The baking industry in Venezuela is hanging by a thread, after a new threat of expropriation by the regime of president Nicolás Maduro.
Bakeries in the South American country must not only face price control, currency controls, and the government monopoly on imported raw materials, but will also be obliged to meet three requirements: continuous production, regulation of raw material, and verification of the legality of their inputs.
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Vice President Tareck El Aissami announced the establishment of the new regulations for the 709 bakeries in Caracas, the Venezuelan capital, and stressed that the ones that fail to comply will be occupied by the government.
“We must guarantee that from 6am until the bakery closes that bread is made…the first loafs must be sold no later than 7am,” he stated.
But El Aissami with this order, would be forcing many bakers to close their doors, because not everyone has enough flour to produce throughout the day, and even less if they must sell baked goods at regulated prices which make it impossible to turn a profit; an even greater concern when bakery owners must factor in paying their employees.
The vice president also said that under the new regulations regarding the use of raw material by bakeries, 90% will be destined for the production of ordinary bread, and 10% for other products such as deserts. He added that some bread should be left over for the next day.
In order to enforce compliance with these regulations, a monitoring team will be established, consisting of the National Superintendence for the Defense of Socioeconomic Rights of Venezuela (Sundde), a Bolivarian militia group, a member of the Local Supply and Production Committees (CLAP), and members of the Bolivar-Chávez battle units.
They will also have to supervise the amount of bread produced according to the capacity and the equipment that the bakeries have on hand.
In an interview with the PanAm Post, Víctor Maldonado, executive director of the Chamber of Commerce, Industry and Services of Caracas explained that thanks to this threat of expropriation and the tightening of controls, at least 7,000 jobs are at risk in Caracas. With this new measure the government will hamper bread production in the Caribbean country.
Maldonado commented that, like the rest of the companies that depend on imported raw material, what has happened is that the government has stopped importing wheat flour, an item that is not produced in Venezuela.
It would take about one million tons of wheat flour a year to meet expectations for bread and other products like pasta and crackers.
“The government monopolized the importation of all food products and everything that monopolizes the government ends up being characterized by inefficiency and corruption that is paid for by the Venezuelan consumer and ultimately collapses the companies,” he said.
He further explained that the problem is that daily bread (termed canilla in Venezuela) is regulated at a price that can not offset the costs of production, costs that are impacted by sometimes having to acquire the flour at unfavorable exchange rates, or at marked up prices through informal resellers.
“Once the government sets the price unilaterally, freezing prices in an inflationary economy, the effect is that the product disappears. And the bakeries have opted for producing other products in order to be able to survive economically,” he pointed out.
He said that at this moment at least 7,000 jobs linked to 700 bakeries, are in jeopardy in Caracas, because the government is going to force the emptying of inventories to give away bread at a price that does not cover its production costs.
According to Maldonado, in 2016 alone there was a loss of 700,000 jobs, while 30,000 companies closed.
Of Venezuela’s 800,000 companies before Hugo Chávez came to power in 1999, there are only 230,000 left, which means at least 570,000 went bankrupt.
Foreign exchange controls, price controls, labor laws, expropriations, and threats are the most commonly cited reasons for why the Venezuelan industrial and business sectors are failing.