Venezuela's 'beer war' mirrors hostile politics | Reuters - Firstpost
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Venezuela's 'beer war' mirrors hostile politics | Reuters

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By Diego Oré
| CARACAS

CARACAS Running short of raw materials in mid-2015, Venezuela's two biggest beer makers Polar and Regional publicly chided the socialist government for delays in releasing foreign currency to import hops, barley and tin for cans.Their stance in a joint communique angered President Nicolas Maduro's administration, which allocates dollars to businesses under currency controls that are a cornerstone of Venezuela's state-led economic model, beer industry sources said. But it then dealt with the two companies very differently. Executives at Regional met surreptitiously with government officials, and weeks later the currency board coughed up crucial dollars for hop imports, a plant expansion and some foreign debt payments, said sources close to the talks. But Polar, Venezuela's largest private company whose high-profile owner Lorenzo Mendoza is cast by the government as a symbol of callous capitalism and architect of an "economic war" against socialism, was given the cold shoulder.It received fewer dollars - then not a single one this year - while inspections of its factories and detentions of its managers multiplied.Venezuela's beer war had begun, with a political flavor."We are being subject to discrimination, it is public and notorious: we have requested (currency) countless times this year, every day, and they have not given us anything, not once," said Marisa Guinand, director of Polar Brewery, at her office in an industrial zone of Venezuela's capital, Caracas."We will keep insisting until they assign currency as they do to the competitor (Regional) and to many other businesses in this market," added Guinand.Government officials did not respond to requests for comment on the accusation that it was discriminating against Polar, in a nation where more beer is consumed than milk. Polar's complaints mirror what plenty of local and foreign businessmen operating in Venezuela say in private: play ball with the government and all will be well, speak out and harassment may follow.Regional, a company of 3,790 workers which began in 1929 in Venezuela's second city Maracaibo and is owned by the billionaire Cisneros family, has denied favoritism.But it is not the first time "Chavismo", as the ruling socialists are known due to their late founder Hugo Chavez, and the Cisneros family appear to have found common ground.In 2004, during a push for a referendum vote to remove Chavez from power, the multimillionaire Gustavo Cisneros, uncle of Regional's current low-profile boss Andres Cisneros, met Venezuela's then president at an army base.Although Gustavo Cisneros denied making a deal with Chavez, his businesses, including local TV channel Venevision and the country's franchise for the DirecTV network, went on to flourish while others suffered state takeovers.

His main TV competition, pro-opposition RCTV station, lost its licence and went off the air.DOLLAR SUPPLIES DRY UP
It was Chavez who in 2003 introduced the currency controls that have become so problematic for companies in Venezuela. Whereas Chavez enjoyed an oil revenue bonanza that gave his government plenty of access to dollars, the tap has dried up under Maduro's presidency amid a crash in global crude prices since 2014 and the OPEC nation's unprecedented economic crisis.Though there is no official data and state currency board Cencoex did not respond to questions from Reuters, local consultancy Ecoanalitica calculates the government has sold just $18 million a day this year, 63 percent less than 2015.That has left not just Polar, but other businesses from automakers to food importers, clamoring for ever-scarcer dollars which can only be legally obtained from the state. Shortly after issuing the critical communique along with Polar, Regional executives began meeting with the government. The company then moderated its tone and announced it had sufficient raw materials and supplies for full output.

The difference in treatment has driven a wedge between Polar and Regional which, despite being direct competitors, previously had a sometimes cooperative relationship, even lending each other raw materials for making beer. "For our size and needs, we've had an ok access (to dollars)," said Carolina Requena, marketing manager for Regional Breweries, which has 15 percent of Venezuela's market compared to Polar's 80 percent."Since February ... we have asked four times and they have given us four times, though less than we requested."Other smaller breweries told Reuters they were being assigned dollars in timely fashion from the currency control board to import raw materials, although together they produce less than 1 percent of the country's beer.Polar, which began producing beer in 1941, lodged a formal complaint in August at the International Labor Organization (ILO) for "harassment and discrimination."Pro-government union groups within Polar's 10,000-strong workforce have led labor disputes leading to plant closures in the last year. And so far in 2016, the military has briefly detained a dozen of its managers in around 800 inspections.Like Chavez before him, Maduro often singles out the long-haired, U.S.-educated Mendoza in public tirades, accusing him of hoarding products and provoking shortages."If you can't manage your companies, give them up to the people. Bandit, thief, oligarch, traitor!" Maduro thundered in one recent public speech, as a crowd demanded "Expropriate!"

Mendoza has been publicly critical of the government's economic policies, and is touted by some Venezuelans as a possible future presidential candidate. Opinion polls show his company and products are popular among Venezuelans.In April, Polar closed all four of its plants for two months after running out of raw materials, though it later obtained a $35 million loan from Spanish bank BBVA to reopen two.Still, hit by economic crisis and the shortage of dollars, it is currently producing 50-60 million liters of beer per month, down from 140-150 million liters last year.BEER AND BASEBALL
The beer war has even spilled over into sport, with two baseball teams run by people close to the government - the Aragua Tigers and the La Guaira Sharks - replacing Polar with Regional as their sponsors.The change, an important one given that beer sales rise during the baseball season, was part of the agreement reached between Regional's Cisneros and government officials in four or five meetings over about a month, said the sources with direct knowledge of the talks.Last year, Venezuelans were the biggest per capita consumers of beer in Latin America: 89 liters annually, according to the World Health Organization (WHO). Yet due to a third year of recession, scarcity of raw materials and Venezuelans' fast-shrinking purchasing power, the local market is now crashing.Regional predicts a 50 percent drop in sales for 2016, and Polar sees an even bigger fall of 60 percent.Even so, it remains a profitable business and Polar's brewery arm still subsidizes the rest of the conglomerate, which also produces Pepsi-Cola and flour for Venezuela's staple "arepa" cornbread.Currently working at 40 percent brewing capacity, Polar estimates it has enough materials to keep producing beer until January next year, but beyond then it faces uncertainty."There seems to be a clear intention to break Polar," said another Polar executive who asked not to be named."There is a decision to strangle us with the currency issue. Beer is good business, the most profitable one, so it's a good way to strangle the whole corporation." (Writing by Andrew Cawthorne; Editing by Christian Plumb and Kieran Murray)

This story has not been edited by Firstpost staff and is generated by auto-feed.

First Published On : Nov 25, 2016 22:17 IST

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