Shortages leave Venezuela with nothing to put in packaging

Marianela Toledo

25-May-2016

Steve Meddle REX ShutterstockHOUSTON (ICIS)–Venezuela has resumed production of some petrochemicals needed to make plastic packaging, but shortfalls in other parts of the economy are leaving producers with nothing to put in the packages, a market participant said on Wednesday.

“Clients are running out of raw materials,” the source said.

Coca Cola has cut beverage production because of a lack of sugar, and Polar is running out of flour.

Coca Cola said, “The lack of sugar involves the temporary interruption of the lines of drinks made with this raw material.”

Manuel Felipe Larrazabal, director of Polar Alimentos said, “The current levels of raw material to produce PAN flour will last until the end of May.”

PAN is a brand of flour, which is used to make arepas, a Venezuelan staple.

“Given the deficit of the national harvest, [the company] depends exclusively on buying white maize imported [and] assigned by the national government”, Larrazabal says.

Polar is among the largest brewers and food companies in Venezuela. In April, the company closed its three beer plants because of problems accessing to the US dollars needed to pay foreign suppliers.

“Before we have problems with resins, but now is raw materials,” the market source said.

Petrochemical resins such as polyethylene (PE) and polypropylene (PP) are commonly used to make packaging for the food, pharmaceutical, and hygiene industries among others.

Some of these resins are not suffering from the shortages endemic in other parts of the Venezuelan economy. Indeed, Venezuela was said to have exported large volumes of high density polyethylene (HDPE) to Colombia recently.  

Linear low density (LLDPE) production was said to be good. But low density PE (LDPE) supply continues to be hampered by production problems.

PP supply was also said to be sufficient.

Many private companies in Venezuela face severe restrictions to accessing US dollars, making it difficult to import raw materials. The government controls access to foreign currency needed to buy imports through the Comision de Administracion de Divisas (Cadivi).

The country, in fact, has three exchange rates, as shown below.

Venezuela bolivar exchange rate versuss US dollar

 

22 Apr

29 Apr

6 May

13 May

20 May

Dicom

354

372

400

411

446

Parallel

1,112

1,115

1,096

1,091

1,098

Dipro

10.0

10.0

10.0

10.0

10.0

In addition to food and beverage companies, some petrochemical producers are also contending with shortages. One of the worse cases is Venezuela’s sole polystyrene (PS) producer, Estizulia. Its plant has been down for almost a year because it cannot obtain the dollars needed to import feedstock. 

Venezuela as a whole continues to struggle with water and energy restrictions, the source said. These are being felt by plastic-processing companies among others.

Venezuela has faced problems with its power generation for years. But the cyclical weather phenomenon known as El Nino has brought drought and worsened the energy crisis by limiting hydroelectric production.

(Photo: Chronic shortages are leaving Venezuela with nothing to fill PE bottles and other plastic packaging. Source: Steve Meddle/REX/Shutterstock)

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