VENEZUELAN GOVERNMENT "HITS THE ACCELERATOR" ON

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 000307

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E.O. 12958: DECL: 03/10/2019
TAGS: ECON PGOV PREL ETRD EINV EAGR VE
SUBJECT: VENEZUELAN GOVERNMENT "HITS THE ACCELERATOR" ON
INTERVENTION IN THE ECONOMY

REF: A. CARACAS 290

B. CARACAS 305

C. 2008 CARACAS 1443

D. CARACAS 280

E. CARACAS 265

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


1. (C) SUMMARY: The government of the Bolivarian Republic of
Venezuela (GBRV) has dramatically increased its intervention
in the Venezuelan economy in the weeks following President
Chavez's successful February 15 bid to abolish presidential
term limits. As the price of oil remains low, the GBRV
recognizes it will be increasingly unable to resolve food
shortages with imports. Rather than stimulating domestic
private sector production, the GBRV seems to be opting for
direct government control over the food supply with a marked
increase in farm nationalizations and a renewed interest in
agricultural "communes". Over the past week, President
Chavez has made expropriation threats regarding both Cargill
and Coca-Cola FEMSA properties and has increased scrutiny of
Heinz. Some commentators suggest singling out large US
companies is a deliberate attempt to provoke a confrontation
with the Obama administration. END SUMMARY.

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IS CHAVEZ TARGETING US COMPANIES?
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2. (C) There are approximately 58 rice processing plants in
Venezuela. Cargill has only one plant and 1.6 percent of the
rice market (ref A). Cargill staff have repeatedly stated
that they have done everything in their power to comply with
government regulations and stay out of the press.
Nevertheless, during Chavez's weekly TV program "Alo
Presidente" on March 8, Chavez again attacked Cargill saying
"they say they do not have the machinery to produce the other
type of (price regulated) rice... they say it is damaged,
well it is damaged because they abandoned it here, they
dismantled the machines, is it that they think I'm a
'pendejo' (politely translated as fool)?" He continued later
in the program saying "The people of Cargill said they want
to cooperate. Well great, thanks, let's cooperate then, give
me everything..." (NOTE: See ref B for the status on the
government's plans to nationalize a Cargill rice plant. END
NOTE.)


3. (C) During the March 8 "Alo Presidente" Chavez also spoke
at length about a large parking lot Coca-Cola FEMSA owns and
uses to park delivery trucks saying, "Here it is, this is the
result of an abuse by the bourgeois capitalist state that
favored and still continues to favor the powerful, in this
case a transnational that is taking advantage of us and sees
it as normal that it has a hectare of flat, solid earth and
the poor over there are thrown out like trash." He continued
saying "Coca-Cola I tell you to go now, I ask you to go
now... I am giving the company Coca-Cola two weeks to move,
in a voluntary manner, from this ground." Chavez later said
he planned to use the property for low income housing. While
Coca-Cola Venezuela's primary share holder is the Mexican
company FEMSA, the US-based Coca-Cola company owns a third of
the shares and Coca-Cola remains an emblematic US brand (ref
C).


4. (C) Embassy staff plan to meet with the President of Heinz
Venezuela, Eduardo Benatuil, on March 12 to discuss the
GBRV's heightened scrutiny of Heinz operations, which the
Venezuelan Consumer protection agency INDEPABIS inspected the
week of March 2. Heinz has been very creative in launching
products, such as Ketchup Light and flavored ketchup, that
fall outside of government price controls. This may open
Heinz up to government retaliation similar to Cargill's
experience with producing parboiled rice rather than the
government-regulated white rice (ref D).

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OR ARE ALL COMPANIES IN HIS SIGHTS?
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CARACAS 00000307 002 OF 002



5. (C) Chavez recently proclaimed he is "hitting the
accelerator" on "socializing" the country. Since February
15, there has been a sharp increase in highly publicized land
nationalizations and renewed discussion of "communes" with
Chavez emphasizing that "ground is not private, rather it is
social property... this earth is the property of every
Venezuelan." The two most publicized "interventions" in past
weeks have been the "Hato El Maizal" and "Hato El Pinal"
estates, which amount to nearly 8,000 acres. The smaller of
the two estates, Hato El Pinal, is owned by Ireland's Smurfit
Kappa. The media reports the estate is valued at over
500,000 Euros. Minister of Housing and Public Works Diosdado
Cabello confirmed the decision to take the estates was
"irreversible". In a sign that he is not done yet, during
another public appearance on March 8, following his "Alo
Presidente" show Chavez said "early, when the roosters are
still crowing, we will intervene in more 'latifundios' (large
agricultural estates)".


6. (C) On March 10, the press reported that the government
has now "intervened" in the 6,900 acre "Hato Caroni" estate
with plans to convert the farm into a "social production
unit." Additionally, the government is in the process of
"rescuing Hacienda Tamarindo", a sugar cane farm that
produces 20,000 tons of sugar cane a year, and is evaluating
whether or not it will nationalize a sugar processing plant
owned by the prominent Cisneros group. (NOTE: In 2005, the
GBRV expropriated sugar cane processing center "Cumanacoa".
The government did not succeed in reopening the plant until

2008. The Sugar Cane Growers Association reports production
has fallen for domestic sugar cane by 15 percent between the
2005 and 2008 harvests. END NOTE.)


7. (C) On March 4 Chavez said that his Minister of
Agriculture Elias Jaua "wants me to inspect all the plants
that produce corn flour, rice, cooking oil, toilet paper and
tomato sauce. We will take strong measures in favor of the
people if we find (companies) are not following the law."
The President of INDEPABIS and new Minister of Commerce
Eduardo Saman publicly committed to inspecting every plant in
the country producing 12 staple foods ranging from margarine
to rice.

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COMMENT
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8. (C) The President's recent threat to nationalize "all the
bourgeois" suggests that Chavez has chosen further to
centralize power in his own hands post-referendum rather than
easing up on the private sector. As oil prices remain low,
Chavez seems to be employing a dual pronged approach in
response to Venezuela's waning ability to import essential
goods: increase central government control over the food
supply, as keeping food staples on the table is essential to
maintaining himself in power, while blaming any resulting
problems on the private sector and the US.


9. (C) Although the GBRV's apparent targeting of
US-affiliated companies in the food processing sector could
be mere coincidence, the attacks are more likely part of the
new life Chavez is giving his decade-old strategy of
attacking the US when things get tough at home (ref E).
Chavez has not been as serious about threatening to
nationalize US company assets since 2007 with his
nationalizations of the telecom and electricity sectors. His
recent attacks on the new US administration, as well as his
renewed threats regarding US companies, have had some
commentators suggest that Chavez is looking to provoke a
confrontation with the US to distract attention from the
domestic economic situation.

CAULFIELD