Busting the myth of Polar's debt


Polar CervezaFACT: on January 22, 2014, AVN published an article titled “Polar doesn’t need dollars at the –cheap- Cadivi rate to produce”. The starting point of the piece is a press release, in which Empresas Polar claimed that their production levels could be at risk if Cadivi didn’t pay the US$463 million owed to them. In response, AVN quoted economic analyst José Piña as saying that Polar didn’t need cheap Cadivi dollars, because it is an exporting company that makes profits in dollars. Also, the US$ 463 million debt would “only” represent 11% of Lorenzo Mendoza’s personal fortune and 7% of Polar’s 2011 earnings of US$ 6.5 billion.

CONTEXT: Venezuela’s Central Government owes private companies an estimated US$13 billion. For example, the debt with food companies members of the Venezuelan Food Industry Association (Cavidea) adds up to US$2.4 billion. The debt with Empresas Polar, just like their own press release suggested, comes to US$463 million. The amount is not in dispute.

Empresas Polar is a key supplier of food and drinks, including many basic products with fixed prices: corn oil (Mazeite), tuna (Margarita and California), oatmeal (Quaker), corn flour (P.A.N. and Mazorca), butter (Mavesa and Chiffon), pasta (Primor and Gran Señora), melted cheese or cheese sauce (Rikesa), tomato sauce (Pampero) and yoghurt (Migurt). Polar also produces drinks such as mineral water (Minalba), fruit juice (Yukery and Yuky-Pak), malta or wheat soda (Maltín Polar), soft drinks (7-Up, Golden and Pepsi), beer (Ice, Light, Pilsen, Solera, Zero), wine (Pomar) and sangría (Caroreña).

It is highly unlikely that a Venezuelan family might end a trip to the grocery store without buying at least one of the many products that Polar offers. In fact, many prefer Polar brands.


  1. Polar doesn’t need dollars at the Cadivi rate to produce. Yes, they do. Venezuela’s dependence on imports is such that one of the Central Government’s main solutions to our current economic crisis is to increase public imports (in some cases, paying with oil) and to create a Foreign Exchange Budget to determine what, when, how much and who in the private sector can import. Venezuela also maintains a foreign exchange control since February 2003, which has encouraged imports by selling dollars at an artificially cheap rate, harming local production in the process. Venezuela imports cornbarley, and even butter. The only legal way to obtain dollars –so far- is through Cadivi or Sicad – if any Venezuelan manufacturing company needs dollars to produce, and their production is considered a priority to the economy, Cadivi is the sole legal supplier of said dollars. Purchasing dollars at the black market rate is prohibitively expensive, given the price controls on most of the products that Polar sells. One might think that the Central Government should ease access to dollars for companies that produce basic goods and services, rather than justify the nonpayment of already approved dollars. Even more so: Polar is not asking for a favor, it is claiming payment for a debt. Cadivi approved a certain amount of dollars and failed to pay them. The moment to question the request for dollars is when the request is made, not after it has already been approved.
  2. The Central Government won’t pay up, because the company doesn’t need it. The real reason is different. The debt with the private sector –and, for example, the announcement of payments with oil- are a clear sign that the government is short on dollars. In October 2013, Rafael Ramírez -Venezuela’s oil minister, president of Pdvsa and vice president in economic matters- claimed that by the end of 2013 Pdvsa (state oil company that contributes up to 96% of Venezuela’s dollars) would have transferred US$47 billion to the BCV and Fonden, but total imports of goods and services had already reached US$58.9 billion by September 2013. The situation will be even more critical in 2014, because the Foreign Exchange Budget for the year was estimated at US$42.7 billion, US$4.6 billion less than 2013. This means the Central Government expects private companies to swallow their losses, putting their sustainability at risk and belittling their importance to the economy and to the employment sector – the private sector accounts for 58% of Venezuela’s GDP and employs 78.8% of the total workforce. It should also be said that Polar doesn’t produce Plasma TVs precisely, it produces food and drinks. Shouldn’t food and drink manufacturers get preferential access to currency? Isn’t the food and drinks sector the one that is registering the highest levels of scarcity?
  3. Polar is an export company. The few sales Polar makes overseas do not come from Venezuela, because Venezuela punishes exporters. The World Bank’s “Doing Business” report shows that, in order to export from Venezuela, 8 different permits are needed, and that the cost per container reaches US$ 3,490. If companies are able to overcome this, the export process would take an average of 56 days, when the world average is 22 days. There are countries, like Estonia and the US, in which the export process takes as little as 6 days. In 2011, Lorenzo Mendoza explained the difficulties to export from Venezuela. He claimed that the Central Government had to approve a certificate of national production, which rarely happened, and that the fixed exchange rate affected the potential profitability. If additional evidence was needed, it should be said that non-oil exports account for just 4% of total exports. To export from Venezuela, the Central Government must approve a “Certificate of National Production”, which confirms that national production covers internal demand and that only “leftovers” can be exported. Given the increasing levels of scarcity of basic products, Venezuela should not be exporting them. If Venezuela were in fact exporting basic goods, it is thanks to the express consent of the Central Government. On the other hand, hasn’t the Central Government been announcing over and over that it will be promoting exports to increase the availability of dollars? So shouldn’t the Central Government be supporting exporting companies, or at least those that could potentially export?
  4. The Bodega Complex. It’s more than clear that José Piña, the economic analyst quoted by AVN¸ has little to no knowledge of finance, let alone the difference between corporate finance and personal ones. For a small mom-and-pop store, a “bodega,” one that accounts for the total income of the owning family, one could make the case that both are equivalent. But when we’re talking about a large company that employs thousands of workers and provides for their families, with many different shareholders, there is no equivalence. Mendoza is not Polar, and vice versa.
  5. Being rich is a sin. AVN claims that, according to Forbes, “Lorenzo Mendoza is Venezuela’s second richest person and runs one of the country’s biggest private companies: Polar.” We think this should be praised, because Polar is a company that offers a large array of products, most considered basic goods and sold at fixed prices. The company also generates thousands direct and indirect jobs. But there is no recognition for the company’s effort, let alone praise. For the Central Government, being a large private company is not an accomplishment, but a sin.


