VZCZCXYZ0008
PP RUEHWEB

DE RUEHCV #1286 2782003
ZNY CCCCC ZZH
P 052003Z OCT 09
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 3782
INFO RUEHBR/AMEMBASSY BRASILIA 6188

C O N F I D E N T I A L CARACAS 001286

SIPDIS

SECSTATE PASS AGRICULTURE ELECTRONICALLY

E.O. 12958: DECL: 09/28/2024
TAGS: EAGR ECON PGOV VE ETRD
SUBJECT: SUGAR PROCESSORS ARE BRV FAVORITES

Classified By: Randall Hager, Agricultural AttachQ,
for reasons 1.4 (b) and (d)

¶1. (C) SUMMARY: Despite the BRV's overall negative attitude
toward big business, Venezuela's large sugar processors have
found official foreign exchange and import permits easier to
obtain. A prime example is Centro Azucarero Portuguesa
(CAPSA), the country's largest processor. However,
facilitated access to inputs comes with an implied obligation
to respond to government requests to provide more sugar for
the masses. END SUMMARY.

¶2. (C) According to XXXXXXXXXXXX official foreign
exchange have been easy to obtain from the government, in
contrast to other sectors which must often wait longer to
receive needed paperwork. During a September 23 plant visit
by AgAttache, we noticed a significant number of trucks
discharging loads of recently imported Brazilian raw sugar.
Arco estimates that CAPSA will import as much as 150,000
metric tons of raw sugar this year.

¶3. (C) To provide additional sugar for the consumer market,
an Official Gazette notice of July 17, 2009 stipulates that
the industry as a whole sell 60 percent of output to the
consumer market and 40 percent for food processing. COMMENT:
By directing that a larger percentage of sugar now goes to
the consumer market, the BRV can demonstrate its support for
the people. However, we expect some "leakage," and other
plants may continue to divert raw materials to processors,
despite official limitations, as it is profitable to do so.
END COMMENT.

4 (C) According to XXXXXXXXXXXX, Minister of Agriculture
Elias Jaua recently inspected CAPSA operations, and found them to
be acceptable and beneficial for the country, though he did
reportedly encourage them to boost output for the consumer
market, something that CAPSA is starting to do. As a result,
CAPSA is confident that it will not be expropriated given
that it is a strategic industry, is complying with government
wishes, and is far too complicated for the government to
administer properly. COMMENT: We believe that Arco's
analysis is correct, sugar milling is a complex process, and
the costs of mismanagement would be significant. It is
telling that the BRV continues to strongly support this mill,
even as it has invested millions to build several of its own
modern plants in the same region. These plants have never
begun operations. END COMMENT.

¶5. (C) CAPSA is clearly a well-run operation, with
significant investments made in infrastructure over the last
few years in a difficult economic environment. The company
was founded in 1966, and since 1984 has been owned by the
Cisneros Group.

¶6. (C) In a September 30 conversation with the Ambassador,
Oswaldo Cisneros (protect) noted that he had been asked by
the Minister of Science, Technology and Intermediate Industry
Jesse Chacon to prepare a report on the sugar industry which
would be delivered to the government the week of October 5.
Cisneros said he estimates that domestic sugar production
will drop 12-14 percent in 2010 and that Venezuela will
import as much as 650,000 metric tons of sugar.
DUDDY