Coffee & Tea

Venezuela Food and Drink Report Q1 2009

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  • BMI forecasts that Venezuela’s food and drink industry will grow rapidly between 2008 and 2013, drivenby rising levels of consumption linked to improving economic conditions among low-income consumers.However, although disposable incomes have grown in recent years, Venezuela’s economy looksvulnerable to falling oil prices, which could cause the state to cut back on welfare programmes, reducingpurchasing power among the poorer segments of society.With high levels of inflation in the economy, there are also concerns over rising food prices, which couldcause discontent among poorer Venezuelans, who form the core of President Hugo Chávez’s support.Indeed, there are now fears that there could be a spate of nationalisations, in sectors such as foodproduction. New laws declare that food production is a public good and give the state the power toappropriate any goods that do not meet this standard. In essence, this gives the government the power toappropriate food producers without the approval of the National Assembly.The firm most clearly threatened by the new powers is Empresas Polar, a food and beer manufacturer.Empresas Polar is the largest private company in Venezuela, and Chávez has regularly threatened tonationalise it if does not stick to the socialist ideals of the government. Considering that the government isalso looking to attract more foreign direct investment (FDI) into the country, the new laws come as asurprise to many industry stakeholders. Indeed, BMI expects a worsening of Venezuela’s already poorbusiness environment as a result.In BMI’s Business Environment Ratings for the Latin American region, Venezuela is in last place owingprimarily to government-imposed obstacles such as price controls and import restrictions. The threat ofstate appropriation of leading producers is only likely to scare off interested investors. As a case in point,AmBev, the Latin American arm of brewing giant InBev, has stated that it is no longer looking to expandsignificantly in Venezuela as operating conditions are too tough. Consequently, it is focusing itsinvestment in other Latin American countries.
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    Business Monitor International
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    Venezuela Food and Drink Report Q1 2009
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