with pork, where 1.5kgs kilo were consumed in the past, now it is 3.5kgs" says Gustavo Moreno, president of Fedeagro, the bosses' organisation in agro-industry. Without a doubt, increased purchasing power has fuelled demand. However, this does not explain the food scarcity.

"Price controls are totally divorced from the real trading situation," pleads the leader of Fedeagro. What he really means is that price controls, if applied, are reducing profit margins especially for the big food industry and traders.

National industry crippled

A closer look at the state of the milk industry will give us more clues as to the real underlying mechanisms behind the ‘shortages'. (Based on an article in El Universal, April 22, 2007). Almost two thirds (64,3%) of the productive capacity of the industry is standing idle. Six plants, with a total daily capacity of 4.7 million litres of milk, are producing only 1.7 million litres or 35.7% of total capacity.

The figures provided by the Chamber of Commerce of the Milk Industry (Cavilac) are even more revealing. Over the last eight years milk production has decreased. In 1998 some 1,410 million litres of milk were produced. In 2006 the volume decreased to 1,250 million litres. Genaro Méndez, president of the Federacion Nacional de Ganadores (Fedenaga) goes further: "Milk production has decreased over the past 17 years. We are far away from the peak of 1998. (...) The decisions of the government [price controls] are stimulating demand but not production."

Today the per capita production of milk stands at 42.4 litres a year which is the level of ... 1952! Imports of powdered milk have not stopped increasing over the last 20 years. Figures for the industry reveal that in 1986 the country produced 86% of the milk consumed and only imported 14%. In 2006, 39 % of the milk consumed was imported. The industry estimates that 120,000 tons of milk needs to be imported to meet demand. But on the world market prices are increasing as China and India are sucking in more imported milk and there may not be sufficient milk available.

The president de Cavilac, Roger Figueroa, in a very clear message, explained that to produce one litre of milk and sell it at 1860 bolivars is not profitable enough. What the owners of the milk industry are in reality saying is: "as long as we cannot make enough profits you will have no milk!" The capitalists in the other sectors of the food processing industry repeat in unison "keep away from our profit margins or we will starve you". On the part of the bosses this is a way of retaliating against the price controls, but it is also a political tool aimed at destabilising the country, trying to foment unrest and finally undermining confidence among the masses in the effectiveness of the social reforms of the revolution. It is part of more general strategy to sabotage the revolutionary process from within.

A sterile bourgeois class

In a debate a few years ago a member of the Ministry of Agriculture who visited the European Union told me that if there were some problems with the capitalists in the agro-business it was not because they were bourgeois elements but only because they were not patriotic enough!!! This little survey shows us the real patriotism of the bourgeois class in Venezuela. Historically it has always been what is described in the country as a "sterile bourgeoisie", parasitic and organically incapable and unwilling to develop even a basic industrial infrastructure to guarantee basic food supplies. Is this not enough proof of the utter reactionary character of the bourgeoisie? There is not one ounce of progressiveness or so-called patriotism in the capitalist class of Venezuela or in the rest of the continent. Their only "fatherland" is profit.

Those "organised shortages" also affect the famous public network of cheap food outlets, the Mercals. In a recent Alo Presidente (number 263), the Sunday TV programme of president Hugo Chavez, he expressed his concerns. "I have been reading also about shortages in the Mercals. This worries me greatly. I have asked the Minister for Food, Erika Farias and the president of Mercal, Felix Osorio, to make a superhuman effort. This cannot be allowed, everything is supposed to be getting better and not worse. How is it possible that Mercal is now distributing less than before? How is this possible?"

Some Mercals are indeed complaining that in the last weeks the volume of goods delivered has been reduced by 80%. Corruption is a part of the problem when deliveries are channelled away from these supermarkets to be sold at high prices on the private markets. In the last period the Mercals have been the network through which the food shortages have been partially overcome by a massive increase in supplies of the missing products. So if this important lever is now being affected, the alarm bells must start ringing!

