VENEZUELA: President Hugo Chavez nationalizes Mexico's Cemex after negotiations failed

Record ID: 805159

  • Title: VENEZUELA: President Hugo Chavez nationalizes Mexico's Cemex after negotiations failed
  • Date: 19th August 2008
  • Summary: (BN01) CARACAS, VENEZUELA (AUGUST 18, 2008) (REUTERS) BUILDING WHERE OFFICE OF VICE PRESIDENT IS LOCATED VENEZUELA'S FLAG
  • Embargoed: 3rd September 2008 13:00
  • Keywords:
  • Topics: Economic News,Domestic Politics
  • Reuters ID: LVA4SMWM02O4MNKS18CI3T5MCC9F
  • Story Text: Venezuela seized foreign owned cement plants on Tuesday (August 19), a show of strength as President Hugo Chavez moves forward with a plan to make South America's top oil exporter a socialist society.
    Cement companies Holcim and Lafarge signed agreements with Venezuela on Monday (August 18) to hand over shares of their local units, the government said.
    A statement from the energy ministry, which is overseeing the cement takeover, said Holcim and Lafarge signed memorandums of understanding to transfer shares of their local businesses.
    "We have just signed memorandums of understanding with the company Lafarge and the company Holcim. These memorandums of understanding signed today, 18th of August, complies with the decree of reorganizing the cement sector of the country started by the government of Venezuela on the 18th of June," Minister of Energy and Oil Rafael Ramirez said.
    Following the signing of the agreements with Holcim and Lafarge, Chavez said Venezuela would take control of cement plants and offices belonging to Mexico's Cemex as of midnight after failing to reach an agreement in nationalization talks.
    "At midnight, we will take the cement plant because today is the deadline for the cement factories to pass into the hands of the government," Chavez said.
    At midnight, to cheers from workers gathered at the gates, Venezuela took control of installations belonging to Cemex.
    "We are fulfilling the nationalization decree," Minister of Energy and Oil Rafael Ramirez said as the clock struck midnight.
    Chavez, determined to build a state-dominated economy in Venezuela, has already taken oil and telecommunications companies from private hands and is buying a large Spanish-owned bank and a steel company.
    Despite losing a referendum last year that would have given him wider scope to remake the economy, the former paratrooper last month used decree powers to pass a package of laws giving the state greater powers to intervene in sectors such as food.
    At Cemex's main Venezuelan plant in Pertilgete on the Caribbean coast government supporters sang the national anthem and waved the country's yellow, blue and red flag. State television showed images from another plant of supporters holding up the flag of Venezuela's communist party.
    Chavez wants the cement companies, as well as a major steel plant he is buying from an Argentine group, to help meet the home-building and infrastructure goals his administration has struggled with.
    After nearly ten years on office, Chavez also has an eye on key regional elections in November, where his coalition's control of the majority of states and cities is expected to be eroded as voters fed up with crime and corruption either turn to opposition parties or abstain.
    Chavez has long won elections because of support for his economic policies and sharing of an oil bonanza among the majority poor.
    Workers at the Pertilgete plant on Tuesday shouted: "That's the way to govern," reflecting the popularity of nationalizations among many Venezuelans.
    As part of the cement takeover, Venezuela struck deals to buy majority shares in the local operations of European cement makers Holcim and Lafarge, following a pattern of usually compensating takeover targets well.
    The government said it paid 552 million U.S. dollars for an 85 percent stake in Switzerland's Holcim and 267 million U.S. dollars for 89 percent of the shares in France's Lafarge. But Venezuela said Cemex was asking for too much.
    Ramirez, said Venezuela would pay Cemex considerably less than the 1.3 billion U.S. dollars it had sought for its local plants in compensation talks.
    Cemex's position is weakened by the expropriation.
    The move against Cemex's local unit will further chill the investment environment in Venezuela, where companies enjoy fast growth from a consumer boom but face heavy regulations on prices and frequent government takeover threats.
    Ramirez said the three private cement companies now moving into government hands would be merged into one operation controlling almost all of the sector.
    He said the merger would reduce costs and increase efficiency, despite oil state Venezuela's history of bloated, poorly run government enterprises.
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