It’s clear the government’s case against Polar is fallacious and misleading. The government should honor its commitment and give Polar the money they owe them.


  1. Great meaty chunk of a blog !! shock full of well analyzed data , enough to feast (not just feed) our interest on the subject !! welcome Mzs Anabella and Barbara .!! . The argument that you are rich and therefore need not collect on whats owed to you is particularly ridiculous !! It might be used by Cuba to avoid paying Venezuela its already heavily discounted oil deliveries !!

  2. Wow, you guys (gender neutral expression) are good! That was a fantastic piece. Well done.
    So, like, what happens if the Chavistas decide to stiff Polar with a 463 million dollar bill? Does Polar shut-down? When? Next week? What happens then? This is serious stuff. If Polar is nationalized, or shut-down, it will have incredible ripple effects throughout the economy, or what’s left of it. Big stuff here.

      • I think it depends largely on how much capital they have available and what their working capital requirements are. I don’t have a report on their Venezuelan operations, so it is a bit murky. Will it shut them down? Probably not entirely, but will affect their operations? Very likely.

        To put it in perspective at a personal finance level (which is still apples and oranges), imagine if you lived comfortably in LPG with a relatively nice apartment, had a car, decent furniture, a moderately affectionate cuaima and take annual vacations with her to Los Roques and Margarita. Life is pretty sweet. Then your cunado convinces you to buy a bunch of stuff to import which he will help sell, but doesn’t have the capital himself to buy, but which he should have sufficient income to make good on in a few weeks. It takes a big chunk of your dollar savings and a chunk of your income, but you do it, because you are obligated to do so. Then, lo, your brother underprices stuff and won’t pay you back.

        You have plenty of assets, but your cash reserves drop and you have to live skinny for a while. You can afford gas, but those nice lunches out, the vacations, su cuaima, and the new iPhone you wanted your buddy to bring back from Miami for you…all that has to go because you have to cover basic living expenses.
        Your personal working capital is crippled and so you cut back on your expenditures and expansion plans, or you borrow, which is prohibitively expensive, if even possible.

        Essentially, what the government has done, is taken pressure off of the BCV’s dwindling reserves and passed the drain on to the private sector.

        Funny thing about governments and businesses: they follow the exact same finance death spiral that average consumers do, they just dress it up in nicer terms. People say they are “broke”. Businesses say they are “illiquid” or “insolvent”. Governments say that they have a “capital crisis” or “balance of payments” problem. It is all the same thing, in the end. All parties are broke.

