Breaking News on Dairy Processing & Markets

News > Markets

Comment

Cargill vs Chavez: Clash of the rice titans

09-Mar-2009

Clutched to the president’s chest like a medal of nationalisation, Cargill Venezuela cannot be sitting very comfortably this week as it awaits the fate of its rice plant.

But selling the wrong kind of rice in a country that has a track record of nationalisation could do more than derail Cargill’s operations in the country. It could seriously impact investments across South America, and make the continent less able to weather the economic slump.

 

Last week Chavez ordered the expropriation of Cargill’s rice processing plant. You see, Chavez had put in place price controls for basic white rice, in a bid to protect Venezuelans from price inflation of basic necessities.

 

But Cargill was not making basic white rice. It was making Santa Ana parboiled rice. That meant its rice was in a different price league, and not subject to the law. Right?

 

Not according to Chavez, who ordered the plant’s takeover.

 

It’s a pretty grim outcome for Cargill, even though the rice plant is a tiny part of the American giant. But the response has been diplomatic – in public at least. Cargill says it respects the decision, but hopes to talk through a resolution.

 

For now it seems Cargill’s other Venezuelan operations are not about to be swept up in the government’s embrace. But the hand of Chavez is still hovering over other food firms. Empresas Polar, the number one private food firm in Venezuela, finds itself threatened with total nationalisation.

 

And for any foreign food firm that does happen to have money to invest overseas right now, Venezuela is unlikely to be top of its list of prospects.

 

Other countries in the region, like Ecuador and Bolivia, could be emboldened by Chavez’s move, analysts fear. Argentina’s Christina Fernandez has also fuelled debate about nationalisation, with the shock move last year to nationalise private pension funds.

 

And if they do go that route, quite aside from market distortion and long-term implications for food security, the economic repercussions could extend beyond their own borders.

 

For multinationals are not about to take chances with their spare funds, especially not right now. Just like the rest of us, when money is tight they think very carefully what to spend it on.

 

The brewing of nationalising policies in a region could well turn them off – especially as large firms report on a regional basis, and tend to use one country as a platform for others.

 

This means countries like Uruguay, Mexico, and resource-rich Brazil, which have no history of making life difficult for foreign investors, could find themselves overlooked.

 

As for Cargill, it still has 2000 employees and 21 other locations in Venezuela. Being in the eye of a president bent on nationalisation would make anyone squirm. Let’s hope they are not making the wrong kind of edible oil, cookie or petfood.

 

Jess Halliday is editor of award-winning website FoodNavigator.com. Over the past decade she has worked in print, broadcast and online media in both Europe and the United States. If you would like to comment on this article, please email jess.halliday'at'decisionnews.com

Key Industry Events

 

Access all events listing

Our events, Events from partners...