VENEZUELAN GOVERNMENT THREATENS TO "EXPROPRIATE" A

C O N F I D E N T I A L CARACAS 000280

SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MMALLOY
COMMERCE FOR 4431/MAC/WH/JLAO
SECSTATE PASS AGRICULTURE ELECTRONICALLY

E.O. 12958: DECL: 03/01/2019
TAGS: ECON PGOV PREL ETRD EINV EAGR VE
SUBJECT: VENEZUELAN GOVERNMENT THREATENS TO "EXPROPRIATE" A
US MULTINATIONAL'S PLANT

REF: CARACAS 270

Classified By: Economic Counselor Darnall Steuart for reasons 1.4
(b) and (d).


1. (C) On March 4, Chavez directed the Minister to "begin
the process of expropriating Cargill." The President of
Cargill Venezuela Roberto Moro (protect) told Post this
morning that he was on his way to a meeting with the Minister
of Agriculture Elias Jaua. Moro reported that he believes
thus far, only the rice plant would be affected by Chavez'
expropriation threat. There are press reports that the
Venezuelan consumer protection agency, INDEPABIS has occupied
the Cargill rice plant with the Venezuelan National Guard,
but we have been unable to verify this with Cargill. Sources
have also told post that Cargill's vegetable oil plants will
be inspected today by INDEPABIS. Post is watching the
evolving situation closely. (NOTE: Cargill, a US based
agribusiness, is one of the largest privately held companies
in the world. END NOTE.)


2. (C) A source told Post on March 5 that Cargill had met
with the Ministry of Agriculture in late February. The
Ministry complained that Cargill was producing rice above the
government-regulated prices, but agreed not to sanction
Cargill if it lowered its prices. For this reason, he added,
the expropriation announcement caught Cargill by complete
surprise.


3. (C) The government is targeting the plant ostensibly
because it does not produce rice at the regulated price. The
plant is designed to produce only one type of product,
parboiled rice. Unlike plain white rice, parboiled rice does
not fall under government-established price controls.
However, on March 3, the government passed a law mandating
that companies produce 80 percent white rice, a requirement
that Cargill's plant cannot meet in the short term. In order
to start producing white rice, the Cargill plant would have
to retool. There is a clause in a decree issued March 3 that
says agribusinesses which have historically produced
variations on white rice can ask for an exception to the 80
percent rule. The government did not give Cargill a chance to
apply for that exception before threatening its expropriation.


4. (C) Cargill, like many other rice processors, is unhappy
with leading Venezuelan food processor Polar for "stirring
the pot." A Cargill rep. told post that his company has gone
out of its way to keep the peace with the government. He
added that Cargill only has 1.6 percent of the rice market in
Venezuela. Many industry insiders believe the true target of
the government's actions is Polar (ref A). Polar's owner,
the Mendoza family, is in staunch opposition to the
government. On March 3, Chavez said "We will expropriate you
Mr. Mendoza, I'm warning you."


5. (C) Moro committed to meeting with the Embassy following
his March 5 meeting with Minister Jaua, but as government
ministers are notorious for keeping companies waiting, he was
unable to tell what time the meeting with Jaua would actually
take place. In the past, Moro has capably navigated Cargill
out of troubled waters with the Venezuelan government. There
is still hope that he will be able to do so again and avoid
the expropriation of Cargill's rice processing plant.


6. (SBU) Cargill entered the Venezuelan market in 1986. It
has approximately 2,000 employees in 22 locations with 13
manufacturing plants involved in the following areas:
oilseed processing, grain and oilseed trading, animal feed,
salt, wheat/pasta, and financial and risk management.
Cargill's Venezuelan branded products include cooking oil,
pasta, rice, cookies, fruit juice, pet food, and livestock
and poultry feed.

GENNATIEMPO