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How a toilet paper shortage may temper Chavismo in Venezuela

In VenezuelaHugo Chávez‘s successor seems to be turning toward big business for help in ending rampant scarcities of basic consumer goods and an almost 30 percent annual inflation rate. 

Newly elected President Nicolás Maduroinvited Lorenzo Mendoza, the billionaire boss of Venezuela’s largest privately held company, Empresas Polar SA, to the Presidential Palace this week. Mr. Mendoza spent years on the outs with the Chávez government. Now, however, it appears Mendoza and Mr. Maduro may have reached a mutual understanding, leading to speculation that an attitudinal change on the part of the government towards big business may be in the works.

“We are ready to support you,” Maduro said on state television days after his meeting with Polar’s president. “Count on our support.”

Polar, the country’s leading food producer, makes everything from beer to corn flour — crucial for making arepas, the mainstay of the Venezuelan diet. Earlier this week, Mendoza rebuked Maduro for his previous claims that the company was hoarding food in an effort to destabilize the government.

“At the very least, the encounter [between Mendoza and the president] is seen as a positive first step towards improving relations with business,” says Jessica Grisanti, senior economist at theCaracas-based consultancy, Ecoanalítica.

The late president Chávez often irked business leaders and economists by imposing rigid price controls and nationalizing more than 1,000 companies and assets during his 14-year tenure. And while he never followed through, Chávez often threatened Polar with a state take over.

“The main agreement was not to politicize the issue of food,” said Mendoza, adding that he was “extremely pleased” after exchanging ideas with the new president on how to boost national food production.

Toilet paper shortages

For weeks now, Venezuelans have been struggling to find many staples ranging from milk to toilet paper. While official plans have yet to be announced, Maduro’s outreach could mean a rapprochement between the country’s battered private sector and the government struggling with record high levels of scarcities.

“It’s evident that [the government] is finally realizing that it was mistaken in its policies,” says Ismael Pérez Vigil, executive president of the Venezuelan Confederation of Industries, Conindustria. “That it can’t respond to the country’s needs by controlling the market.”

Tomorrow, recently appointed Finance Minister Nelson Merentes is scheduled to meet with business leaders in a continuing effort to establish dialogue.

Mr. Vigil, whose confederation represents more than 80 percent of the country’s manufacturers, explains the key issue among business concerns is a lack of foreign currency made available to companies. According to Consecomercio, a Caracas-based trade chamber, greenbacks are vital to feeding the nation as about 70 percent of the goods consumed in the country are imported or assembled from raw materials shipped from abroad.

Despite new dialogue, however, skeptics remain unconvinced that a major policy change is on the immediate horizon.

The shortages present a very potent political risk for Maduro, who is still deflecting claims of electoral fraud after his narrow victory last month, says Luis Vicente León, president of the polling firm Datanalisis.

“It is clear: Right now the debate in Venezuela is an economic one,” says Mr. León. “And not appearing to addressing it publicly would be disastrous in terms of his public support.”

* Follow Andrew Rosati on Twitter at @andrewrosati.

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