Venezuela To Nationalize Cement Industry in Order to Boost Construction

Mérida, April 3, 2008 (venezuelanalysis.com)- Venezuelan President Hugo Chávez announced Thursday that the cement industry in Venezuela will be nationalized, saying that foreign companies export cement while the Venezuelan market suffers from high prices and shortages.

"Enough already," Chávez declared, assuring that foreign companies will be compensated fairly.

The nationalization would be one of several measures in the past two years aimed at improving Venezuela's ability to satisfy its construction needs, especially for housing. Government figures show a deficit of 2.7 million homes in the oil-exporting nation.

"If the rich want to build their homes, they can do so, but they must respect the rest of us," Chávez proclaimed.

Last weekend, President Chávez called for the acceleration of the government's programs to replace improvised shacks, known as "ranchos," in which most of Venezuela's poor live, into "true communes and popular communities…where the People live with the largest possible sum of happiness." Part of this plan is to build homes with PVC plastic filled with cement, a project known as "Petrocasa" because it is funded by oil profits and uses oil-derivative materials.
 
To strengthen Venezuela's cement industry, in June 2006 Venezuela and Iran signed $9 billion in economic accords, including the construction of the Cerro Azul Cement Factory. In 2007, cement production was a focal point of economic accords between Venezuela and Cuba as well as the Bolivarian Alternative for the Americas (ALBA), an endogenous fair trade agreement initiated by Venezuela and Cuba to avert the free trade deals touted by the United States.

These plans float on the wake of Chávez's pledge, since his election to a second term in December 2006, to "nationalize everything that was privatized" by previous administrations, focusing on what he calls "strategic industries" such as oil, cement, and telecommunications.

Chávez had previously threatened to nationalize the cement industry in June 2007, and in August of that year, a small affiliate of the Colombian cement company Argos was confiscated and indemnified. The president said Thursday that with the sector completely nationalized, Venezuela will promote "social power in the cement plants."

Mexico-based CEMEX, the world's third largest cement company and principal cement maker in Venezuela, according to the Venezuelan daily El Nacional, has withheld public comments. 

However, Mexican officials declared that the government "will do everything within its reach to protect the legitimate interests of Mexican companies abroad." 

Mexico's foreign relations department announced in a brief public statement that it had contacted Venezuelan officials "in order to know the reach and the nature of the declarations," and summoned the Venezuelan Ambassador to Mexico in order to find out more details.

The French cement company Lafarge, the third largest in Venezuela following CEMEX and the Swiss firm Holcim, have also declined to comment on the nationalizations so far.

The French Minister of the Economy, Christine Lagarde, told the press that the ministry is "closely following the situation and will ask for explanations." The minister pointed out that Venezuela and France signed investment protection accords in 2001, which guaranteed "quick and appropriate indemnity, whose amount should be equal to the real value of the concerned investments" in the case of nationalization.

Holcim spokesperson Peter Gysel said, "we take this very seriously," but clarified that the company is "calm because this is not the first time Chávez has announced that the sector will be nationalized," and concluded that "we should wait to see what happens." The Swiss government has not commented as of yet.

Holcim achieved record stock prices in 2007, according to El Nacional, and its investments in Venezuela are worth 1% of total company receipts and account for 1.5% of the company's world production, Gysel told the press Friday.

CEMEX-Venezuela's report from the third trimester of 2007 indicated a 30% hike in net sales and stated that "public investment continues to be the principal motor of construction activity," principally in housing and infrastructure.

The nationalization of the cement industry would follow on the heels of the nationalization of several other sectors, such as electricity, the country's main telecommunications company (CANTV), and some oil production projects. For example, in May 2007, the government partially nationalized key oil projects located in the Orinoco Oil Belt. All of these were indemnified by mutual agreement between the government and the original owners.