Chavez nationalization juggernaut now running Venezuela’s cement industry

Venezuelan President Hugo Chavez has scored his most sweeping nationalization since his government seized petroleum refineries in 2007. The Chavez Administration is, perhaps appropriately, getting into cement.

by Dorothy Kosich

The Chavez Administration nationalization juggernaut swallowed up yet another sector this week as Venezuelan soldiers and workers seized control of facilities belonging to Mexican cement giant Cemex and locked up more than 90% of Venezuela's domestic cement industry.

The good news is that President Hugo Chavez is sometimes willing to compensate for nationalization losses as Venezuela's government announced it has agreed to pay $1.65 billion for half ownership of Sidor, the country's largest steel manufacturer.

Originally, Chavez had declared he would pay no more than $800 million for the Sidor stake, while parent company Ternium initially wanted $3.1 billion.

Unfortunately for the Monterrey, Mexico-based Cemex, its officials could not reach a price agreement with the government, prompting Venezuelan Energy Minister Rafael Ramirez to lead the workers, police and support to literally take control of Cemex's main plant in Pertigalete. "From this moment a decree of expropriation is in effect and the job stability of workers is guaranteed by the state," Ramirez declared. Cemex was expropriated into the control of Venezuela's state oil company PDVSA.

In a tersely worded news release, Cemex officials acknowledged that PDVSA had taken "operational control of the plants of Cemex Venezuela ... on behalf of the Government of Venezuela."

Although the nationalization was announced last April, both sides had negotiated up until Monday when the Cemex assets were seized. At the time, Mexico's Finance Secretary accused Chavez of not respecting property rights or the rights of Mexicans. Chavez had argued that he could not allow foreign companies to export the raw materials needed to overcome a domestic housing shortage.

Cemex operated three cement plans in Venezuela which produce about 4.6 million tons annually, as well as 13 distribution centers and four sea export terminals.

Swiss-based Holcim was also impacted by the nationalization order, which will cost the company two plants that produce three million tons of cement annually. The Chavez Government will pay $572 million to Holcim for 85% of its Venezuelan subsidiary.

France's Lafarge will sell 89% of its local operations to the Venezuelan Government for $267 million. Ramirez has told reporters that Cemex wanted $1.2 billion, but will be lucky to get $400 million. The government reportedly initially offered $800 million. CEMEX's Venezuelan operations are considered to be much larger and more valuable than those of Holcim and Lafarge.

All three private cement companies will be merged into one company, according to Ramirez.

Nationalization of major industries has been an integral part of Chavez socialist agenda. Argentinean industry conglomerate Techint, which owns a majority stake in Ternium, is about to be compensated for the seizure of its assets.

Luxembourg-based Ternium SA controlled Sidor until the steelmaker was seized in May via presidential decree. The workers of Sidor have been campaigning for the nationalization for more than 16 months. The main bones of contention were the size and timing of wage increases; incorporation of subcontractors into the total Sidor workforce; and a demand for a substantial increase in pensions.

Argentinean media have reported that the Venezuelan Government will pay $1.65 billion for a 50% stake in Sidor.

Previously, the Chavez Government has seized oil and telephone companies and is currently in the process of buying a large Spanish-owned bank. The government has asserted that improved efficiency and access to services are among the chief goals of the nationalization plan.