Supply Risk Fascismo Style — Chavez Seizes Coffee Companies

For years, I've been railing both on this blog and in person that we must expand the definition of supply risk to also includes forms of political and trade risk. There's no better example of this than what recently happened to a Cargill plant in Venezuela except perhaps yet another private sector facility seizure earlier last week. According to the BBC, "The Venezuelan government has seized temporary control of the processing plants of two of the country's biggest coffee companies ... de America and Cafe Madrid."

According to the Venezuelan government, the plants have been accused of potentially "smuggling, hoarding, disloyal and monopolistic practices". But what does this mean in translation? Essentially that the plants do not supply goods at the set quota prices which stretch across "12 basic foods" that the government set in March. In other words, these plants are running afoul of Chavez' communist/fascist (take your pick) agenda. Just as we covered at the time, the article also suggests this is a continuation of policy from earlier this year when "Chavez ordered the expropriation of a rice mill, owned by a subsidiary of US food giant Cargill, accusing the company of not distributing rice at government-set prices".

Any organization with direct or indirect supply interests -- let alone manufacturing, distribution or production operations -- in Venezuela or with any of its left wing ally states (e.g., Bolivia) in the region would do well to re-evaluate their options. After all, it looks like our own government is too preoccupied at the moment to enforce fundamental Western rights protecting property interests of private concerns. And who knows how far Chavez will go in these continued efforts? Especially considering that oil prices are stubbornly refusing to climb in line with the rest of the financial markets (which provide the lifeblood of funding for his maniacal initiatives), Hurricane Hugo might take even more desperate and draconian measures.

Jason Busch

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