Venezuela is experiencing a sugar shortage amid a severe political and economic crisis, the country’s state-run sugar producers announced this week.
Coca-Cola FEMSA, the Mexico-based world’s largest bottler of Coke, announced on Friday they have been forced to temporarily cease production in Venezuela for the foreseeable future. The U.S. soda giant said it was forced to undertake this action because there is not enough raw sugar to continue to manufacture its signature soft drink. To make Coke, the company needs refined sugar made by the state-run Venezuelan Agricultural Corporation of Sugar.
“While this situation will impact the production of sugar-sweetened beverages in the coming days,” a Coca-Cola spokeswoman told CNN Money, “the production lines for zero-sugar beverages such as bottled water and Coca-Cola Light… continue operating normally.”
— @ReutersVzla (@ReutersVzla) May 21, 2016
Coca-Cola FEMSA stated it would continue to produce Coke until it exhausts its own stockpile of sugar. It is currently seeking other sources of refined sugar, though sugar-free drinks would be unaffected by the production freeze, according to the Telegraph.
“Fruit juices and water will continue to be produced by the firm’s 7,300 employees, in four bottling plants and 33 distribution centres. Imported Coca-Cola will still be available, but perhaps at a price inaccessible to ordinary Venezuelans. Latin America is the world’s largest market for Coca-Cola, with 29 percent of the company’s 1.9 billion cans a day consumed in the region. But the announcement marks another serious blow to Venezuela’s crippled food sector.”
The move comes as Venezuela’s economy is on the edge of collapse, with widespread food shortages and inflation forecast to surpass 700 percent. The South American country is currently under a state of emergency, and many basic goods such as eggs, flour, and milk are experiencing shortages. Last week, Empresas Polar, Venezuela’s largest brewing company, announced it was halting production of beer due to a lack of barley. A shortage of medical supplies has also cost the lives of some citizens, and scheduled blackouts to save energy occur for four hours a day in many cities.
— Telegraph Business (@telebusiness) May 21, 2016
President Nicolas Maduro has blamed the country’s problems on the opposition-controlled congress, foreign critics, and drought. In recent weeks, there have been violent protests in the capital city of Caracas when Maduro refused to hold a referendum on whether he should remain in office. In response to the unrest, the president declared a 60-day state of emergency granting further powers to security forces, and staged the largest military maneuvers in the country’s history on Friday, according to Fox News.
“Two days of drills included fly pasts by Russian-made Sukhoi Su-30MK2 strike jets and state TV showed tanks and troops on maneuvers. The drill, codenamed ‘Independence 2016,’ involves 520,000 soldiers and military personnel and is thought to be aimed at the United States, which Mr. Maduro blames for most of his country’s problems.”
President Maduro has also announced a two-day work week for government employees and those in the civil service to further save electricity. Venezuela’s economic woes come from a severe drought and low prices for crude oil, coupled with increased government spending. Petroleum exports make up about 50 percent of the country’s GDP and roughly 95 percent of its total exports. CNN noted that Venezuela’s economy seems to be in free fall.
“The International Monetary Fund projects that inflation will rise nearly 500 percent this year and over 1,600 percent next year. Venezuela’s economy is shrinking, its currency is worth less than a penny, and many investors are betting it will default on its debt by the end of the year. It’s a hard place to do business. Pepsi reported a $1.4 billion charge in September for its business in Venezuela, citing the country’s currency woes.”
If oil continues to average $44 a barrel this year, analysts say Venezuela could face a deficit of $20 billion in 2016.
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