For the past few years, Venezuela has seen a steady and staggering rise in food imports. In 2003, Venezuela’s food imports totaled $2.4 million (US). Fast forward to 2010, when Venezuela’s food imports reached $13 million (US), a 442% rise above its 2003 levels. Today, Venezuela imports 40% of its rice and corn, 56% of its coffee, and 60% of its sugar. In the past, all these crops were sustainably grown in the country. Experts attribute this phenomenon to three main factors – expropriations, price controls and poor government policies.

Since the Chávez government took over Venezuela’s food production, productivity has declined and food imports have skyrocketed. Let’s look at the coffee sector, as an example. In 2006, the Chávez Administration launched a “rescue plan” for what he considered was an ailing domestic coffee industry. As part of that process, Mr. Chávez expropriated the two largest coffee-producing companies in Venezuela, Fama de América and Cafea. The move guaranteed that more than 70% of Venezuela’s coffee production ended up in the government’s hands. Experts say that the Chávez-controlled coffee industry has yielded negative results in terms of domestic production. They are correct. Between January and May, Venezuela imported 51,000 tons of coffee – a 13% increase over its total imports in 2010.

Between 2003 and 2010, the Chávez government revised the prices of 182 food items. Each revision was typically accompanied by price control measures that negatively impacted crop production. Let’s address this in dollars and cents. Today, the Venezuelan government pays a coffee grower between $150 and $200 (US) for 46 kilos of crop. In a normal market, the same grower makes $465 (US). “I had to abandon my farm because it wasn’t enough for me to live on,” said former coffee grower Vicente Perez. He adds that coffee farming is no longer financially sustainable in Venezuela.

Mr. Chávez has long prophesized the dream of “food sovereignty” in Venezuela. However, his own policies are pushing the country farther and farther away from that goal. Rolling blackouts, for example, have had a significant negative impact in food production in Venezuela. It is estimated that at least 8% of crop losses are due to the daily electrical disruptions. And “[Venezuelans] are heading to 12%,” according to CAVIDEA Director Pablo Baraybar. CAVIDEA is the main food industry advocacy group in Venezuela. Baraybar, a harsh critic of Chávez’s food policies, believes that food sovereignty will only be attained by improving the quality and variety of Venezuela’s crops and by creating a sustainable food industry. These changes will only take place if and when the Chávez government allows the private sector to plays it inherent role in a free market economy.

Yesterday, in a shot across the bow at the Venezuelan government the U.S. State Department sanctioned seven foreign companies that it deemed in direct violation of international agreements over Iran. Among those listed is Venezuela’s state-owned oil company, Petroleos de Venezuela, S.A. (PDVSA).  “By imposing these sanctions, we’re sending a clear message to companies around the world:  Those who continue to irresponsibly support Iran’s energy sector or help facilitate Iran’s efforts to evade U.S. sanctions will face significant consequences,” Deputy Secretary of State James Steinberg explained in the announcement.

The sanctions prohibit PDVSA from gaining access to financing from U.S. financial institutions and make U.S. government contracts inaccessible. Notably, however, it does not impact Venezuelan oil exports to the U.S. and exempts PDVSA subsidiaries, mainly CITGO, from any sanctions. Steinberg said the Obama administration had carefully considered any affect on oil markets before making the decision.  U.S. Rep. Connie Mack, a Florida Republican who has been pushing for sanctions against the South American country, said he thinks they are “not going to have an immediate, drastic effect” on Venezuela’s petroleum industry or weaken Chávez’s government. [But it’s] a step in the right direction,” he added.  U.S. Senator Richard Lugar (R-IN), ranking member of the Senate Foreign Affairs Committee,  welcomed the announcement saying “that the Venezuelan government is not likely to back away from these relationships [with Iran] without more explicit international exposure and action.”

The reaction from Venezuela was predictable. Its Foreign Minister Nicolas Maduro warned that given these measures he could not guarantee regular shipments to the U.S., and that the Chávez government was currently evaluating proposals in response. These are likely empty threats that the Chávez government will not follow through on given the significant revenues it receives from its oil sales to America.  Shipments from Venezuela currently account for about 10 percent of all oil imports to the U.S. and 40% of the South American country’s oil exports.

These are the first sanctions imposed by the United States for refined petroleum products under the Iran Sanctions Act since it was amended last year.  According to reports, PDVSA has delivered at least two cargoes of refined petroleum products to Iran between December 2010 and March 2011, worth approximately $50 million.