The “E” word: Venezuela and the return of expropriation

CARACAS — It’s expropriation season in Venezuela.

Emboldened by a comfortable win in a referendum last month that abolished term limits, President Hugo Chavez has issued a wave of decrees that has seen rice mills, farms and parking lots taken over by the state.

Last week, Chavez — who can now run for re-election indefinitely — went after the U.S. food giant Cargill, the world’s largest trader in agricultural commodities. After an inspection of one of Cargill’s rice mills, Chavez accused the company of “flagrantly violating” a law that requires food producers to sell basic staples at regulated prices. The company was allegedly found to be coloring its rice in order to bypass the laws. 

Polar — the country’s largest private company and the producer of many of Venezuela’s most popular food brands — has also been the subject of Chavez’s ire. He sent in the National Guard to occupy one of Polar’s rice-processing plants. Coca-Cola, meanwhile, has had a car park seized for use for housing.

The government has also used a law that allows it to seize "latifundios," or large estates, that are deemed idle.

Last Friday, the National Land Institute (INTI) took over a eucalyptus farm belonging to Irish paper manufacturer Smurfitt Kappa, saying that it was needed to produce other crops. Other farms have also been seized.

Chavez has even extended his reach to museums. While he didn’t actually take over the touring Bodies Revealed exhibit, he did shut down the controversial show, which uses real human cadavers to demonstrate the inner workings of the human body. There appeared to be some confusion, with the Venezuelan government thinking that the bodies would be made of plastic.

"We are in the midst of something macabre," Chavez said on his weekly Sunday television program. "They are human bodies. Human bodies! This is a really clear sign of the huge moral decomposition that is hitting our planet."

In recent years, the government has taken a greater hand in the pricing of goods. 

Since 2003, the government has imposed price restrictions on basic staples such as rice, chicken, coffee and sugar to combat the effects of rising inflation, which last year increased 31 percent. “These private companies can continue functioning as long as they remain within the scope of the law and the constitution," Chavez said Wednesday.

Companies are obliged to ensure that between 70 and 95 percent of their products fall within the regulations. But many argue that the rules force them to sell at a loss.

This recent wave of expropriations is rooted in part in February’s referendum on term limits, and in Chavez’s socialist vision. Since that victory, Chavez has launched another 10-year phase of his “Bolivarian Revolution,” with a particular emphasis on agriculture and housing.

But it also reflects the current economic situation in Venezuela. 

Since Chavez took office, an oil boom has prompted economic growth of an average 8 percent per year. At the same time, however, other industries have suffered and the government has increased its imports of food and other basics more than four-fold since 2004, from $10 billion to $44.38 billion last year.

INTI has plans to take over another 17 farms in the state of Lara, a move that critics say is part of a government plans to enforce a socialist model on food production that will stretch from the field to the kitchen table.

“We are determined to implement new spaces to advance towards a socialist model of production,” said Rafael Isea, the governor of Aragua, where many of the expropriations have taken place.

Companies complain that they are given little indication of the government’s displeasure before their property is seized. They are calling for dialogue. 

“Chavez is trying to show that he is combating the crisis, but there’s also another motive and that is this is an anti-corporate, anti-management government that wants these things to happen,” said Ricardo Sucre, a political scientist at the Central University of Venezuela.

“They’re not doing this only as an anti-crisis mechanism, but in the end they believe in companies controlled by the state,” Sucre said.

But questions remain about whether Chavez’s government can afford to nationalize any more industries in the current economic climate. Venezuela relies on oil for 93 percent of its export earnings, and the collapse of the price of oil — from an average of just under $100 per barrel last year to around $40 so far this year — is likely to hamper economic growth. Many analysts are predicting a year of “stagflation” — a stagnant economy with high levels of inflation.

The government’s track record with nationalization is not good. Apart from successful takeovers of the national phone company, Cantv, and the electricity sector, the government has yet to compensate other industrial sectors, such as cement and steel industries. On Monday, aluminum industry union leaders said they needed an injection of $6 billion to avoid a crisis.

Time — and money — will tell whether all of Venezuela’s major industries will be nationalized. But Venezuela’s latest expropriation wave is another chapter in the tug between socialism and capitalism in Latin America, and in the fight over land that Chavez says dates back to the arrival of the Spanish in the 16th century.

“Historically, there’s a great inequality between the rural and the urban here in Venezuela and that is something important,” Sucre said. “But the government is using those measures for all sorts of things and uses that excuse as justification for it.”

More GlobalPost dispatches from Venezuela:

Venezuela’s media caught in vicious circle

Dropping oil prices pinch Venezuela’s economy

For more on the global economic crisis: