Venezuela takes steps to expropriate Cargill rice mill

by Staff
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CARACAS, VENEZUELA — Reacting to steps aimed at expropriating a rice mill, Cargill Inc. was working with government officials in Venezuela this week to avert the takeover.

Mark Klein, a spokesperson for Cargill, said representatives of the government were in Cargill’s rice mill on March 5 as part the process of taking the mill over from the company.

The pending takeover is in response to allegations Cargill has circumvented price controls imposed by the government on white rice.

Venezuela’s president Hugo Chavez said the plant, located in Turen-Piritu Portuguesa state, violated local laws by distributing rice without printing the regulated price on its packages. He directed Agriculture Minister Elias Jaua to "begin the expropriation process."

"Prepare the decree and we'll expropriate Cargill," Mr. Chavez said.

The action comes several months after Mr. Chavez publically threatened to nationalize food companies. Inflation in Venezuela, at 31%, is the highest in Latin America.

Tensions over Cargill’s rice pricing rose following threats by Mr. Chavez to nationalize Venezuela’s largest food producer, Empresas Polar. Polar has been accused of circumventing the rice price controls by introducing value-added product such as flavored rices, e.g., with chicken flavor added.

Mr. Klein said Cargill has never produced white rice at its mill. Instead, the company consistently has produced parboiled rice there, he said.

"Cargill is committed to the production of food in Venezuela that complies with all laws and regulations," he said. "The rice mill was designed exclusively to manufacture parboiled rice, which the company has done at this site for the last 7 years and elsewhere in the country for 13 years. Cargill expects the opportunity to clarify the situation with the government and is respectful of the Venezuelan government decision."

Venezuela is one of 14 countries in Latin America in which Cargill has a presence. Its 2,000 employees in Venezuela account for well under 10% of the company workforce in Latin America (exceeding 30,000). Cargill has 160,000 employees worldwide.

Mr. Klein said Cargill has a relatively modest position in the Venezuelan rice market, with a market share well beneath 5%. On the other hand, the company operates several other businesses there. Cargill runs 2 offices in Caracas as well as 13 manufacturing facilities and 7 commercial branches in Venezuela.

In addition to rice, its branded products in Venezuela include edible oil, pasta, flour, cookies, fruit juice, pet foods and animal nutrition.

Cargill’s first acquisition in Venezuela was the 1986 purchase of Agroindustrial MiMesa (a pasta and flour business) in Maracaibo. Since then, the company has made several additional acquisitions while also expanding through organic growth.

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