How Venezuela weathers rising food prices

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Matalon: Erasmus Palacio manages a Mercale, a state-run food store in a hillside barrio, a slum, in Caracas.

Palacio: �Even though there were food shortages recently, the government stepped in and resolved the situation."

Palacio in his storePalacio in his store

Matalon: Ch-vez's government, has used record oil revenues to subsidize food The oil money has tempered the suffering felt in other poor countries�.even though Venezuela's Central Bank says food prices are up by more than 35 %. The government runs 10,000 Mercales and 13,000 Mercalitos, smaller food stores, where the goverment has set prices for beef, chicken, sugar, rice and cooking oil.

But Gustavo Misle, a community leader in the barrio, says despite the government's Mercale system, shortages do take place, hurting everyone, especially the poor.

Misle: �'When it comes to food, the inflation here is a real problem. Venezuela's whole strategy, he says, has been of importing from Argentina, Brazil and Cuba instead of producing food ourselves. The poor here have felt the impact more than anyone.�

Gustavo Misle works in the barriosGustavo Misle works in the barrios

Matalon: Misle points out at least 4 family members have to earn at least the minimum wage�about 280 dollars a month�to survive.

Others criticize the Mercale as a temporary fix that may collapse if the price of oil falls. Private sector farmers say price-fixing is forcing them to sell at a loss, while others have simply stopped production, leaving land fallow�.or giving up farming altogether. In the fertile State of Carabobo for example, a farmers' lobby group says 30 per cent of its members have either given up farming or are seriously contemplating it. Many large estates have also been expropriated by the state as part of Chavez' so-called "Bolivarian Revolution" and squatters have taken over the fallow land.

Rrecent price rises have tripled the cost of once inexpensive products such as bananasRrecent price rises have tripled the cost of once inexpensive products such as bananas

Matalon: The government says the divide between it and food producers is a "clash of ideologies." Ch-vez's Food minister says the private farmers and food companies are only interested in profit, while the gov't wants to help as many people as possible. And in private grocery stores where prices are more expensive, but also highly regulated, polls show that shoppers support the government.

Golinger: "You have 10 people out of 20 who were the only ones able to buy all the chicken in the supermarket. Today we have 18 out of 20 who can do it. But the amount of chicken remains the same so there's going to be a shortage."

Matalon: Eva Golinger is a Venezuelan-American lawyer and a Ch-vez advisor. She blames shortages on private food producers and distributors.

Golinger: "Sabotage. This is a strategy that has been used over and over again hoarding of products to somehow create a state of panic, a state of instability, chaos amongst the public so that they'll react somehow in a violent way against the gov't."

Matalon: During the signing of a trade agreement on agriculture and energy with Brazilian President Lula da Silva on Friday, Ch-vez said the state is building a strategic reserve of food to avoid future shortages. And he said he hopes that trade will ease food shortages.

President Ch-vez and Brazil's President Lula da SilvaPresident Ch-vez and Brazil's President Lula da Silva

Matalon: Ch-vez said,' We'll be happy the day that all the people of Brazil and Venezuela will be able to eat breakfast, lunch and supper, and that'll be no hunger in the land."

Still even with shortages and double-digit inflation, analysts here�even those who oppose Ch-vez- say Venezuelans are not feeling the brunt of the world's food crisis. But critics predict Ch-vez's subsidies will wither if and when oil prices fall, and domestic agriculture hasn't improved.

For the World, I'm Lorne Matalon in Caracas.