BRASILIA: In June, the president of Venezuela’s congress, Diosdado Cabello, spent four days in Brazil. It wasn’t a secret. He was accompanied by other officials, tweeted that he was “working for the homeland” and met with the president. But it was an unusual state visit.
His first major meeting was with Joesley Batista, the eldest of a billionaire clan of five siblings who control JBS SA, the world’s largest meat packer. On three days, Cabello went to JBS plants. He dined with the Batista family.
If spending so much time with a foreign meat producer seems surprising, it tells a great deal about the co-dependent relationship emerging between one Brazilian company and the government of Venezuela. And it is a lesson in the Venezuelan government’s priorities these days. December elections are looming as hyperinflation, falling production and rising crime have led to food rationing, riots and looting.
“The government’s main worry now is food supply,” Fernando Portela, executive director of the Venezuelan-Brazilian Trade Chamber, or Cavenbra, said. “They need to keep supplying shops to stay in power.”
Only one in five voters say they want President Nicolas Maduro to serve out his term ending in 2019. The ruling party could lose control of congress for the first time in 16 years.
Cabello described his trip to Brazil as negotiating food and medicine to win the “economic war” capitalists are waging against his country. Requests to the Information Ministry for further comment from Cabello, the Food Ministry and the president’s office went unanswered.
For JBS, the Venezuelan market now has special significance. It has a $2.1 billion contract and provides almost half the meat and a quarter of the chicken eaten by 28 million carnivorous Venezuelans. The country accounts for about 10 percent of JBS’s export revenues, which some analysts have labeled a risky position, given Venezuela’s near default status. JBS doesn’t see it that way.
“For JBS, it was an opportunity to do something nobody else did in a country which has an important demand potential,” Miguel Gularte, president of JBS Mercosul, said in an interview. By taking over the packaging and distribution of its products in Venezuela, JBS also has been able to sharply reduce the time it takes to get to store shelves.
JBS has an arrangement other companies do not. In 2014 it sold $1.2 billion of food to the Venezuelan government and was paid within 90 days, according to documents prepared jointly by the company and the state import monopoly Corpovex.
By contrast, numerous local and foreign corporations in Venezuela haven’t been able to obtain rationed dollars from the government in years. Ecoanalitica, a Caracas-based consultancy, notes that the Venezuelan government has $28 billion of unpaid invoices to private companies.
Gularte said JBS expected to expand sales to Venezuela by 20 percent in 2015. The company is in talks with Credit Suisse AG to structure financing for further growth there.
Politics, both Brazilian and Venezuelan, lurk in the background. The countries’ ruling parties have grown mutually supportive in the face of crises, with Maduro defending Brazilian President Dilma Rousseff against impeachment calls as she criticized U.S. sanctions on his government. The JBS deal provides a Brazilian lifeline to Maduro’s government as it endeavors to stock food shelves in advance of elections.
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