Hard row to hoe for farmers

These should be the best of times for dairy farmer Luis Espinoza.

The Venezuelan economy is booming, thanks to a flood of oil dollars, and consumer demand for food items including milk and cheese is unprecedented. Overall consumption by Venezuelans is up 10% this year, and vendors of cars, clothing, computers and many other goods are raking it in.

But things couldn’t be much worse for Espinoza and hundreds of ranchers and farmers like him here in the northeastern state of Monagas. Espinoza’s herd is dwindling, his milk output is shrinking and his future is more tenuous by the day.

He is a casualty of President Hugo Chavez’s Socialism for the 21st Century, as the fiery leader calls his economic plan. Chavez’s policies are squeezing out private farms in favor of worker-owned cooperatives that enjoy massive government subsidies and for which profits are of secondary importance.

Espinoza’s problem is he cannot produce milk at the low price -- 50 cents a liter -- that the Chavez government has set for it. Nor can most private ranchers. Milk is one of 29 basic food items on which Chavez has slapped price controls. Others include cooking oil, flour, canned tuna, eggs, beef and poultry. Espinoza and other producers complain that the artificially low prices are leading them to ruin.

The lifelong rancher says he is under more than just economic pressure. In Venezuela’s increasingly polarized society, he says, for-profit farmers are made to feel like villains.

“The worst is the psychological impact of the uncertainty and the political confrontations,” said Espinoza, 54, as he walked among a cluster of cows from his 600-head herd, down from 900 seven years ago. “There are hatreds and passions and family conflicts that didn’t exist before.”

Because farmers including Espinoza can’t recoup their costs, they are cutting production, forcing the Chavez government to import foods for which the country was once self-sufficient. Although worker cooperatives are producing more and more food, they are far short of covering the private sector’s decline in output.

Total Venezuelan imports could hit $40 billion this year, a 20% increase from 2006.

“The state’s answer is to import milk and beef from Brazil, Argentina and New Zealand, creating jobs there and poverty here,” said Jose Antonio Coraspe, a third-generation rancher and president of the Cattlemen’s Federation in Monagas.

Chavez aims to address the long-standing inequities of Venezuelan society and better distribute the nation’s oil wealth among the poor. His programs have made him enormously popular with a majority of Venezuelans, and last year he was reelected to another six-year term by a wide margin.

He claims to have reduced the country’s poverty rate to 30% from 50% in the 1990s, eliminated illiteracy and raised the poor’s standard of living by providing free healthcare, much of it administered by 25,000 Cuban doctors.

Another boon to the poor is the government’s Mercal retail food chain, where more than half of all the grocery items consumed by Venezuelans are sold. Goods are discounted as much as 35% off market prices, thanks to government subsidies made possible by Venezuela’s oil revenue, which now tops $1 billion a week.

Patrons at the Fabrizio Ojeda Endogenous Development Nucleus -- a center in the Catia slum of Caracas that includes a Mercal market, a medical clinic and a shoe factory -- lauded Chavez.

“I credit Chavez for this. We have very few means and he is the first leader who has cared about us. Just look at what he has done, not what he has said,” said Yaneth Nava, a 32-year-old homemaker who was picking up free prescription medicine for her migraines.

But critics say the policies are unsustainable if oil prices fall, and that Chavez, by slowly smothering the private farm sector, is ensuring an even deeper crisis when that day comes because domestic production will be crippled.

“It is clear that Venezuela is sitting on a time bomb, though the timer has still left us enough time to react,” said the August quarterly Perspective report by Ecoanalitica, a leading Caracas-based economic consulting firm, in addressing Chavez’s spending.

Ken Shwedel, an agricultural economist with Rabobank in Mexico City, said: “These imports and subsidies are costing Chavez a lot of money, and it may not be sustainable. But with the price of oil at $80 a barrel, you can argue that he can afford it. At that price, you can afford to finance any bad policy.”

The drop in domestic food production has happened so quickly that scarcities have developed. A thriving black market has since developed in which food items including sugar, beans and other staples are sold at an average 93% markup from the controlled price, according to a recent survey by the Venezuelan Teachers Federation, which monitors consumer prices.

Higher food prices are a key factor in Venezuelan inflation, which is expected to exceed 17% this year -- the highest in Latin America.

Because his profit is nil, Espinoza can’t afford to invest in equipment or new livestock, which means his future as a farmer -- if he has one -- is likely to be less and less productive.

It’s typical of all sectors of Venezuela’s private industry fearful of Chavez’s socialist policies, said Ismael Perez Vigil, executive director of the Venezuelan Industry Federation.

Declines in industrial jobs, manufacturing capacity and the number of manufacturers are symptomatic of the investment drop-off, said Perez Vigil. Another sobering statistic: Foreign investment in Venezuela last year was negative, meaning more foreign capital fled the country than came in.

“The economy is not generating high-paid jobs, not adding technology. There is a brain drain not just of qualified people like doctors but even plumbers and electricians,” Perez Vigil said. “Yes, there is an increase in car manufacturing, but vehicles are usually assembled with imported parts because of Chavez’s controls and the difficulty of finding skilled labor.”

Oscar Garcia Mendoza, president of the Venezuelan Credit Bank and a critic of Chavez’s economic policies, said the decline in investment was “bringing pauperization and decline.”

“The country is turning into Africa, with everyone trying to benefit from the [oil] bonanza as best they can. But it’s only possible if oil prices stay high.

“Production is falling and [government] spending is rising. It’s a celebration of irresponsibility and of ignorance without limits.”

Espinoza spends what little he can spare on security. Cattle rustling has become endemic in Monagas, with 10,000 of the state’s 400,000 head stolen last year. Cattlemen have had to band together to form what cattlemen association leader Coraspe calls the local version of the Texas Rangers.

Espinoza says investing in his ranch makes little sense in view of what he calls “judicial insecurity.” He was referring to the takeover of three private cattle ranches in Monagas by peasant groups with the encouragement of Chavez’s government.

Espinoza says he is barely hanging on. He has reduced his payroll to nine from 13. His milk production has slid to 600 liters a day from 1,500 seven years ago.

His shrinking herd is part of a broader reduction: Venezuelan beef and dairy cattle now total about 12 million head, or 1 million fewer than when Chavez took office in 1999. That works out to a ratio of about half a head per capita, far below the 1-1 ratio in Brazil, for example, Coraspe said.

Espinoza’s frustration is evident. “The government is committing grave errors with its agricultural policy,” he said. “If things keep going the way they are, there will see a collective protest, some sort of civil explosion.”

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chris.kraul@latimes.com