  3. Debunking Argument No.1: Have you ever met Jose Piña? Well, I have and oh boy!, I´ll tell you, he is a complete basket case of human mental insanity…I close my case #FullAdHominemAttack #Yonodiscutoconlocos

  4. “It’s more than clear that José Piña, the economic analyst quoted by AVN¸ has little to no knowledge of finance”

    This is a common conception of chavista economists. It’s more likely that he knows full well what they are doing and the damage they are causing, but who cares? They can get away with anything they want, even if logic is not part of the equation.

    • The sad thing is that an “economic analyst” would even try to float such a specious argument. Anyone with a base understanding of even entry-level finance would know that such a statement is prima facie evidence of ignorance of how a business functions and working capital requirements. If he knows better, then he’s whoring his reputation for the cause, which is quite sad.

      There is life outside the “revolution” and eventually, it will catch up with him.

  5. What a great article, congratulations to both authors. It gives a clear explanation of one of the most important private companies in Vzla.

  6. Too much emphasis is put on what is outside oneself in Venezuela,and in this case people are worried about a rich company.What is inside is more important.In this case what should be emphasized is the importance of paying debts.The most important ‘moral’ here is not whether or not someone else has the right to be rich, but rather that we ALL owe it to ourselves to pay our debts.

    This is just the simplest of moral precepts.

    Where is pride in doing the right thing? The rest is just unimportant detail.

  7. Loved the article, gracias!

    One quibble, in Spanish it is correct to state that Polar’s earnings in 2011 were “$6.500 millones” however in English you should write $6.5 Billion.

    Writing $6.500 millions, while probably “correct” is not the common usage and is a bit confusing.

    • And yet, if they make that adjustment, they should also watch out from backporting it to Spanish, since “6.5 billions” is translated to Spanish as “6,5 millardos” and not “6,5 billones”, because “6,5 billones” is “6.500.000 millones”.

  8. Not to mention the fact that the products Polar does export are not manufactured in Venezuela, everybody goes nuts over the fact that there are plenty of Polar products available in most major cities abroad but they fail to notice the tag at the bottom that says “Made in Colombia”.
    I don’t think polar has too many options at this point, the government would like nothing more than for Polar to shut down so they can take over and “liberate” it, I can already visualize the news reporter being led to a warehouse by a national guardsman and then opening up a door to reveal an apparent massive stockpile of products and finally the “real” cause of the food shortages has been found, the Mendozas have to flee the country to avoid being incarcerated.
    I think the only option for Polar is to slow production down, ration what supplies they have been able to import to maintain the appearance of regular production and avoid being taken over by the government.

    • Polar has expanded to Colombia ; Mexico and other places , Its no longer a purely Venezuelan business . Probably the move was motivated by the challenges and opportunities of globalization but also to protect at least part of their assets in case the Govt decides on an arbitrary expropiation . They have a smart management team , probably fully prepared for a govt takeover since a long time . Other big Venezuelan businesses are doing the same . The govt is probably aware that its own managerial capacities are limited and that if Polar goes the production of some very popular stapples are also going to fall considerably, badly hurting their popularity!!

      • It’s the only way they can service foreign markets. With Venezuelan import red tape, export permits, limited supply of foreign currency to import and forced sale of foreign currency from exports; it’s just too crazy.

        Colombia is also exporting cocosetes, just so you know.

        • Wait, cocosetes are Venezuelan?! We’ve always had them in Colombia as far as I know. But yeah, polar has adapted really well to the Colombian market, especially with premade arepas. As most mid and high class Colombians do not buy arepa flour. They have arepas from every region and they even partnered with a dairy company to have weird stuff like arepas filled with gouda cheese. Which are really good. But alas, the Venezuelan arepa remains superior.

          • Yes! Cocosetes are deeply Venezuelan. The ones you used to have were made in Venezuela, Savoy being a Venezuelan company, later bought by Nestlé. Savoy is also responsible for other Venezuelan flag snacks, like Toronto, Susy, Boston, Ping Pong, Bolero, Samba, etc.

            But at some point in the recent past, Nestlé began producing cocosetes in Colombia. I could tell them apart because those have a blue logo (in Venezuela the logo is red, how appropiate).

  9. Interesting post. This is not a criticism of Polar but I read your shopping list of Polar products and I wonder: did Polar create the modern Venezuelan diet, or vice versa?
    This is where my interest in Rodrigos thoughts about craft brewing in Venezuela kick in…

    • That’s a great point.

