IMPACT OF PUBLIC POLICIES ON AGRIBUSINESS AND ITS EFFECT ON FOOD RETAIL IN VENEZUELA
Faustino Flamarique
Partner
Agribusiness in Venezuela has faced great challenges due to the public policies that have been implemented in recent years. These decisions have had a significant effect on agricultural production and, as a consequence, on the availability of food on the market. This not only affects farmers and producers, but also impacts the food retail sector[1], further complicating access to basic products for the Venezuelan population.
I. Public Policies and their Evolution
During the last decades, the Venezuelan State has implemented various policies and strategies in the agri-food field. These initiatives have alternated between socialist and other ideologies, but have often failed to effectively address the problems affecting the sector. This resulted in low production, which led to shortages of basic products and critical situations, such as long lines and increased food insecurity.
Since 1999, Venezuela has experienced a considerable increase in state intervention in its economy. Through various policies, the State has been responsible for regulating prices and guaranteeing the supply of products. This panorama has formed a broad debate in Venezuelan society about the effectiveness of these policies and the consequences they have brought. Some argue that these are necessary to protect consumers, others indicate that they have only contributed to distorting the functioning of the market, thus affecting producers and consumers.
II. Effects of Public Policies on the Agro-industrial Sector
Public policies have generated a series of effects on agribusiness. As a result, distribution networks have been established such as Mercado de Alimentos (Mercal), Productora y Distribuidora Venezolana de Alimentos (PDVAL) and the Local Committees for Supply and Production (CLAP), which aim to facilitate access to food at affordable prices. However, these initiatives have also contributed to a growing dependence on the State for food supplies, which has discouraged local production.
These policies have affected both the availability of food and the ability of local producers to compete in the market. Dependence on the State for supplies has compromised local production, which has a negative impact on food security and the sustainable development of the agro-industrial sector.
III. Relationship between Agribusiness and Retail
The relationship between agribusiness and retail in Venezuela is the key to understanding how the agri-food system works in the country. This connection is manifested in how production is transformed and distributed through different marketing channels.
A. Structure of the Agribusiness
Agribusiness in Venezuela is an essential pillar of our economy, as its influence goes beyond simple food production, because it plays a crucial role in the development of the country. This sector connects agriculture with industry, contributing significantly to the nation’s well-being and economic sustainability.
It includes a variety of activities, one of the most important being the transformation of agricultural raw materials into food products. This process is essential to ensure that the retail market has a constant supply of processed products. Without this connection, it would be difficult for stores and supermarkets to offer consumers the variety of food they need.
B. Impact on Food Retail
The dynamics between agribusiness and retail are influenced by several factors, among which we find the following:
- Food Supply: One of the most significant problems facing agro-industrial production is shortages. This means that there is often not enough production to meet demand, which creates difficulties for retailers when it comes to maintaining their inventories.
- Economy: High inflation also plays a crucial role in this dynamic. Retailers’ operating costs are rising, and often the prices set by the state do not reflect the actual costs of production.
- Import Dependencies: Venezuelan agribusiness has come to rely heavily on imports to meet domestic demand. This has a direct impact on retail, since many of the products available in the market are imported. This dependence can make the sector vulnerable to global economic variations, affecting both retailers and consumers.
IV. Effects of Public Policies on Agricultural Production
- Agricultural Development Initiatives: Since the Great Agro Venezuela Mission was launched[2] in 2011, with the aim of boosting food production in the country and guaranteeing food security[3], the State has worked on programs such as agroecological urban agriculture. Which aims not only to increase the production of healthy food, but also to promote organization and community work.
- Price Regulation: Minimum pricing policies for sensitive crops such as cocoa and coffee have been implemented with the intention of protecting local producers. These measures seek to ensure that farmers receive a fair income for their work, which is essential in such an important sector for the country’s economy.
- Structural Challenges: Despite investments and policies aimed at strengthening the agri-food sector, it has faced significant challenges. Dependence on imports has limited the country’s ability to produce its own food, and the lack of essential inputs has exacerbated the situation. As a result, domestic production has decreased, which has led to problems of shortages in the market. Many consumers are affected by shortages of basic products that are vital to their daily diet.
- Impact on Food Security: Public policies have sought to improve food security through the promotion of family and urban farming, but results have been limited. This has led to an increase in food insecurity and malnutrition, mainly due to ineffective implementation. This situation affects the retail sector, where a lack of sufficient local production can result in empty shelves and higher prices, making it difficult for consumers to access basic foodstuffs.
V. Analysis of the Behavior of the Retail Market in Venezuela in the Face of Changes in Public Policies
The retail market in Venezuela has undergone significant changes in its behavior due to fluctuations in public policies, especially in a context of high inflation and shortages.
- Sales Growth: Retail sales in Venezuela have grown, which is good news for the sector after difficult times. This increase not only relieves retailers, but also indicates that the market is starting to recover. This situation highlights the tenacity of merchants and the ability of consumers to adapt, thus providing renewed hope for the future of commerce in the country.
- Government Initiatives: The State has implemented policies to stimulate the production and distribution of products, which has resulted in the emergence of new brands and greater variety in the market. This development reflects a growing dynamism in the retail sector, evidencing the effort to diversify the available options and adapt to what consumers really need.
- Pricing Strategies: Despite growth, inflation remains a central concern affecting retailers’ profit margins. This has led to strategic adjustments in prices and the need to innovate to maintain competitiveness. Containing inflation is crucial to sustaining consumption and retail activity.
When looking closely at this interaction, it is fascinating to see how the decisions made in agribusiness have an impact on the prices and availability of food we find in stores. It is evident that the effect of public policies on Venezuela’s agribusiness presents a complex and challenging panorama. Despite efforts to improve production and ensure access to food, the measures implemented so far have failed to address the structural problems affecting the sector fully.
For this reason, it is essential that more inclusive policies are developed. These must take into account the needs of both producers, who are the basis of our diet, and consumers, who seek access to fresh and affordable products. As well as, promoting a balance between both groups that will not only strengthen the agribusiness sector, but also contribute to the general well-being of society.
[1] Woxi, “food retail is a dynamic and essential sector that connects food and beverage producers with consumers”
[2] Genesis Pérez, Ministry of People’s Power of Economy, Finance and Foreign Trade, 25/01/2023. Retrieved from: https://www.mppef.gob.ve/gran-mision-agro-venezuela-12-anos-fortaleciendo-la-soberania-alimentaria/
[3] As can be consulted at the following link: https://misionverdad.com/opini%C3%B3n/lo-estrat%C3%A9gico-de-la-gran-misi%C3%B3n-agrovenezuela
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LEĜA Abogados
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Faustino Flamarique
fflamarique@lega.law
+58 212 2772204
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