Half-baked Socialism: A Glimpse Into Venezuela’s Bread Crisis

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Panaderías in Venezuela aren’t just bakeries. They’re cultural institutions. They are canilla, francés, andino, campesino and a galaxy of sweet and savory pastry products that have become staples of the Venezuelan diet for decades. Just like you can’t picture Paris without the cafés, or a deli-free New York City, a Caracas without panaderías is an unthinkable image.

Unless you’re a chavista official, that is.

“During all these years we’ve never faced anything like what we’re facing now,” Nelly says, frustrated “it started when they declared businesses like panaderías ‘special contributors,’ meaning that now we have to pay double in taxes while facing shortages of milk, eggs, cheese and deli products. And if they arrive, you can only buy a bit of each.”

They have people to snoop around your business, pretty much telling you how to run it.

Nelly —which is not her real name— is about my age and she works at her family bakery, since it’s hard for her to find a job related to her college degree. Like so many others, her grandparents left Portugal to start over in a new country, opening a panadería almost four decades ago in a small city in Aragua’s heartland.

Despite all the hassles they have faced in the past few years, they’ve managed to keep their heads above water, until now.

Nelly’s family bakery is one of the 10,000 in Venezuela, according to Fevipan, the Venezuelan Bakers’ Federation. By March 14th, Fevipan reported 80% of bakeries in the country had no flour stock and the rest were getting by with 10% of their usual monthly amount.

Fevipan says that in that same month 120,000 tons of wheat should have been in the mills, another 120,000 tons in transit from abroad, and yet another 120,000 should already have been guaranteed from foreign traders in order to keep the cycle going. As you can see, saying things are less than perfect right now is an understatement.

“Then, two months ago, the government sent committees to every state, setting up meetings two or three times a week to discuss an agreement with all the bakery owners, which we could only accept.”

Then, the government came up with the  Plan 700, a chavismo initiative against the “economic war” that involves some 4,000 officers from the Armed Forces, the National Police, Sunagro (the national unit of agricultural and food management), the Sundde (the national unit of consumers’ rights protection) and the CLAPs, all working together overseeing the production and distribution of bread nationwide.

By March 14th 80% of bakeries in the country had no flour stock and the rest were getting by with 10% of their usual monthly amount.

“They have people to snoop around your business, pretty much telling you how to run it. People from SUNDDE make sure you are selling products at the right price, and also prevent queues from starting inside the stores. Almost impossible. As soon as anyone starts baking bread, people line up in the streets. There’s just no way to manage so many people!”

Other new rules imposed by the SUNDDE include that 90% of the flour from Cargill (the only authorized distributor) must be used to bake ordinary bread,  the rest allowed for pastries. Bakeries must also provide an ongoing bread supply from 7 a.m. to 7 p.m and ensure the next day’s supply by retaining bread from the previous day.

And that’s not the end of it.

“At the meeting, there were owners of very modest bakeries, places that are also restaurants or sell deli products as well, supermarket bakeries and even bread factories. And we were told the same rules applied to everyone: you got 100 sacks of flour meant to last for 10 days, regardless of the size of your business or how much you are used to make. Someone complained they would be done before noon.”

Each 45 kg sack was sold to bakers for Bs. 12,000, which Nelly admits is a pretty good deal for them since the same sack easily reached Bs. 200,000 on the black market. The two types of ordinary bread to be made with that 90% of the flour,  francés and canilla, have been respectively set at 45 g and 180 g, and at a price of Bs. 50 and Bs. 200.

If they used 100% of the flour in ordinary bread in order to fulfill the ten-sack-a-day quota, they would have to bake 1,000 loaves of francés or 250 of canillas, or a combination of the two, in order to make Bs. 50,000. That isn’t even enough to buy the ten sacks of flour they’re using!

At the end of the process, you have to give them back the empty sacks, they just want proof that you have used the flour.

And if they use only 90% in ordinary bread, that is to say 1,000 of francés or 225 of canillas for Bs. 45,000, then the rest should be sold for Bs 75,000. Now, those are some really expensive cachitos.

“They still expect you to keep the store running and pay employees’ salaries and labor benefits with that crazy math they do. And then, the cost of sugar, yeast or eggs products not subject to price control it simply doesn’t add up to the final price they want us to sell bread.

