Socialist Coffee


Venezuela Minister Calls for Full Takeover of Coffee Companies
By Jeremy Morgan – Latin American Herald Tribune staff

CARACAS – The government’s “temporary intervention” of Venezuela’s two biggest coffee companies will become a permanent state takeover if Commerce Minister Eduardo Samán gets his way.

Samán’s statement Thursday shouldn’t surprise anyone, given that within days of the two companies, Fama de América and Café Madrid, being put under state control early last month, President Hugo Chávez announced that he intended to “expropriate” them.

The minister said he would “recommend” a full state takeover when the intervention order formally expired. The government set a three-month deadline when it sent in troops to take control of the companies’ two plants on August 3.

Samán justified his proposed nationalization on the grounds of a “petition” submitted by workers at the companies’ plants. State ownership would also be aimed at avoiding the “artificial shortages” which, he continued, “appeared every year” and were “provoked” by producers trying to force up state-controlled prices.

Between them, Fama de América and Café Madrid supply an estimated 80 percent of the domestic market. Samán claimed there had been no production hitches or problems with supplies of raw material since state management was imposed on the companies.

At the time of the interventions last month, the government said both companies were being investigated to establish whether they were illegally smuggled coffee out of the country to circumvent price controls. The companies denied any wrongdoing.

The move against the companies came amid allegations that large amounts of contraband coffee were being sent to Colombia to secure higher prices there. Estimates showing signs of having been inspired in official circles suggested that 10,000 tons of coffee had mysteriously been “diverted” over the border.

Ahead of the intervention, Agriculture and Land Minister Elías Jaua claimed an illegal “parallel market” was operating in the industry. Intervention was intended to prevent “intermediaries and monopolies” getting rich at the expense of consumers, he said, vowing that action would be taken against those who “hoard and speculate” in coffee.

Before the dual intervention, the two companies had warned that they only had sufficient supplies of raw material for five days’ production. Juao claimed that the companies had just purchased larger amounts of raw coffee than usual.

“They claimed they didn’t have raw material, something which awoke suspicion because there was an increase in production this year,” he said, and an investigation had uncovered what he described as illegal shipments of coffee to Colombia.

If adopted, as seems more than likely, Samán’s proposed takeover would be in line with the president’s policy of nationalizing companies and industries deemed to be of “strategic importance” to the country’s “economic sovereignty.”

The policy was led off earlier this decade by the return to state ownership of Electricidad de Caracas. Then, in 2007, President Hugo Chávez demanded and wrested controlling stakes in oil fields across thecountry.

The vehicle for this was the creation of “mixed companies” in which the state oil corporation, Petróleos de Venezuela (PDVSA) holds 60 percent stakes.

Former private shareholders with hitherto controlling equity in oil fields were obliged to accept becoming minority partners in the mixed companies if they wanted to stay on board in Venezuela. Most, and they include some of the biggest names in World Oil, went along with the demand on the grounds that it had been conceded in other countries.

However, there were exceptions. ExxonMobil (the biggest oil outfit on the planet) and ConocoPhillips (not far behind) are both in dispute with the government in the wake of Chávez’ demand majority stakes in their heavy oil fields in the Orinoco Basin, colloquially known as the Faja.

However, industry reports say that oil companies which cooperated with the shift to majority state ownership and control have yet to be compensated in full – or, it’s said, in some cases at all – for surrendering some of their interests in oil fields.

Oil field service companies became a target of sudden nationalization in May this year. Wrangling over compensation is said to be continuing after this move.

Chávez has also taken over plants previously owned by the three biggest cement producers in Venezuela – Pemex of Mexico (reputedly the largest such company in the Americas), Lafarge of France and Swiss-based Hilcom). At least two of these companies are said to have not yet reached agreement on compensation or to be pressing for payment.

Other takeover targets have been steelmaker Sidor, in which Termium, an offshoot of Argentine engineering group Techint, held 60 percent, and Banco de Venezuela, in which Grupo Santander of Spain acquired a controlling interest during the mid-1990s financial crisis in Venezuela.

Both Techint and Santander are said to have agreed terms. But, again, there’s speculation about whether actual payment has been made in full. The bill for state takeovers this year alone is unofficially estimated at over $4 billion.


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