Chavez Threatens to Nationalize Nestle and Parmalat Plants in Venezuela

by James Suggett - Venezuelanalysis.com

Mérida, February 13, 2008

Venezuelan President Hugo Chávez threatened to nationalize the milk factories of Nestle and Parmalat, accusing the transnational food companies of bribing producers and leaving the network of state-owned and cooperative milk processing plants without the product.

"This government needs to tighten the screws," the president affirmed on his weekly talk show Aló Presidente on Sunday. "If, for example, it is demonstrated that [Nestle and Parmalat], by distinct economic mechanisms or pressure, take away production and leave the factories of the state and the cooperatives without the necessary milk supply, we must apply the constitution and intervene and nationalize the plants."

Nestle claims it would be "premature" for the company to respond to the nationalization threats, which it has only heard about through the media, until there is a "direct, formal, and official communication from the government of Mr. Chávez." Nestle commented to the press, however, "we maintain an intimate relationship with Venezuelan milk producers because we are clients, it is natural...the relationship is always registered within the legal rules set by each country."

The Chàvez government already nationalized key sectors of Venezuela's telecommunications, electricity, and hydrocarbons industries. Profits from nationalized companies such as the telecommunications giant CANTV have been redirected toward general rate reduction, plus special rates for community organizers and low-income patrons.

Last year, the shortage of basic foodstuffs in Venezuela was 25%, while milk shortages reached 80%, according to the Venezuelan polling firm Datanalisis. Along with that, price inflation in basic goods and services was 22% in 2007. Opposition sectors blame the government's price controls, overvaluing of Venezuela's currency, and inefficient state management of the economy for the problems. The government, on the other hand, says it is fighting price speculation, food hoarding, and smuggling, which Chávez said on Sunday is part of an "economic conspiracy" that threatens national security at a time when Venezuelans' consumption capacity has been greatly augmented by successful social programs.

In late January, the National Consumer Defense Institute (Indecu) and the National Guard supervised Nestle's delivery of almost 2 million kilograms of powdered milk to cities in 11 Venezuelan states. Also, the National Silos Supervisor summoned both Parlamat and Nestle to meetings with the purpose of "gaining control over national inventories," the Food Ministry reported. The meeting's agenda included an evaluation of the national system, a private sector distribution plan, and the presentation of the Integral Control System for Food and Agriculture.

Over the past month, the government has raised or lifted the regulated prices on all except 10 basic food products, including a slight raise in the price of milk and various cheeses. Meanwhile, the Foreign Currency Administration (CADIVI) gave permission for direct-pay international transactions to speed up milk imports, which are the country's primary source of milk.

Nestle, which employs 4,000 Venezuelans directly or indirectly, was one of a group of private companies that, through the Venezuelan Chamber of Food Industries in 2003, sold products at reduced prices to the state-run subsidized food market known as Mercal. This was one of the Chávez administration's earlier measures to provide food to the country's poor majority.

But Nestle is not a part of the government's newest food distribution enterprise PDVAL, run through state petroleum and electric companies, which instead signed a 12-year milk importation contract with the Argentine cooperative Sancor and will sell milk imported from Brazil as well. PDVAL will also distribute milk produced in new state-run milk processing plants created this year by the government.

The federal budget this year invests heavily in a growing state-run agricultural sector, which operates on "socialist" principles such as community participation and the prioritization of human needs over profits. This includes the creation of the National Milk Production Fund announced by the president last Saturday, which was well received by the National Confederation of Venezuelan Agriculturalists. The fund will be directed at "those small producers that are poorly attended to, to augment milk production in the country."

Chávez made a related announcement Sunday that Colombian paramilitary forces are increasingly infiltrating Venezuelan communities and private industries. Nestle is one of several transnational corporations which hire paramilitary troops to suppress worker organizing in their Colombian facilities, according to Caracas-based German Political Scientist Darío Azzellini, who attended Sunday's broadcast of Aló Presidente.