At the end of the process, you have to give them back the empty sacks, allegedly for something related to the environment. But the truth is that they just want proof that you have used the flour. It’s ludicrous. I can’t deny there were indeed some bakery owners doing shady businesses with the flour, but why do all of us have to pay?”

But for businesses like the one Nelly’s family runs, failure is not an option. Literally.

If you refuse to comply, then you’re blacklisted from Cargill. That means you can only buy flour in the black market. If you dare not to be careful, you might end up like Mansion’s Bakery, in  downtown Caracas, which was taken over on March 17th by a 90-day period and transformed into a “communal bakery.”

Reports on their success are contradictory. Either they don’t have flour to make bread or they make an average of 5,800 loaves of bread daily, well above the ten sacks quota. In fact, some report SUNDDE demands 3,500 pieces a day!

But for businesses like the one Nelly’s family runs, failure is not an option. Literally. In true Orwellian fashion, failure is illegal.

“Flour hasn’t come for several weeks, so now we’re pretty much like a bodega, selling coffee and cigarettes and some deli. And if you close the shop, they accuse you of ‘not using the space to produce for the people’ and then they might seize the business. It’s insane!”

She laughs, nervously, at the conundrum her family is forced to face. Then she sighs.

“Fortunately my grandparents are not to be alive to see this. My uncles keep hope that things might improve. They used to start at 4 am and work until midnight, now they start at 7 a.m. and usually close at around 5 p.m. This bakery is all they have.”

17 COMMENTS

  1. Panadarias sin pan, carnicerias sin carne, ferreterias sin ferrets, what else is new? It’s Venezuela!!!

    The lunacy continues.

  2. In my travels to Venezuela In the 1980s, I will always remember the bakeries. People would go buy bread every morning for breakfast. Bakeries were everywhere. It was super fresh bread and tasty. No one kept bread in their house for days.

    No more.

    Maduro is using food to control the population- just like the Castros.

    • It’s a bit more complex than that, in my opinion. 100 sacks of flour cost 1.200.000 Bs, so they should make at least 120.000 Bs/day to be able to afford the flour (not even pay other fixed costs). What’s missing I think is that, in this bakery, max production is about 1000 for the smaller bread or 250 of the bigger bread (or a mix). Is that’s the case >> If they produced to the max and sold them at the official price, either way they’d make ~50.000 Bs daily. Considering this, it makes sense that if they were to use 90% of the flour in making bread they’d have to cover an extra 75.000 Bs in other bakery that uses only 10% of the flour to get to the minimum daily sales to just afford the flour (thus extremely expensive cachitos). This is why (1) the price is absurd, considering this particular bakery couldn’t even afford just the cost of the flour (and in reality they have to pay salaries, taxes, other ingredients, electricity…) working at max capacity if selling only bread – I think basic bread normally doesn’t have large profits, but they’d lose more than 50% investment if complied and considering the total costs probably lose money (2) They force the same rule for everyone, disregarding production capacity and needs. Add to the mix the fact that you HAVE to use at least 90% of all the flour or lose your business.

    • The numbers dont match the description. If you assume that a sack of 45 Kg is going to be used integrally to do canillas of 180g, then you get the 250 canillas per sack which at 200 Bs is 50000 Bs per sack, which is still “profit” from the 20000 … if you think the only thing affecting the price of bread is flour, of course. As those things are fixed but others like the salary of your worker arent, well, you may be very well losing money in each sack.

      If you actually had to go and get the flour on the black market then selling it at regulated prices is basically giving it away.

      I remember a good example of the chavista idiocy in regulating prices from a way back, when they moved the price of coffee from one day to the other like x100 or so. Which begs the question, if the x100 price is the “just price” today, who in hell was selling coffee yesterday at 1/100 th of the value?

  3. Grapevine data from a baker friend , before, they could exchange flour and other items with other bakeries so that every one traded what they most needed depending on their specialties , then it was forbidden , about a month ago flour just became impossible to get unless you had special contacts , my friend knew someone who had a relative in the military who could get them russian flour , they stopped the cakes and pastry and concentrated on ‘cachitos’ (small croissants) which were the only thing that they could make with the little flour they had , then that supply fell and they started buying chineses flour on the black market which is not anything like the flour they used to get in the past ………., from a very busy always full bakery theyve become a nearly empty place ……

    People who teach themselves the socialist mode of production are lacking in even the most basic knowledge on the handling of inventories …..a US lady known to a relative was sent to Russia after communism fell to teach them ( people in what now is Gazprom) how an ordinary business is run , she had prepared presentations but had to scrap them and begin from scratch when on the first meeting she discovered that people didnt have even the crudest accounting notions …….

