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Tuesday, May 31, 2016

Other Downsides of Consolidation

Lorenzo Mendoza greets and kisses worker at his shuttered brewery in Caracas, Venezuela. He's trying to boost morale. Mendoza is the chief executive of Venezuelan food giant Empresas Polar, which was founded in 1941 and is now the largest private company in this socialist country. But Polar has come upon tough times. Many of its processing plants are running at half-speed, and thousands of employees have been furloughed since April, when all four of the company's breweries were shut down by a barley shortage. The government controls access to foreign currency, and Mendoza says it has refused to provide the dollars Polar needs to import barley, which doesn't grow in Venezuela's tropical climate.

The problem, of course, is this:
For Venezuelans who want to unplug from all these problems by popping open a beer, that's no longer possible. Polar used to produce 80 percent of Venezuela's beer, and now the supply is rapidly drying up.
Venezuela needs more breweries!


  1. You're going to have to explain how increasing the number of breweries would relax Venezuelan governmental controls on capital movements, freeing up dollars for breweries to purchase barley from overseas.

    Further, "...says David Smilde, a sociologist at Tulane University who specializes in Latin America. He says private food companies like Polar have helped to prevent the total collapse of Venezuela."

  2. If barley is a commodity that has to be imported, and the government refuses to provide the hard currency to pay for it, you could have 1000 breweries, and they will all have the same problem.

    Consolidation to the point of a virtual monopoly in consumer goods, is never good, but you've made a poor argument against it this time.

  3. The correct title of your post is "Other Downsides of Socialism." I'm sure Bernie will make it work great here, though.

  4. I'm prepared to admit I don't know what the hell I'm talking about here. Econ is Patrick's gig.