Southern powerhouses pose threat to Venezuela's agricultural sector

Venezuela's business partners in the Common Market of the South (Mercosur) include two large producers of agricultural raw materials for export: Brazil and Argentina. Those two nations are also Venezuela's leading suppliers of food products.

Agriculture is the most important economic activity of this South American bloc. Nevertheless, the largest concentration of agricultural land is found in Argentina and Brazil, representing 61% of Mercosur's agricultural area whereas Venezuela's ratio of land for cereal production, for example, amounts to only 3.99%.

Venezuela's entry into this market set off a series of warnings from the local productive sector as a result of the country's unfavorable agricultural position with regards to its business partners.

Over the last three years, domestic production has shown negative year-end results and evidenced a significant drop in the performance of its main commodities. In 2011, the country's agricultural activity receded 0.57%, and its land for agricultural activities was 7.8% lower than in 2010, according to statistics published by the Ministry of Agriculture and Land.

Even though a four-year timeframe has been allocated for Venezuela to adopt Mercosur standards, trading can start immediately. Therein lies the fear of productive sectors, which see more threats than strengths for Venezuela.

In addition to the natural and structural limitations of the country's agricultural sector, public environment and policies have been hostile to the sector's development. Therefore, farmers from different associations have pointed out that time is needed for not only reactivating means of production but also preventing future commitments from sinking the economy even further.

Domestic production does not meet consumption requirements. Imported items, such as corn, rice, coffee, meats and sugar, are needed to supply nearly half of the current demand. Wheat for making bread and pasta and grains and soy for production of balanced foods for farm animals are entirely imported; the same applies to powdered milk.

While the production systems of other Mercosur members are comprehensive and involve high technology and producers from Argentina, Brazil, Uruguay and Paraguay are awarded incentives for their work, the domestic production system, despite recent growth, is still vulnerable compared to that of its Mercosur partners.

The downfall of the agricultural sector is largely due to price controls on production, giving rise to lower profitability and less capital for investment.

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Imports are the main concern in Venezuela's adhesion to Mercosur.

The national government has sent out mixed messages. Though President Hugo Chávez talks of exporting glass bottles, flowers, agro-chemical products and foodstuff to Mercosur; the minister of Industry, Ricardo Menéndez, has said that one of the advantages of joining the trade bloc will be the economical food imports. Government adverts played on the National Public Media System support the latter.

Menéndez has also stated that 52% of imports from other Mercosur members will be food products.                       

Argentina supplies grains and leguminous plants, cereals, oilseeds and meat to Venezuela. Brazil exports sugar, coffee, meat, live cattle and rice to the country. From Paraguay and Uruguay, Venezuela imports meats, processed milk and cheese. These products represent the largest portion of the domestic market.

Translated by Félix Rojas Alva