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Chávez Emphasizes Global Context of Venezuelan Food Shortages

Fri 28th Mar 2008

In an international press conference Tuesday, Venezuelan President Hugo Chávez expressed concern for a potential world food crisis and criticized the diversion of food supplies for biofuel, while Venezuela and other Global South countries struggle with food shortages.

“The important thing is that this theme be explained to the people, that governments be alerted; many might not realize it with the sea of things that occur daily,” Chávez advised.

Since 2004, global cereal production has remained constant at around 1.6 billion tons, while the demand for cereals has escalated to almost 1.7 billion tons, according to research by a group of Spanish agricultural companies published at agroinformacion.com.

Consistent with this trend, Chávez highlighted a 400% increase in the consumption capacity of Venezuela’s poorest population as a result of government social spending, citing recent non-government polls.

The burgeoning middle classes of China and India have also boosted demand for food. They also consume more oil than ever, which is part of the reason petroleum exporting countries cannot increase supply even as oil prices top $110 per barrel, according to the Venezuelan Oil Minister Rafael Ramírez.

The food supply is also weakened by bad harvests in Australia and Ukraine, and the encroachment of farmland by urban and industrial development, especially in China.

Under these conditions, the world is amidst its sharpest food price inflation since the early 1990s. For instance, since 2006, global rice prices have risen 60%, corn prices 149%, and wheat prices 257%, according to the Toronto Star.

A 40% leap in global food prices in 2007 and 41% increase in cereal prices over the past six months has left the U.N. with a $505 million budget shortfall this month and produced what it calls a “crisis” for three dozen Global South nations, including Venezuela.

Similarly, the U.S. Agency for International Development (USAID) announced in early March that it will reduce emergency food aid this year because price inflation has carved a $200 million hole in next year’s budget that USAID officials say the Bush administration does not plan to repair.

“The United Nations Food and Agriculture Organization (FAO) is soliciting $500 million to alleviate the food crisis,” Chávez said Tuesday, referring to the U.N.’s urgent request for donations this week in order to prevent a cutback in emergency food aid to 73 million people worldwide, “while the United States spends $500 million per day in Iraq.”

According to Josette Sheeran, executive director of the United Nations World Food Program, which depends on USAID for 40% of its food contributions, "this is really the first emergency we've faced without a drought, war, natural disaster."

In Venezuela, rice has been missing from shelves for months since Chilean distributors, who import from Europe, have not delivered in over 200 days, according to the Venezuelan daily El Nacional, and milk and pasta prices have doubled despite government price controls.

The Venezuelan opposition continues to blame Chávez for food shortages and says the lifting of price controls and measures to facilitate imports have been insufficient.

Meanwhile the national government subsidized food markets called Mercal were expanded last month with a new program called PDVAL that is run by the state oil company PDVSA and distributes essential food items at regulated prices.

In a controversial measure recently, PDVAL stores were prohibited from selling non-essential food items listed for PDVAL, which currently include milk, sugar, rice, oil, black beans, chicken, and beef. This was partially a response to widespread complaints that Mercal markets had been requiring people to buy food in packages that included non-essential food items such as brand name canned ham in order to clear inventories of non-essential food products.

Other countries are also battling food shortages in the wake of worldwide price inflation. In Mexico, which imports over 60% of the wheat it consumes, angry demonstrations arose after many Mexican bakeries were priced out of business last year. Moreover, Afghanistan solicited $77 million in emergency food aid recently, and the Phillipines was unable to obtain its rice quota in March following a 40% rise in the price of rice since January, agroinformacion.com reports.

President Chávez further emphasized in the press conference Tuesday that the movement toward the production of biofuels as alternatives to fossil fuels, a policy peddled internationally by the U.S., is a prime cause of price inflation that will eventually lead to a “famine that produces desperation for millions of people.”

Peter Brabeck, the CEO of Nestle, which Chávez threatened to nationalize in February on suspicion that the company was hoarding food in order to destabilize the country, echoed Chávez’s point of view. Brabeck predicted that there is not enough water or farmland to replace the proposed 20% of world fossil fuels with biofuels, and if this goal is pursued, “there will be nothing to eat,” and it will be “morally unacceptable and irresponsible.”

A throng of international business journals confirm that biofuels have spurred food price inflation, but they welcome the trend as the driver for a new “golden age” of agriculture.

Chávez commented Tuesday that he will discuss the biofuel issue with Brazilian President Luis Ignacio Lula da Silva in their meeting on bilateral energy cooperation this week. Last year, Brazil expanded its production of food for biofuels and last month Virgin Atlantic revealed it will seek Brazilian palm oil to use as biofuel for its newest line of hybrid jets.

An overarching factor in all of this is that major food exporting countries, including China, Kazakhstan, Ukraine, Russia, and Argentina, have instituted export restrictions to help satisfy domestic demand.

Increases in export tariffs by the administration of President Cristina Fernández de Kirchner were met with a management-led strike by Argentine food producers that reached its 13th day Wednesday.

The strike has raised concerns about the flow of Argentine food exports to Venezuela. In a series of economic accords signed by the two countries in early March, Venezuela was to send cheap oil to help fill Argentina`s energy gap as the southern winter approaches in exchange for much-needed food imports.

James Suggett writes for Venezuela Analysis.
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