      I agree with every said in the article. If the government create this exchange rules and Polar is playing by them then the government MUST honor its commitments.

      But in that future country that we all dream of, some serious antitrust work is needed.

      • Picking up on that, if you have some thoughts on beer and markets that you would like to share I think many of us would be very interested.

        • For a time they had a monopoly on beer , they purchased an excelent Maracaibo brand with a much smaller volume of sales , they refused to shut it down , but to keep the smaller brand going they required any large buyer of Polar beer to also buy some of the other brand . That by itself is a typical anti trust violation . Problem with Venezuelan market is that its not always optimum size to allow for a lot of competition in the making of certain products . Competition leads to good results when you have a large market . In a small market not always. Also when there are few companies supplying one common set of products they tend to form a kind of unplanned price cartel , they all charge close to the same prices , Companies explain this convergence as mandated by the need to ‘meet competition´’. Big complex topic , will probably require a blog ot its own.

          • Every type of industry has its own specific ideal size so that if you make it too small or too big it tends to fail , the more capital you need to succesfully operate a business the bigger the company , Mao tried increasing steel production by having each backyard build a small smelter , needless to say that proved a total failure. Funny that when Japan and korea decided to modernize their economies they concentrated on building up a samall group of large companies to make them into locomotives of industrial developement , showering them with privileges and easy money . Mitsubishi, Marubeni, Itho Shu, ..( the Tsaibatsu) , but below them where dozens of small companies in all out war of free competition .

        • Beer has always been a very luchrative business throughout Latin America, specially in hot climate countries , In Venezuela beer is among the most popular stapples . When Velasco Alvarado took over the whole banking system in Peru and as a result people couldnt get a loan anywhere , The Beer companies replaced the banks as money lenders , In Perus ruined economy of those days they were the only business with money to lend. That cash cow quality of beer enterprises provides them with a rich steady flow of cash with which to build other businesses . In Venezuela every one drinks beer !!

      • Mmm… not so sure…

        Polar’s current hegemony was not caused by lack of regulation, but by over regulation. We need to get rid of lots of regulations that restricted Polar’s competition in several cases to Big Capital like Heinz, Kraft, Ambev, Cisneros. What we need is lower entry barriers, so more people can compete, and for that we have to flexibilize or eliminate measures like currency control, export restrictions, import red tape, price control, profit margin controls, etc.

        The last thing we’ll need after chavismo is to bankrupt Venezuelan Polar so we can import from Colombian Polar. Or to prevent Albeca, Fritz or other brands from growing enough to take Polar head-on. Remember we’ll need Polar to remain competitive inside Mercosur (or in case of an Andean Community resurrection).

        Besides, they don’t have a history of corruption, strong arming rivals and lobbing to legislate their competitors away. I’m not going to defend Cisneros, though.

        When I was a kid, there was more choice of these:
        -cornmeal: Harina Pan, Juana, Mazorca, Doña Arepa,etc. Now Juana is struggling as the government took over Monaca. Some cachapa flour brands that predated Juana’s and Polar’s recent incursions, tanked at the beginning of the Chavez era.
        -Mayonaisse: Kraft, Mavesa, Nelly, La Torre del Oro, Hellman’s, Albeca. Nelly, la Torre del oro and Hellman’s are missing, but there are some new smallish entrants.
        -Juice: up until ley de costos, you could easily find California, Carabobo, Frica, Los Andes (even more when it was private) and some others.
        -Beer and Malta: Regional used to be a strong 2nd place competitor (with Cisneros backing), and Brahma had a multinational (Ambev) behind it. But recently, Brahma announced they were going to pull out and Regional seems to be dwindling. There are new entrants like Destilo, and niche competitors like Tovar.

        Some categories remain competitive:
        – Soda: Coca-Cola and AJE (Big Cola) are strong competitors. If anything, Cisneros caused Pepsi (and 7-up) to go to Polar with his famous side-switch, because otherwise Polar would only have the more modest Golden brand.
        – Primor Pasta and beans has lots of competitors. But Cargill took a hard blow from the governement.
        – Cheese: Cheez Whiz (Kraft) was the market leader when I was a kid. They are still strong, but some other entrants have failed to compete, or have had too much trouble under the current economic regulations.
        -Yogurt: Migurt is actually the new kid in town. Los Andes, Frigurt, Alpina and other companies have a lot of headstart here.
        -Tomato Sauce: Heinz, Eureka, and some smaller shops are strong competitors.

