November 29, 2011

A leader in milk production, Italian Parmalat was threatened by Venezuelan President Hugo Chavez with nationalisation Sunday (Nov 27).

The threat followed accusations by Chavez that the milk company was "monopolising milk supplies" in Venezuela and treating the government as "fools". Chavez's remarks follow the discovery of nearly 256 tonnes of powdered milk in two trucks and a warehouse located in the Andean western Merida State. Parmalat denies claims of speculations and has defended itself, claiming that the Ministry of Food was aware of the cargo and that the powdered milk had been actually given to them by Chavez's administration and was due to be delivered under a government plan. An investigation has been opened against Parmalat; Chavez claims the company is trying to make his government look "ridiculous" with its explanation.

Food shortages, including milk, are the result of a widespread wave of nationalisations of companies in the food sector and of the government policy to seize rural land under the controversial Law of Land.

Chavez's threats come against the backdrop of the new Law of Costs and Prices that foresees nationalisation as a penalty against for companies that speculate against or violate the government controlled prices. Foodstuff shortages, including milk, are high on the agenda ahead of the 2012 presidential elections, and an issue that has contributed to undermine Chavez's popularity. Meanwhile, the issue is likely to contribute to the perception among business sectors that the new legislation is yet another tool of the government to legitimate a policy of taking over companies under the banner of protecting consumer rights.