Focus on Venezuela

by Melissa Alexander
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The backbone of the Venezuelan national economy for centuries, agriculture experienced a steadily diminishing role during the last half of the 20th century as oil eclipsed all other economic sectors. Today, agriculture — contributing a mere 5% to gross domestic product — plays a smaller role in the Venezuelan economy than in virtually any other South American country, and Venezuela is a net agricultural importer.

In recent years, Venezuela’s economy has experienced tremendous turmoil, and the historical pattern of agricultural neglect has been reversed, as the government has focused on the sector as a key to diversifying the economy. Venezuela features vast agricultural resources that have yet to be tapped, with as much as 20 million hectares available for new cultivation.

Recognizing these opportunities, the government is implementing reforms intended to increase domestic production. Objectives include doubling agriculture’s share of GDP to 12% by 2007, attaining food self-sufficiency and building export markets.

A major tool for reform is the Agricultural Plan, which focuses on improving rural incomes, food safety and nutrition and expanding food processing. A key emphasis is land reform, specifically the distribution of government land.

Traditionally, private sector production has been controlled by a small number of very large landowners; about 75% of private land is owned by 5% of farmers, while 75% of farmers hold only 6% of the private land. By redistributing idle land to landless peasants who commit to its cultivation, the government hopes not only to mitigate economic and social disparities, but to increase agricultural output.

By increasing production of domestic crops such as rice and maize, the government hopes to encourage greater consumption of these products to reduce the need for imports such as wheat, which is 53% of the typical Venezuelan’s diet.

The government wants to build on Venezuela’s current agricultural exports, which include rice, tobacco, fish, tropical fruits, coffee, cocoa and processed foods. Products marked for export growth include oil palm, sugar cane, maize, sorghum, cassava, cotton, fruits and vegetables, pork, poultry and eggs.

But in the short term, agriculture and the country as a whole continue to

grapple with a severe economic and political crisis. Analysts expect the economy in 2003 to decline between 15% and 20%, with inflation and devaluation surpassing 30%.

Earlier this year, the government imposed foreign exchange and price controls, which have greatly affected imports and consumption of wheat and wheat based staples. In addition, a three-year drought cut rice, maize and sorghum output in the past two seasons, although good rains have helped the 2003 harvest and should curb import needs.


Wheat is not grown in Venezuela, yet the country’s mostly urban population traditionally has chosen wheat products as a dietary staple.

Until the economic turmoil of recent years, Venezuelan millers imported high quality, high protein wheat, primarily from Canada and the United States. But in the last few years, because disposable incomes have been declining and consumers have become more price conscious, millers and bakers have begun to blend cheaper, lower quality wheat with higher protein wheats to produce a low-cost flour.

At the same time, less expensive brands of pasta, made from hard wheat and durum blends or from 100% hard wheats with high-temperature technology, are becoming more prevalent in the market.

Venezuela’s milling and importing industry consists of three major companies: Cargill Venezuela, which controls 40% of the market; Gruma-Monaca with 20% of the market; and Polar (MOSACA), also with 20%. A handful of smaller millers and pasta producers make up the remaining importers and processors.

The first half of 2003 was a particularly turbulent time for the wheat industry, as the government’s exchange controls and import restrictions severely hampered operations. Although the severe shortages that threatened to shut down the industry have eased, difficulties remain.

After the exchange control commission, CADIVI, was established in January, most analysts expected foreign exchange transactions to begin flowing fairly normally within two to three months. But major disbursements did not begin until the end of May, and many companies ran up large paper debts with suppliers in the interim to keep product flowing.

Overall, sources estimate that the local milling industry may have accumulated over U.S.$80 million in debt to grain exporters alone by the end of May, when foreign exchange finally started to flow.

Authorizations for dollars from CADIVI are continuing, and the companies are working down their backlog of debt, but they remain cautious about future purchases. Because the government could devalue the currency at any time, companies are hesitant to buy unless they can lock in currency at the official rate.

The foreign exchange access difficulties still contribute to spot shortages, mainly of flour for bread production. But these have been limited and have not led to any protests as consumers are slowly becoming accustomed to doing with less.

The supply chain disruptions would have been more problematic except for the fact that domestic demand is also down. A recent survey by Datanalysis showed that 28% of Venezuelans were reducing bread consumption, 10% were reducing pasta consumption and 15% were reducing maize flour consumption.

Despite price hikes and reduced demand, consumption rates in Venezuela should continue at about 14 kg per person. And bread use is not expected to slide much below the 20- to 22-kg level recorded in 2002.


