What Mamdani Can Learn From Hugo Chávez's Government-Run Grocery Store Debacle

New York City Mayor Zohran Mamdani announced plans to open five government-run grocery stores that would offer discounted food to residents, promising prices 30 percent lower than typical retail rates. The initiative, which will cost taxpayers $70 million, aims to provide affordable groceries to everyday New Yorkers. During a press conference on Monday, Mamdani held up a bundle of plantains and emphasized the program’s goal of helping families put food on the table. When questioned about potential misuse of the subsidy, he reiterated that the Request for Proposals clearly outlined the intent of the program, not to enable profit-driven resales. Jeanny Pak, interim president of the New York City Economic Development Corporation, added that the city is exploring a “library card-esque” system to manage access, focusing on ensuring that the benefits reach regular citizens. This approach contrasts sharply with the challenges faced by Venezuela’s government-run grocery chain, Mercal, which was launched under former President Hugo Chávez in 2003. At its height, Mercal became one of the most popular social programs of Chávez’s administration, offering heavily subsidized food to millions of Venezuelans. In early 2007, Chávez demonstrated the effectiveness of Mercal by comparing prices at the stores with those at private retailers. A kilogram of sugar at Mercal cost 740 bolívares, significantly cheaper than the 1,300 bolívares charged elsewhere. Similarly, chicken was priced at 1,900 bolívares versus 4,550 bolívares in private stores. These discounts, ranging from 43 to 62 percent, were hailed as a success, reinforcing Chávez’s vision of creating a “socialist commerce” model. However, the initial success of Mercal soon gave way to severe logistical and economic challenges. By 2005, over 70 percent of households had purchased at least one item from the stores. Yet, as demand surged, the artificial pricing structure led to widespread shortages. Shoppers began lining up outside the stores, often for hours, as shelves emptied rapidly. By 2014, the percentage of households using Mercal had dropped below 40 percent, signaling a dramatic decline in the program’s viability. The disparity between subsidized prices and those at private stores created a lucrative black market. Resellers exploited the situation, transporting food across borders to sell at higher prices in neighboring countries such as Colombia. This illegal activity gave rise to a new profession known as bachaqueo, involving the smuggling and resale of subsidized goods. Corruption also flourished within the system, with reports of fake purchases, preferential treatment for personal connections, and mismanagement in procurement and distribution. To combat these issues, the Venezuelan government introduced stricter controls. Purchases were capped, and shoppers were assigned specific days based on the last digit of their national ID numbers. Some stores required proof of family status, such as presenting a baby or a birth certificate, to qualify for certain items like diapers. Despite these measures, centralized procurement continued to face problems. An audit conducted by Venezuela’s Comptroller General in 2010 revealed numerous irregularities, including unjustified contracts, poor storage conditions, and discrepancies in inventory records. While Mercal played a role in Venezuela’s broader economic crisis, it was not the sole cause. The country’s food shortages stemmed from a complex web of factors, including rigid price controls, currency devaluation, import subsidies, land seizures, unstable property rights, and reliance on oil exports. As oil production declined, so too did the government’s ability to fund essential services, exacerbating existing problems. Mamdani’s initiative, by contrast, operates within a different context. Limited to New York City, it relies on private contractors to run the stores, with oversight from auditors, legal institutions, and the media. Unlike Chávez’s regime, which restricted press freedom and suppressed criticism, New York’s system allows for greater transparency and accountability. While the outcomes remain uncertain, the local nature of the project means that failures are likely to have smaller consequences than those experienced in Venezuela.