By Thor Halvorssen
CARACAS, Venezuela -- Hugo Chavez announced last week on a national broadcast (aired, by presidential decree, on every television channel and radio station simultaneously) that Venezuelan troops are amassing on the western border with Colombia and that this was being done "in secret" so as to not alarm the population of Venezuela. Stung by the mountain of evidence of his support for the FARC terrorist group, Chavez is using a potential conflict with Colombia to whip up nationalistic fervor. The truth is that Chavez's Bolivarian Revolution continues to crumble with no end in sight -- his celebrated war against hunger defeated by seven years of a reckless food policy that causes shortages, involves price controls, central planning and currency manipulation and rewards corruption. Food policy, not his shenanigans with the FARC, are of much greater importance to the Venezuelan population in advance of legislative elections in September. The past few months reveal a government in chaos and crisis mode.
From Venezuela's presidential palace, Minister for Food Supply Felix Osorio denounces "the oligarchy's media campaign" for a single report aired on Globovision -- the last opposition television station remaining in Venezuela. The TV segment said that 23,000 lbs of rotting chicken were found in a rural waste dump in Eastern Venezuela. The packaging, they said, indicated the chickens came from the government food program. The Minister rejected this as false and called it a part of the "imperialistic onslaught" against Hugo Chavez's Bolivarian Revolution.
The minister was silent about a different food scandal (ten-thousand times larger) that has made headlines across the world: 2,340 shipping containers with more than 120,000 tons of rotting food (estimated to feed 17 million people for one month) laying idle at Puerto Cabello. The port where the debacle took place recently became nationalized. The new incompetent management, combined with electricity rationing, led to the food putrefying as it sat in refrigerated containers. Such bungling shows that the national food supply network PDVAL, despite its status as a flagship revolutionary program and the logistical support of Venezuela's state oil company and military, is a disgraceful failure that lays bare the results of the disastrous government food policy.
Perhaps it is no surprise then that Venezuela's agricultural policy is modeled on that of another country with chronic food shortages -- communist Cuba. Agricultural advisors have joined the ranks of Cuban teachers, military advisors and doctors in providing expertise to the Venezuelan government. In rhetoric that harkens back to the days of Soviet communism, Venezuelan policymakers speak of land reform, not to create small farms, but to expropriate large working farms and turn them into "cooperatives" with no private property.
Venezuela has imposed price controls on basic goods like chicken, sugar, milk and other food stuffs. As supplies have dwindled, hoarding has become a growing problem, despite government efforts to criminalize stockpiling.
With erratic policy, Venezuelan authorities have on occasion allowed sudden liberalization of food prices. Rather than equilibrate the market overnight, such confused policy leads to double digit increases in price as supply meets demand. Price controls are then invariably re-imposed.
Seventy percent of Venezuela's food is now imported, up from forty percent ten years ago.
The state monopolizes the sale of fixed-rate dollars for food imports but these dollars are worth a lot more in the floating-rate street markets of Venezuela, so the stage is set for rampant speculation.
This year alone Venezuelan food prices have risen 21%. The result is that foodstuffs are unavailable and unaffordable to Venezuela's poorest people, even in a country awash with petrodollars.
Throughout the food market in Venezuela, corruption is rife. The state-owned low-budget food chain, Mercal, is perhaps the most egregious example.
Created in 2003 to compete with private supermarkets, Mercal was intended to undercut the prices of Venezuela's other grocery stores. The principal beneficiary of Mercal has not been the Venezuelan consumer -- it has been a businessman with close ties to the Chavez family, Ricardo Fernandez. When private media reports surfaced critical of Fernandez, Chavez has gone on Venezuela's airwaves to defend him.
In a large part due to profits from Venezuelan social welfare programs, Fernandez became a billionaire.
I know this because in 2007, Fernandez approached an international bank flashing a personal financial audit from KPMG. It showed his net worth in excess of U.S. 1.5 billion dollars. The bank declined any financial transactions with Fernandez, although a copy the KPMG audit was sent to me by an official at that bank.
I passed the audit along to a Caracas-based correspondent of a major American newspaper. Not long after, the laptop of the correspondent -- with Fernandez's financial statements -- was stolen from his Caracas home. Fearing for his personal safety, the journalist chose to drop his investigation into Fernandez. (Eventually the KPMG audit received wide circulation and it can even be found online.)
However, I soon began to be publicly pilloried on Venezuelan state television. These attacks have continued ever since. In November of 2009, Fernandez was finally eaten by the revolution that created him and he is now in a Venezuelan jail accused of bank fraud. Fernandez is not an unusual character in Chavez's Venezuela and his story illustrates that the Bolivarian Revolution is incapable of preventing the opportunism, incompetence and the voracious appetite of its cronies.
The Chavez government has the reverse Midas touch. Whatever they manage deteriorates: energy policy, healthcare, the financial sector, land reform, food policy, crime prevention, oil production, agriculture. And they know public exposure is their Achilles heel which explains why Globovision's main shareholder, Guillermo Zuloaga, is now a fugitive of Venezuela. Ironically, he is accused of "hoarding" 14 cars