  4. “If you refuse to comply, then you’re blacklisted from Cargill.”

    Uh, Cargill has nothing to do with “blacklisting”. Cargill is only the producer/manufacturer of flour. Blacklisting is the governments domain.

  5. According to relatives living in The Las Palmas – La Florida area in Caracas, the neighbors have organized themselves into groups to take turns working pro-bono at the local panadería so that the owners can at least keep the place open and make some bread. Apparently, at the regulated bread prices they can barely pay for rent, electricity, raw materials and supplies. But they can’t hire anyone, which means they can’t keep up with the work of making the bread and running the business. So, even if/ when they manage to buy the supplies they need to meet demand they have long lines of people outside the store waiting to get their canillas. So, the neighbors figured the best thing to do was to do volunteer work for the owners to keep them in business.

    • One caveat to be aware of… the largesse that the Lula and DR administrations put forward are going to be difficult (impossible?) to unwind. Which is why that article kinda glosses over the road ahead.

      But the point about “it works at the beginning” is being overly generous with the way it played out in Brazil. In truth, it didn’t “work at the beginning” but instead just shifted the pain until they ran out of other people’s money.

      Bernie could not be available for comment. Nor his wife who single handed bankrupted a private college in Vermont. Students lost credits and were stuck with massive loans on useless degrees that could/would not be honored at other institution.

      • “the largesse that the Lula and DR administrations put forward are going to be difficult (impossible?) to unwind.”

        Well, economically speaking, the situation is already unwiding, with figures gradually getting back in normalcy territory. (http://www.brazilgovnews.gov.br/news/2017/04/imf-projects-gdp-growth-for-2017-and-2018)

        For instance, I have been at ‘APAS’ this week, which is one of the largest supermarket fairs in the world, held in Sao Paulo annually, and everyone there was surprised with the amount of deals closed, the number of visitors and international companies present, which was better than in the previous editions. A curious fact, by the way, was the Bolivarian government of Ecuador with a huge stand promoting their private sector there. Go figure. Anyway, the general feeling there was that of a crisis already in the past, with employers investing and hiring again.

        The Brazilian problem is pretty much the left, though, and the article kind of glosses over the road ahead because it assumes that the left won’t be back in power after the 2018 elections, given the society’s change in political attitude, which is something difficult to measure. But if the left does get back in power, then Brazil will be economically in trouble again. Thus, we all should focus our efforts in fighting the left, not only in Brazil, but all over the world. As they have already shown multiple times that their insane ‘solutions’ do more harm than good and can’t do much for the poor, long-term speaking.

        Just look at the US, with Trump in his three-month term already achieving magical numbers. (http://www.thedailystar.net/business/us-unemployment-falls-10-year-low-april-1401739)

        That’s what really help poor people: low unemployment and sane economic management. Not unsustainable welfare that bankrupt countries.

        • I would love to give Trump credit for the turn around, but, reality is … it has to happen with fundamentals or else its just a brief “bump”.

          Not to say his policies are wrong economically, a cage match with Canadian subsidies was going to happen no matter who got into office. And a little bit of protectionism is not a bad thing. Its when it turns into a full blown gubmint takeover like in Marxist countries that we Americanos need to stay clear of.

          Time will tell if current policies in the USA are heading in the right direction (or enough of a “turn”). I’m hopeful and optimistic, but, cautious none the less.

          In Brazil, the regional economies are what is going to matter most. Its move away from a centralized theme, but, hopefuly w/o further attrition of capital.

  6. For the record, I can still get delicous PAN from Amazon delivered to my house w/o fear of getting mugged as an Americano. I enjoy the freedoms I have and hope that others in the US do not suffer the same fate as what has befallen else where.

    The lack of food and the starvation that the people in VZ have to endure is tragic. I wish them as safe as possible return to productivity as possible in a democracy.

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