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Associated Press

Chavez Orders Expropriation of Cargill Rice Plant

Christopher Toothaker

CARACAS, Venezuela - President Hugo Chavez has ordered the
expropriation of a rice-processing plant in Venezuela owned by American
food giant Cargill Inc. because the company allegedly was not
distributing rice at prices imposed by the government.

socialist leader also threatened on Wednesday to nationalize
Venezuela's largest food producer, Empresas Polar, amid rising tension
between his government and privately owned food producers that
authorities accuse of sidestepping price controls aimed at stemming
high inflation.

Chavez said Cargill's plant in Portuguesa state
violated local laws by distributing rice without printing the regulated
price on its packages. He instructed Agriculture Minister Elias Jaua to
"begin the expropriation process."

"Prepare the decree and we'll expropriate Cargill," he said.

rice-processing plant in Portuguesa is one of 13 food-processing plants
the Minneapolis, Minnesota-based company operates in Venezuela.

Klein, a Cargill spokesman in Minneapolis, said the company is
respectful of the Venezuelan government's decision and expects an
opportunity to clarify the situation.

"Cargill is committed to
the production of food in Venezuela that complies with all laws and
regulations. The rice mill was designed exclusively to manufacture
Parboiled rice, which the company has done at this site for the last 7
years and elsewhere in the country for 13 years," he wrote in a
statement e-mailed to The Associated Press.

Earlier in the day,
Empresas Polar said it had asked Venezuela's Supreme Court to block the
government from occupying one of its rice-processing plants for a
lengthy inspection. The company's Alimentos Polar subsidiary argued it
was "unconstitutional, illegal and arbitrary" for authorities to occupy
the rice plant for a 90-day inspection.

The government says the
price controls need to be respected to control inflation and keep the
prices of basic foods affordable, while businesses say the controls
could drive them into bankruptcy.

"These private companies can
continue functioning as long as they remain within the scope of the law
and the constitution," Chavez said Wednesday.

inflation is running at 31 percent, Latin America's highest, despite
price controls imposed in 2003 on items such as rice, chicken, sugar
and other products.

The government imposed new rules this week to
try to prevent producers from cutting output of price-regulated
products or from modifying products to circumvent price controls, such
as selling paella-flavored rice that does not fall under the controls.

Companies must ensure that 70 percent to 95 percent of their products are the types that fall under the price controls.

the past year, Chavez has nationalized Venezuela's largest telephone,
electricity and cement companies. His government also is negotiating
compensation for the takeover of the country's biggest steel maker,

Critics of the measures argue the government is sidelining
private enterprise by significantly expanding the state's role in the
economy. The nationalizations, they warn, are dangerous because the
government could be forced to lay off workers if the price of oil
continues its downward spiral.

Venezuela, which relies on oil for
94 percent of exports and nearly half the government's budget, has seen
prices plunge from last year's record high of more than $147 a barrel.
Benchmark crude for April delivery traded Wednesday at $45.38 on the
New York Mercantile Exchange.

Associated Press Writer Patrick Condon in Minneapolis contributed to this report.

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