President Hugo Chávez has raised milk prices in Venezuela by 37 per cent in a bid to ease widespread shortages, while threatening to expropriate the property of companies failing to respect new officially controlled prices.
“If there’s a producer that refuses to sell milk to the government and sells it instead at a higher price to a private company, we will expropriate their farm,” said Mr Chávez on his Sunday television programme, Aló Presidente, as he inaugurated a state milk processing plant.
“If we must bring in the army, we will do so,” he added.
The sporadic disappearance from supermarket shelves of many basic foods – such as milk, sugar, eggs, cooking oil, black beans and meat – is widely accepted as one of the principal causes of Mr Chávez’s landmark defeat in a referendum over constitutional change last month.
Faced with regional elections in November for governors and mayors, Mr Chávez is now attempting to regain lost popularity by solving some of the persistent problems dogging his government. He has also conceded that government inefficiency, corruption and rising crime need “urgent” attention.
In order to tackle food scarcity, the government has already indicated that this year it will loosen price controls introduced in 2003 across the board.
“We have to make price controls more realistic and more efficient,” said Jesus Faria, an economist at the Bolivarian Association of Socialist Economists who also advises the government.
Local producers complain that due to price controls they would often have to sell at a loss, while they have been unable to keep pace with a consumption boom fuelled by a steep rise in oil prices.
Furthermore, an overvalued exchange rate has made it hard for them to compete with cheaper imported food.
But economists worry that loosening price controls will contribute to racing inflation, which reached 22.5 per cent in 2007, well above the official target of 12 per cent and one of the highest in the world.
Mr Chávez’s drive to boost domestic agricultural production led him to threaten on Saturday to take control of banks that failed to meet state-imposed requirements designed to help farmers.
Banks will be required to set aside nearly a third of all loans for agriculture, mortgages and small businesses at favourable rates.
Also, on Monday a new subsidiary of the state-owned oil company, PDVSA, was launched and charged with importing and distributing food.
The subsidiary, PDVAL, has already struck a deal with the retailer Makro to distribute food.
Last year, PDVSA created seven new units that were unrelated its core business – including an agriculture company, a construction firm, a shipbuilding unit and an urban development business – leading to concern that its resources were overstretched.