This situation highlights the limitations of developing a public network of supermarkets alongside a private network. Although wholeheartedly supported by the Marxists, Mercal is still very dependent on the private food companies, such as Polar, a company known for its openly counter-revolutionary stance. This approach is considered by the reformists inside and outside the government as a model for the mixed economy, that Venezuela is supposed to become. By mixed economy they understand a capitalist economy but with a big public sector as was the case in some countries in Western Europe in the past.

At the beginning of the year a law against hoarding and speculation was approved. Strategic food stocks are being established to guarantee food for three months in case of urgency and the intelligence services have been put to work to uncover secret stocks throughout the country. The problem is that in its struggle against hoarding, speculation and illegal price increases the government is still relying on the old capitalist state apparatus, which is notoriously inefficient, corrupt and linked to the oligarchy. Through this apparatus they are sabotaging the efforts of the government. This is the reformist way of dealing with the problem and is ineffective.

A revolutionary, a Leninist, content has to be given to price controls. In order to achieve effective price controls and to be successful in combating the phenomenon of hoarding, the masses and their organisations must be put into action, through elected bodies of inspectors based on the communal councils and the factory councils for instance. They would have the task of controlling prices, uncovering secrets stocks, etc. These would guarantee that there is no impunity and that the law would be used against speculators.

However, it is also important to underline the fact that price controls are only a halfway measure. In a capitalist economy such as that in Venezuela any attempt at imposing price controls is answered by economic sabotage by the bosses and furthers destabilise the economy. You cannot control what you do not own!

Nationalise the food industry

The government's answer in the ongoing crisis in the milk industry has been to establish new publicly owned milk-processing plants with the help of Iranian know-how. One of these plants has just opened in the state of Zulia. More plants will open soon and process a total of 216,000 litres of milk a day and 78 million litres a year. This is definitely a step in the right direction, but it is still not enough though to cover the existing national demand for milk or to compensate for the deficit in production of the private sector.

To make up for this, increasing imports is being proposed as a solution by some sectors in the government. Temporarily this can help and stave off the inevitable confrontation with the bosses, but we should not fool ourselves that they will sit idly by while they are "outmanoeuvred" by increased imports. We must expect more sabotage on their part.

This policy of massive food imports financed by the oil revenues also directly contradicts the government's strategic aim of food self-sufficiency. This is leading to a situation where food supplies are guaranteed through increased imports and food self-sufficiency become even more difficult to achieve.

To guarantee a sufficient level of milk production the private processing plants must be expropriated and nationalised under the control of the workers and the peasants. The same needs to happen with the other branches of the food industry. They then need to be integrated into an urgent plan of food production (including developing agriculture through expropriation of the big landowners) and distribution based not on meeting profit margins but on the social needs of the revolution.

Masses need to act

Chavez himself hinted at this when at the beginning of this year he threatened the food industry with expropriation. He even called on the mayors and state governors to "municipalize" the local slaughterhouses or industrial "frigorificos". This is another way of nationalising them. In one area the local population also took the initiative to take over such industrial ‘frigorificos'. But the mayors and governors did not back this up with legislation. Many of them are reformists and do not want to infringe on capitalist private property.

Comrade Simon of the Ezequiel Zamora Peasants Front, who was present at the Congress of the Coriente Marxista Revolucionaria commented thus: "The question is not that there is no meat or sugar but that the food processing companies refuse to buy our products. In some parts of the country we even have the situation of peasants burning a part of their crop of sugarcane because the agro-industry does not want to buy it. That is why we are now considering organising occupations and take-overs of some of those plants to make sure that our products are bought, processed and distributed to the markets at the regulated prices. Since the beginning of the year the number of conflicts with the landowners in the countryside has not stopped increasing. The level of conflict has rarely been so high as it is today."

The leaders of the working class movement, the UNT, should follow example of their peasant colleagues and launch a campaign of take-overs of factories under workers' control as is being put forward by the FRETECO, the revolutionary front of workers from the factories under workers' control.

The bourgeoisie is attempting to sabotage the revolution, using the levers it has in its hands, ownership of land and industry. The aim is to cause economic chaos and put the blame on the government, thus undermining confidence in the government and prepare for a reactionary backlash. Economic sabotage and how it is combated is an important question at this stage of the Venezuelan revolution. It is a litmus test for the different political currents within the Bolivarian movement.