INSTITUTIONAL CHANGE AND COMPETITIVENESS OF VENEZUELAN DAIRY INDUSTRY IN THE 21TH CENTURY Kiupssy Charmel Graduate Program in Management and Innovation in Animal Industries Faculty of Animal Science and Food Engineering University of São Paulo Avenida Duque de Caxias Norte, 225 13635-900 Pirassununga – SP Brazil kiupssy@usp.br Rubens Nunes Faculty of Animal Science and Food Engineering University of São Paulo Avenida Duque de Caxias Norte, 225 13635-900 Pirassununga – SP Brazil rnunes@usp.br Abstract In this globalized world, competitiveness become a key issue for development strategies of firms and nations. Agrifood chains deserves special attention, since food security and livelihood standards depends on them. In 21th century, Venezuela experienced a wave of populist institutional reforms started in 1999 by President Hugo Chávez. Some of them undermined the development and the competitiveness of Venezuelan agribusiness, particularly the dairy industry. Before 1989, dairy industry as many other Venezuelan industries followed the model of industrialization by imports substitution. From 1989 onwards, a process of trade liberalization started supported by petroleum exports. Chávez government approved the Land Reform Law that raised uncertainty surrounding land property rights, and withdrew market incentives to agriculture. After the “Paro Petrolero”, a lockout in 2002-2003, state intervention in economy raised, including price controls in market of staple goods and multiple fixed exchange rates. As a result, the share of imports in domestic food supply grew. According the evolution of the Index of Revealed Comparative Advantages, adjusted to imports, Venezuela lose advantages in dairy industry and ceases to be self- sufficient. From 2003 onwards, competitiveness of Venezuelan dairy sector worsened steadily. From the point of view of new institutional economics, Venezuelan dairy industry confirms the importance of institutions to the development economic process and to the construction of competitive advantages. Key words: competitiveness, institutional environment, dairy industry, property rights, price controls, imports, comparative advantages, self-sufficiency, New Institutional Economics.