Uruguay finds out it's easier to send food to Venezuela than to get paid for it

Uruguay bet a huge porcentage of its agro-exporting economy on a single deal with the Venezuelan government. What could imaginably go wrong?

One week ago, Uruguayan farmers held a nationwide protest, blocking multiple roads in anger over the enormous, overdue debts the Venezuelan Government has with them. The unpaid deal stems from a huge bilateral agreement made last year to buy large shipments of food that seems to have gone very wrong

Days later, it seemed the farmers had been successful: Venezuela announced that they had paid 50 million dollars, around half of a purchase of powdered milk. At the same time, Uruguay’s the government exhonerated some agricultural products of paying value-added tax to bring relief to dairy producers.

The Uruguayans should have known not to get too excited. The check never actually came, in spite of the earlier promise made by the Venezuelan Ambassador to Uruguay, Julio Chirino. So, what’s actually going on?

De todo.

Back in July 2015, a group of Venezuelan Ministers visited Montevideo and announced a series of bilateral agreements, which included a 300-million dollar deal to buy milk, cheese, rice and chicken. To give you a sense of scale, that was 72% of Uruguay’s exports to Venezuela in 2014. No wonder, Uruguayan President Tabare Vásquez called it “pure oxygen for the country.”

Back in Venezuela, the deal was sold as the fraternal Vásquez government’s way of pitching in against the“economic war”, accoding to then-Finance Minister Marco Torres (recently redeployed to the post of Food Minister, ironically enough).

But the ongoing fall of oil prices has hurt Venezuela’s ability to pay. That created some serious concern in Uruguay, as this deal is essential for some of the sectors involved – including non-food companies as well. The Uruguayan government even offered to take on part of the tab.

But this deal has a lot of peculiarities though.

For one, une, Uruguay is selling food to Venezuela at double the price it does for other nations – a fact that, the Uruguayan opposition wryly notes, “may favor Uruguay, but raises questions about how the resources are being handled. 

Second, the payment was supposed to go thorugh BANDES (the Venezuelan development bank which operates in Uruguay) but ended up being made to a Chinese bank account indicated by PDVSA. Third, the intermediary company involved in this deal is aligned with a sector of the governingFrente Amplio, linked to former President (and current Senator) Jose Mujica (who has been vocal in trying salvage the deal).

Funny that the company at the center of this deal is actually named Aire Fresco (Fresh Air). Alright, let’s continue.

The role of state oil company PDVSA goes beyond this agreement. Last year, the Uruguayan oil company ANCAP agreed with PDVSA to pay part of its debt thanks to a special loan approved by the Uruguayan Senate. Allegedly, part of the money is being used to pay for the food deal, but that detail has created a lot of confusion for many people involved in the operation.

The opposition National Party is already asking for a parliamentary inquiry in the Uruguayan Congress. We would sure hope Venezuela’s own recently installed National Assembly would follow suit, but it looks like the new president of the Foreign Affairs Commission, Luis Florido has his plate full with other investigations.

At a time when the Bolivarian Republic is facing a daunting cash crunch and severe food shortages, it looks like the government can’t afford to drop this deal. But is that because it needs the food to supply the neverending queques across the land or is it because it can’t afford lose an important regional ally?

They lost the big one across the river just three months ago. They can’t afford to lose another. The difference this time is Venezuela really is out of money, so the deal could crash even if both sides really don’t want to.

Let’s wait and see if the air clears out on this one.

(This post was written in collaboration with fellow CC contributor Ruben Rojas in Montevideo.)