Central planning plagues Venezuela agriculture

Reuters/NY Times:

Deep in Venezuela's sweltering heartland, a gleaming dairy plant sits idle, a testament to missteps that slow President Hugo Chavez's drive to make his oil nation self-sufficient in food.

Dozens of workers in yellow rubber boots sluice water to keep metal pipes clean, ready to churn out pasteurized milk and cheese, but the site has barely operated since a team of Iranian technicians built it 10 months ago.

What may seem an obvious obstacle has yet to be overcome -- too few diary cows are raised in the harsh plains where the plant is located to provide enough milk to keeping it running.

"It's like they put their pants on before their underwear," said Humberto Taquiva, a cobbler who is also an agricultural adviser in the tiny plains town of Mantecal, trying to persuade farmers to produce milk for the plant.

With world food prices at all-time highs and hurt by sporadic shortages of basic products last year, Chavez is determined to reduce Venezuela's dependence on costly imports and make its fields more productive.

"Some day Venezuela will export food," the leftist president said April 24 during a visit to a newly irrigated corn farm in the neighboring state of Barinas, where new tractors worked the land. "Output keeps on rising."

Venezuela is a lush country but agriculture collapsed when oil crowded out coffee and cocoa farms in the 1920s.

...

... cases like the empty plant in the tiny town of Mantecal show bad planning, along with an overvalued currency, have slowed Chavez's drive to make the fertile land produce more.

...

Venezuela has promised to help other left-leaning governments in the region -- such as Bolivia, Nicaragua and Cuba -- to boost their production of grains, but it has run into difficulties at home.

Chavez, who says high food prices show capitalism is a failed system, has sheltered consumers from rising world food costs with subsidies and price controls.

Even so, some products have been scarce as world supplies tighten, fixed prices distort the supply chain and a bonanza from record oil prices drives up domestic demand.

...

Chavez can't revoke the laws of supply and demand. Building a milk operation where there is no demand for the service is a classic example that communist and socialist make. A capitalist would have measured demand before committing money to a venture because he expects a return on his investment to payback the cost of building the plant. Any lender would have insisted on a cash flow analysis based on current conditions in the area.

I have used the analogy before because it is so apt for what is wrong with Venezuela. No one can predict how many eggs and slices of bacon are needed in New York City everyday. Anyone who tried would guess wrong ordering either too much or too little. But, when individual grocers and restaurants place orders with vendors each day, they always get the exactly what is needed. It is a lesson a socialist will never learn.

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