Accountability Abroad for Venezuelan State Corruption (Part IV): The effect of the “Food for Venezuela” business scheme on food insecurity, hunger, and malnutrition

Jan-Michael Simon

Versión en español aquí.

Part I and Part II of this series looked at criminal cases in the U.S. and Mexico involving the laundering of proceeds of Venezuelan State corruption, namely corruption in the government procurement of products imported by intermediaries for social programs.

One of these cases is related to the payment of kickbacks to Venezuelan officials for the purchase of basic food products imported from Mexico, mainly between 2016 and 2018, for the State food subsidy program for the Venezuelan population called “CLAP” (the “Food for Venezuela” case). In the U.S. justice system, cases like this can be expected to result in stiff penalties and the forfeiture of the full amount of the sums involved in the crimes. In Mexico, by comparison, the criminal case was settled with the payment of two percent of the total amount of the financial transactions reported.

Part III showed that the Mexican authorities failed to disclose the specific facts of the case and the elements qualifying the conduct as a criminal act. Even so, based on the totality of the evidence, the author was able to determine the business scheme that was used. It included seeking a financial source for the kickbacks by overpricing certain exported foods, while disguising the origin of the source and sacrificing the quality of other foods exported for the CLAP program.

The source of the kickbacks appeared to have been disguised through a hidden compensatory calculation to absorb overpriced business transactions involving high quantities of basic commodities into very low-priced transactions with substandard commodities of the same or similar category. 

The fourth part of the series analyzes the overall effect of these corrupt dealings on food insecurity, hunger, and malnutrition among the Venezuelan population. The author concludes that the scheme has had a significant negative effect on the food and nutrition status of the population, which is why the settlement of the case in Mexico is hardly compatible with a “firm commitment of the Government of Mexico to the Venezuelan people.”

Part V will discuss the impact of the “Food for Venezuela” case on human rights and the rights of victims.

Introduction

The “Food for Venezuela” scheme illustrates how Venezuelan State corruption has diminished the quantity of standard food products and increased the quantity of substandard food products for distribution to the population. This inverse correlation resulting from corrupt business transactions can bring foodstuffs well below the nutritional standards set in Venezuelan regulations, as with the importation of powdered milk.

Venezuela has invested significant public resources in these dealings. Between 2016 and 2018, according to a study by the Venezuela Chapter of Transparency International (TI Venezuela), the value of food imported from Mexico is reported to have reached US$ 1.734 billion. This figure is close to the dollar amount involved in the criminal case in the U.S., estimated to be around US$ 1.6 billion.

During this period, according to the government of Nicolás Maduro, the Venezuelan State allocated over 70 percent of the annual budget to social welfare investment, reaching 75 percent in 2019. In particular, this represents a massive investment in food subsidies. In 2019, according to the Maduro administration, it accounted for 99 percent of the commercial value of the food products distributed.

The lack of reliable official data on the fiscal management of the Venezuelan government in general, and its food policies in particular, makes it difficult to verify whether Nicolás Maduro’s assertion is consistent with reality. But his words provide a general frame of reference for the financial scale of corrupt business dealings in relation to the investment of public resources, especially in the social welfare of the Venezuelan people.

The lack of government transparency also makes it hard to measure the effect of the business scheme on food insecurity, hunger, and malnutrition among the Venezuelan population. The lack of access to reliable and verifiable public information on the subject is well known. Nevertheless, based on alternative information using suitable methodologies and sources, it is possible to identify sufficiently reasonable evidence to address the general magnitude of the toll that corrupt business transactions have taken on the food and nutrition status of the population.

Food insecurity

Nourishment depends on the existence of food (availability) and on the population’s ability to obtain it (access). 

According to the Food and Agriculture Organization of the United Nations (FAO), food insecurity exists when people lack adequate physical and economic access to sufficient, safe, and nutritious food for normal growth and development. Food insecurity can be caused by the unavailability of food, or by the lack of sufficient purchasing power to buy enough food to meet the needs of the population.

Unavailability of food

The events related to the “Food for Venezuela” scheme occurred during a period of deep and sustained decline of animal production in the country. According to data from the Venezuelan Agrifood Network (RAV), production has been falling steadily since 2014-2015. In the case of dairy, it fell from about 90 percent until, in 2019, it reached less than half of the per capita availability rate.

Figure 1 (RAV, 2): Basic commodities per capita availability index (%) (base 100 = 2008)

In the same period, the CAVIDEA index—which includes major Venezuelan producers of basic foodstuffs—shows a significant and continuous drop in industrial production, in similar proportions to the dairy production data in Figure 1, according to RAV. In the case of powdered milk, these data represent 72.60 percent of national production.

Figure 2 (RAV, 4): CAVIDEA Index (%) (base 100 = 2005)

At the same time, Venezuela experienced a steep and continuous reduction in food imports—in proportions similar to the data in Figure 2—according to information from the Inter-American Development Bank (IDB) based on Comtrade, which is also reflected in the national figures put out by the National Institute of Statistics (INE).

