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CARDIFF GARCIA, HOST:

Hello?

MARIANA ZUNIGA: Hello?

GARCIA: All right, Mariana.

ZUNIGA: Yes. Now I can hear you.

GARCIA: OK. Fantastic.

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GARCIA: Hey, everyone. This is THE INDICATOR from Planet Money. I'm Cardiff Garcia. And today, I'm joined by Mariana Zuniga. She's a freelance reporter speaking with me from Caracas, Venezuela. Mariana, hello.

ZUNIGA: Hi, Cardiff.

GARCIA: So, Mariana, you have brought us a story about Venezuela, where, politically, things are obviously very tense right now. There are power outages throughout the country. I should note there's a power outage right this very second as you're talking to me, isn't that right?

ZUNIGA: Yeah. Actually, yeah, we've just lost power at home.

GARCIA: OK. And this has been happening how often?

ZUNIGA: Well, we had, like, a massive blackout 10 days ago. It lasted almost five days. And now, power is kind of intermittent around the country.

GARCIA: Yeah. It comes in and out.

Well, the Venezuelan economy itself has been collapsing for years, Mariana, but the story you brought us is actually not about what's happening right this second. Instead, it's about how things got to be this way.

ZUNIGA: That's right, Cardiff. This is the story about a contradiction - a paradox. Venezuelans are starving because they're eating enough food, but the country should be a farmer's paradise. I have driven across the country many, many, many times. And I can tell you there is fertile land everywhere, lots of sunshine and plenty of water.

Once upon a time, Venezuela used its land to produce more than enough food for its people to eat. My story is about what has happened since that time. Given the country's natural resources, why did Venezuela lose its ability to produce enough food?

GARCIA: OK. And that story is coming right up after the break.

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ZUNIGA: Our story begins in the early 2000s. At the time, the companies in Venezuela's agricultural sector had a reasonable amount of economic freedom.

GARCIA: Guillermo Arcay, an economist based in Caracas at Ecoanalitica - that's an economic research firm - says that Venezuela's farming companies back then could choose which kinds of food they wanted to produce, and they could sell that food at the market price. But, says Guillermo...

GUILLERMO ARCAY: That's something that started to change when Chavez started implementing what he called socialism of the 21st century policies.

ZUNIGA: Guillermo is referring to Hugo Chavez, Venezuelan late president. There were several agricultural policies that Chavez put in place. The first policy was price controls. That started in 2003.

GARCIA: Yeah. And price controls are exactly what they sound like. The government forces companies to sell their products below a certain price. The price is controlled. It is capped.

So in this case, back in 2003, the Hugo Chavez government started capping the price of food. Supermarkets could not charge people more than a certain amount for the food that they bought from them. It started with basic foods, like sugar and milk. And the goal was to make food cheaper for Venezuelans. But there is a reason that price controls are considered bad economics.

ZUNIGA: Here is why. The supermarkets still had to buy the food from the farming companies. And if the supermarkets cannot sell the food for more money than they buy it, then the supermarkets don't have an incentive to buy as much food to put on their shelves, right? So the result is that less food starts showing up in the supermarkets.

GARCIA: And so, as Guillermo explains, the government then just extended the price controls to the farming companies themselves. The government forced the farmers to sell their food for below the market value to the supermarkets.

ARCAY: It started with the price of the final good. But afterwards, they started implementing price caps on all of the supply chain.

GARCIA: So the farmers now could not sell their food to the supermarkets for the market value. So they, the farmers, did not have an incentive to make as much food. And they stopped investing in the equipment and fertilizer and other things needed to make the food. And they did, indeed, start making less food.

ZUNIGA: A few months ago, I spoke with a small farmer named Tomas Santio (ph). He lives in Cojedes State in central Venezuela. The main industry there is agriculture. Tomas became a farmer a few years ago because he was very worried about the shortage of food. But he told me that the price controls have affected his business directly.

TOMAS SANTIO: Why would you invest? I mean - and besides, they're going to tell me, hey, you shouldn't - you should sell your milk at 1,000 - at 500. I can't. I produce at 700 or something, OK? I can only sell at 1,000.

GARCIA: But price controls were not the only policy the Chavez government put in place. Starting roughly in the middle of the 2000s, another policy was nationalization. This is when the government takes over a private company or the branch of a private company. And in the case of the farmers, this was also when the Chavez government started expropriating massive amounts of their farmland.

ARCAY: Hundreds of thousands of acres that were expropriated. And the government became the largest producer in almost every food group in the country.

ZUNIGA: The Chavez government was taking over the Venezuelan agricultural sector. This was part of a political strategy to take power away from the latifundios, which are the biggest Venezuelan agricultural producers.

And as the government took over more and more of the sector, the companies run by the government faced less competition from other companies in the market. So they didn't have to work as hard to produce food because the companies were now accountable to the government, not to the market.

And there was corruption, of course, as Guillermo explains.

ARCAY: They were stealing everything. And there was very little oversight because of how huge the nationalization project was. It was very hard for the government, even if it didn't want to be corrupt, to keep an eye on corrupt officials. So they were looting the machinery.

ZUNIGA: And eventually, the government took over more and more of the entire chain of food production, from the companies that made the equipment and sold the fertilizer to the companies that actually produced the food to the supermarkets where people buy the food. Less land is owned and farmed by private farmers nowadays.

Farmers, like Tomas Santio. Tomas remembers when a private company called Agroislena was nationalized. He says this company used to supply farmers with fertilizers and equipment. Now he relies on a company run by the government for supplies. But he has not been impressed by their work.

SANTIO: When they loan you supplies, they don't necessarily give you the supplies you want at the time you want and the amount you want, OK? And that's the experience many people have, and the ones that told me. So what I'm doing - I'm bootstrapping.

GARCIA: As the nationalization continued, Venezuelan production of food continued falling and falling and falling. So Venezuela started importing more food to make up for it. And in the short run, Venezuela had the money to do this because Venezuela exports a lot of oil. And back in the 2000s, the price of oil was very high, so Venezuela could make a lot of money from selling that oil.

ZUNIGA: But in 2014, the price of oil started collapsing, and so did the Venezuelan economy. The government could no longer afford to import as much food because it wasn't making enough money from selling its oil.

GARCIA: And eventually, the government started replacing its own supermarkets with the so-called CLAP boxes, which it sells to people for cheap. Now, CLAP is an acronym that in Spanish stands for local committees for supply and production. And the boxes are full of basic foods that the government still imports - foods like powdered milk and grains.

And Guillermo says the government has used the CLAP boxes as a way to compel Venezuelans to keep supporting it, because if you don't support the government, you might not eat.

ZUNIGA: But even then, it still isn't nearly enough food. The result of Venezuelan economic policies has been a humanitarian disaster. Only in 2017, the average Venezuelan adult lost 24 pounds because there was not enough to eat. Children are dying from a lack of nutrition. And millions of people have fled the country.

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GARCIA: Mariana, this was an incredibly disturbing story, but thank you so much for bringing it to us.

ZUNIGA: Sure. Thank you for listening.

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GARCIA: This episode of THE INDICATOR was produced by Constanza Gallardo, edited by Paddy Hirsch. And our intern is Willa Rubin. THE INDICATOR is a production of NPR.

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