More than 90% of all maize produced in Venezuela is white maize for human consumption. Although wheat products are a main food staple, precooked maize flour also is a key dietary component.

Venezuela up to now does not have an official system of farmer price supports, but has depended on agreements between the producing sector and the limited number of processing plants that purchase the maize. This system has passed all the costs of producer supports to the processing sector, which inevitably passed them on to the consumer.

With this year’s harsh economic situation, Venezuelan maize farmers recently complained that grain prices promised last spring no longer covered production costs. At the same time, food processors are being squeezed as they are now forced to sell products at controlled prices; if faced with higher priced inputs they will need to raise end-product prices yet again in order to be able to operate.

Meanwhile, consumers already have seen increases in the cost of the basic food basket, and with increasing levels of unemployment they are ill-suited to handle further price increases.

To deal with these conflicts in the food sector, the Ministry of Agriculture and Lands recently formalized the creation of the National Cereals Boards in eight major food sectors. These Boards are composed of representatives from the producer, processor, retail, consumer and government sectors and review the criteria for establishing fair prices for the entire production chain.

The agriculture minister announced prices in late August that producers felt were too low, and the minister was removed three days later, supposedly in part for his arbitrary handling of the price announcement. Farmers, industry and government officials have been negotiating new price levels, but no agreement had been reached as of October.

Venezuela’s feed sector traditionally has relied on imports of yellow maize as a key feed ingredient, but recent import restrictions and currency controls have severely battered the industry. Even before currency controls, the government, to help support domestic producers, had denied maize import permits, instead requiring feed makers to buy domestic supplies at prices substantially higher than yellow maize import prices.

Further hurting the feed sector, meat production in the coming year may drop by 20% to 30% as price controls, as well as declining consumer demand, erode profit margins in that sector.

Data (1,000 tonnes)




















*milled production 2003-04 marketing year projections

Source: U.S. Department of Agriculture


Key Facts

Capital: Caracas.

Demography: Population 24.7 million (July 2003), 1.48% growth rate (2003 estimate); Spanish language; nominally Roman Catholic, 96% Protestant, 2% other religions.

Geography: Northern South America, bordering the Atlantic Ocean and Caribbean Sea; northwest mountains, central plains, southeast highlands; mostly tropical climate, more moderate in highlands.

Government: Federal republic. Chief of state and head of government is President Hugo Chavez Frias.

Official agricultural agencies: Ministry of Agriculture and Land under acting Agriculture Minister Arnaldo Marquez.

Economy: Venezuela continues to be highly dependent on the petroleum sector, which accounts for roughly one-third of gross domestic product, about 80% of export earnings and more than half of government operating revenues. Despite higher oil prices at the end of 2002 and into 2003, domestic political instability temporarily halted economic activity. The economy is likely to remain in a recession in 2003.

Agriculture accounts for 5% of gross domestic product and 13% of the labor force.

G.D.P. per capita: U.S.$5,500 (purchasing power parity), -8.9% growth rate, 31.2% inflation, 17% unemployment, (2002 estimates).

Currency: Venezuelan bolivar (VEB). Nov. 17, 2003 exchange rate: 1,595.82 VEB = 1 U.S. dollar.

Exports: U.S.$28.6 billion (f.o.b., 2001), petroleum, bauxite, aluminum.

Imports: U.S.$18.8 billion (f.o.b., 2001), raw materials, machinery and equipment.

Major crops/agricultural products: Maize, rice, sorghum, sugarcane, fruits and vegetables.

Wheat: Venezuela grows no wheat. Consumption from 1998-99 through 2002-03 averaged 1.3 million tonnes, with imports averaging 1.315 million. All wheat imported and consumed typically is for human use, although in the past two years, some wheat is thought to have been diverted for feed use.

Maize: Five-year production averaged 1.136 million tonnes, of mostly white maize for food use. Imports of mostly yellow maize for feed use averaged 1.027 million tonnes, with total use at an average of 2.159 tonnes per year.

Rice: Output averaged 422,000 tonnes per year, with total domestic use averaging 401,000. Exports averaged 52,000 tonnes, ranging from a high of 80,000 in 2001-02 to a drought-induced low of 10,000 in the past season. Imports in 2003-04 are forecast at a 15-year high of 150,000 tonnes.

Transportation: Highways, 96,155 km, 32,308 paved; railroads, 682 km, mostly 1.435-m gauge; Maracaibo, Puerto Cabello, Puerto la Cruz are major ports.

Internet: Country code, *.ve; 16 service providers (2000); 1.3 million users (2002).