Figure 3 (IDB, 12, figure 10): Venezuela: Food imports ( US$ million)

Within the continuous drop in food imports, the weight of government imports is notable. In inverse proportion to the data in Figure 3, it triples between 2014-2015 and 2019, becoming dominant from 2017 onward, according to RAV based on information from the INE.

Figure 4 (RAV, 7): Share of public and private final consumption food import value (%)

Lack of purchasing power

The progression of food unavailability in Venezuela during the period of the “Food for Venezuela” scheme coincides with the period in which the number of people living in extreme poverty in Venezuela as a proportion of the total population of Latin America in that category increased from 8 to 33 percent. This is based on estimates by the Economic Commission for Latin America and the Caribbean (ECLAC), which, as of 2015, had no official information from Venezuela (Social Panorama 2019, 97, note 4).

The extreme poverty line in ECLAC’s measurement expresses income poverty relative to the value of the basic food basket. It represents the income limit below which it is estimated that people are not able to meet their nutritional requirements. Before the Venezuelan State stopped publishing official information, ECLAC figures on poverty in Venezuela tended to be below INE income poverty figures, based on a Standard Food Basket (SFB) calculated by INE and the Central Bank in 1997.

After the Venezuelan State stopped publishing official information, alternative national measurements applying the same poverty line and the same SFB, such as the National Survey of Living Conditions (ENCOVI), show how in just four years—between 2014 and 2018—the number of people living in extreme poverty in Venezuela tripled. It is a dramatic increase: from about 1 in 4 people in extreme poverty in 2014 to about 3 in 4 people in 2018.

Figure 5 (UCAB et al. via statista): Population living in extreme income poverty (%)

This development contrasts with Nicolás Maduro’s assessment of the situation in Venezuela. In his “Memoria y Cuenta 2018”  speech, he said, “We have managed to reduce extreme poverty to 4.3[%],” and announced that “by 2025 we will reach 0% poverty due to unmet basic needs” (see also the “Plan de la Patria 2025“ [“Plan for the Homeland 2025”], 365).

This contrast in the assessment of the welfare of the Venezuelan people is explained by the fact that “Unmet Basic Needs” (UBN) are being measured instead of extreme income poverty. Indeed, based on this approach, extreme poverty in Venezuela would have declined steadily.

Figure 6 (prepared by the author based on data from the INE): Population living in extreme poverty due to UBN (%)

This is a questionable approach, as it uses a measurement that exists neither at the regional level in CEPALSTAT nor at the universal level in UNSTAT to gauge progress toward achieving target 1.1 of goal 1 of the United Nations 2030 Agenda for Sustainable Development, the eradication of extreme poverty for all people everywhere in the world. The content of Nicolás Maduro’s statements and the “Plan for the Homeland 2025” can therefore be disregarded here.

Acute food insecurity

The marked increase (by a factor of three) in the figures on variables that negatively affected food security among the Venezuelan population during the period of the “Food for Venezuela” business scheme culminated with a third of the overall population experiencing food insecurity between July and September 2019. Of these, 2.3 million people were severely food insecure and 7 million were moderately food insecure, according to the United Nations World Food Programme (WFP). In its Global Report on Food Crises 2020 (GRFC), the Global Network Against Food Crises classified the situation in Venezuela as acute food insecurity, based on the Integrated Food Security Phase Classification (IPC). The IPC uses three scales: acute food insecurity, chronic food insecurity, and acute malnutrition. It also defines acute food insecurity as a situation at a specific point in time of a severity that threatens lives or livelihoods, or both, regardless of the causes, context, or duration. The IPC identifies five phases of severity of acute food insecurity: minimal/none, stressed, crisis, emergency, and catastrophe/famine.

The GRFC 2020 was based on data provided by the Food Security Information Network (FSIN), including information gathered in Venezuela by the WFP in mid-2019. The situation among the Venezuelan population was considered so severe that it was among the top ten food crises in the world, according to the GRFC 2020.

Figure 7 (GRFC 2020, 2): Ten worst food crises of 2019 by number of people in crisis or worse (IPC/CH Phase 3 or above)

Hunger and undernourishment

Under these conditions, there was a very pronounced increase in the prevalence of undernourishment in the Venezuelan population. According to FAO data, it nearly tripled between 2014-2015 and 2019. This means, according to the FAO definition of “hunger,” that food consumption was reduced as a result of food insecurity among poor people, nearly tripling hunger during the period of the “Food for Venezuela” scheme.

Figure 8 (FAO): Prevalence of undernourishment (%) (3-year average)

Nutrition among the Venezuelan population depends on their diet. Hence the relationship between hunger, undernourishment, and undernutrition. Defined by the FAO as a level of food consumption insufficient to consistently meet a person’s dietary energy needs, undernourishment leads to undernutrition.