        Pomar’s case is sui generis, as they pioneered the market, and compete against imported wines mostly.

        • Polar never did go so low as Cisneros did when they ran Pepsi and would intercept Coca Cola and other soda trucks to destroy the glass bottles (the most expensive part of the soda and the hardest to replace).

          • I’ve heard lots of stories of Refrescos Dumbo (the original from the 80’s or maybe earlier) going under because of Cisneros’ thugs breaking their bottles.

            Polar, on the other hand, has well earned reputation of paying handsomely by Venezuelan standards and growing the business with hard work and innovation.

            I can’t think of any Polar corruption scandals of the top of my head, so they beat the average Venezuelan conglomerate at that, though they may well have a few small skeletons in some closet.

          • Other than a little hardball here and there, Polar for the most part has relied, and still does, on having an excellent distribution network as well as great marketing.

            They even go so far as to produce most of their packaging, something that most companies don’t do. Pretty much 100% of their printed flexible packaging is done in-house and of a very high quality to boot.

        • I would also recommend one more thing that is badly needed:

          Better distribution infrastructure. This is something the government should and could have a direct impact on.

          The country is geared towards a few large conglomerates and small bodegas. Bridging (no pun intended) that middle area is difficult in Venezuela, from my observations. I think a lot of local market share that a small or new company could use to grow is missed simply because it cannot penetrate the local and near-local markets adequately.

          The fuel subsidy distorts the market further, where logistics exist, rather than allowing them to develop properly.

          Just my humble opinion.

          • Yes!

            Polar can actually be thought of as Venezuela’s most successful logistic company. That just happens to in-source the product they deliver.

            If there’s any place Polar products can’t reach, I don’t think even the government reaches there. There’s hardly anyone in Venezuela with easier access to Polar’s competitors than Polar’s products.

            And yes. We need better roads and to give farmers and other producers better access to urban markets and export facilities.

            Africa is worth a look, with their mobile based crop price diffusion, and mobile banking in rural areas, mobile trading of crops, etc.

      • There is an absence of beer diversity. I’ve got nothing against Polar. Without them there apparently would be no beer. I’m just looking for some answers.

  10. When Chavismo complains about the private sector, they seem to use the term “parasite” frequently. However, when corporations become parasites, history shows that eventually hurt themselves because they need consumers to buy their products. In the meantime, Chavismo seems to think that expropriations, overprotective labor laws, bureaucratic red tape, outrageous currency controls, and that uncompensated transfer of value from private enterprises into government owned assets are not parasite behavior, but rather anti-parasite behavior. Since, the data speak for themselves, their ideological beliefs are apparently blinding them of the facts, and the outcome will have to be profound economic failure that will be hard to recover from. The ideological blind cannot be 100%, there has to be mid-level leaders within the regime who we can get unofficial interviews?

    • I have had discussions with a few of them myself, why not get some information from within the “bubble”, and share it with us?

  11. So, i find it funny to see this, but think about it for a second here… so… venezuelan bonds, they are okay with paying those on time, and to pay them… at ridiculously high interest rates… the chinese they are okay with paying these debts, at a lower price for their oil, so they are okay with eating the costs… the cubans services, they are totally ok with losing tons of dollars for this… but freaking paying polar whom distributes the basic staples that venezuelans want, and the one company that is still manufacturing within the country? the one with the best distribution infrastructure within the country? the one company that employs so many within the country? the government doesnt want to pay them?!?!?!?!??!?!?!?!?!?!?!??! its literally like… they dont know what they are doing.. and do not understand typical microeconomics/macroecon…. i’m flabbergasted

  12. This article misses the point, obviously the gov knows that they should pay Polar (since they basically are feeding the country), the point is that we are so broke that we can’t even afford to buy food. For me this is a big warning sign that the end is near and things are going to get ugly fast.

  13. Now they want to import even more foodstuff from countries like Argentina and Uruguay: http://www.eleconomistaamerica.com.ar/economia-eAm-argentina/noticias/5502583/01/14/Venezuela-acude-al-trueque-cambiara-petroleo-por-alimentos-con-Argentina-y-Uruguay.html
    And they limit the dollars for their national “capitalist” companies. They like better to buy that from “pueblos hermanos”. What they appear to really not get is the point that their suppliers in the cono sur aren’t “los pueblos hermanos”, but capitalist agro-business companies over there…

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