Children under five are particularly vulnerable to undernutrition. In the hunger dynamics of the period in which the “Food for Venezuela” business was conducted, Caritas-Venezuela recorded, within one year, a doubling in the figures of global acute malnutrition in this group. That is, according to the FAO definition, weight-for-age deficiency, which reflects a condition resulting from insufficient nutrition, previous cases of undernourishment, or poor health, has doubled among children under five.

The data was collected in four Venezuelan states using a baseline established at the end of 2016 by Caritas-Venezuela due to the lack of official figures on the subject. The study uses anthropometric measurements, nutritional indices, family food security indicators, and anemia levels to gather the information.

Figure 9 (Caritas-Venezuela, figure 5): Global malnutrition in children <5 years (%)

Without being a national sample—in the absence of reliable and verifiable official data—the information gathered by Caritas-Venezuela points to the steady deterioration of the nutritional status of children in Venezuela, according to UNICEF, and is consistent with other specialized empirical studies on the subject (Candela 2020).

Child mortality

One specialized study reports that undernutrition affects mainly children under two (Landaeta-Jiménez et al.2018). It also notes that during the period that coincides with the “Food for Venezuela” business scheme, hospitalizations of children under five with severe forms of malnutrition (edematous and marasmus) increased (ibid., 74). Under these circumstances of food insecurity and undernourishment, the study concludes, it is to be expected that infant and neonatal mortality will increase (ibid.).

This conclusion is supported by data on Venezuela from the United Nations Inter-agency Group for Child Mortality Estimation (IGME) and empirical research on the subject (García et al. 2019, 335). The period of the “Food for Venezuela” scheme coincides with a 25 percent increase in the under-five mortality rate per 1,000 live births, according to IGME projections.

Figure 10 (prepared by the author based on data from the IGME): Mortality rate for children <5 years (per 1,000 live births)

Weight of the corrupt scheme

The “Food for Venezuela” business scheme decreased the amount of basic food products and increased the amount of substandard food products. Determining this proportion more precisely is far beyond the scope of this contribution, whose objective is to ascertain the general effect of corrupt business transactions on the food and nutrition status of the Venezuelan population during the period in which the scheme was carried out.

The value of the corrupt business transactions detected by the U.S. justice system (about US$ 1.6 billion) represents approximately 20 percent of the total food imports for the period in which the transactions were conducted (total of about US$ 8 billion, as shown by the data in Figure 3 above). Considering that, in this period, the government’s average share of total food imports was around 60 percent (see Figure 4 above), the value of the business would be about one-third of the government’s food imports in this period.

The share of corrupt business in total government imports already speaks to its role in food insecurity, hunger, and undernourishment among the Venezuelan population. This is even clearer when we consider that, during the period in which the business was conducted, the value of government imports accounted for only about 50 percent of the value recommended by experts for an emergency supply program to import basic foodstuffs (Hernández, J. L.2018). Thus, the business would have involved one-third of the imports, which, by themselves, were only half the imports needed to address the severe nutritional effects of food insecurity during the period in question.

Powdered milk and other dairy products—a category of food which affects one group particularly vulnerable to undernutrition—played an important and sizeable role in the corrupt business transactions, representing 15 percent of the total value of Mexico’s exports to Venezuela and becoming in 2018 the highest export item in the business scheme. 

This part of the business scheme is especially serious, given that a scientific study found that the products were well below the nutritional standards set by Venezuelan regulations. Nutritionists discussed the study’s findings, establishing a link between consumption of the products and infant diarrhea. They further noted that the products could cause severe forms of child malnutrition, especially in the most vulnerable children who are dependent on the “CLAP” program (Hernández, P. et al. 20192021).

While this is not enough to establish a direct causal relationship between the corrupt business and the increase in malnutrition and mortality rates in children under five, in a context of widespread public corruption—of which the “Food for Venezuela” business scheme is a part—this increase is in line with empirical research that, with due caution, has found strong evidence that public corruption increases the child mortality rate (Wathne & Stephenson 2021, 29).

Conclusion

The figures available for the period of the “Food for Venezuela” business scheme show a very significant negative influence of corrupt business dealings on the variables affecting the food and nutrition status of the Venezuelan population. In particular, there is sufficient evidence to conclude that the corrupt business contributes to a higher rate of malnutrition in children under five and a higher child mortality rate. 

Given this dimension of the effect on food insecurity, hunger, and malnutrition among the Venezuelan population, the settlement of the “Food for Venezuela” case in Mexico is difficult to reconcile with the claim of the Mexican authorities that the settlement agreement “is confirmation of the firm commitment of the Government of Mexico to the Venezuelan people.” Part V of this series will demonstrate, in light of the impact of the “Food for Venezuela” case on human rights and victims’ rights, that the “reparatory” agreement to settle the case in Mexico violates human rights.

To be continued in Part V.


Photo: AP Photo/Ariana Cubillos

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