Chavez orders the nationalization of cement

April 3, 2008 10:28:05 PM PDT
President Hugo Chavez on Thursday ordered the nationalization of Venezuela's cement industry, saying his government cannot allow businesses to continue exporting raw materials needed to help tackle a domestic housing shortage.

Speaking during a nationally televised address, Chavez said the cement companies, which include Mexico's Cemex, will be paid fair compensation in the state takeover of what he called "a strategic industry."

"We are going to prepare a plan to modernize these cement plants," he said.

Chavez, who says he is leading Venezuela toward "21st century socialism," said the nationalization would take place in the "short term," but did not provide specific dates.

Prior to Thursday's nationalization order, Chavez had already moved to nationalize Venezuela's largest telecommunications company and the electricity sector, slap new taxes on the rich and impose greater state control over the oil and natural gas industries.

Most of the cement market in this South American country, which has suffered from a severe housing shortage for decades, is supplied by foreign companies.

The three main foreign players in Venezuela are Mexico's Cemex SAB, France's Lafarge SA and Switzerland's Holcim Ltd.

Holcim operates two cement plants in Venezuela with a production capacity of roughly 2.4 million tons of cement a year, while Cemex runs three plants that also produce about 2.4 million tons annually. Lafarge has two plants that produce 1.5 million tons a year.

In Mexico, calls to Cemex offices were not immediately answered late Thursday.

Prior to Thursday's announcement, Chavez had repeatedly expressed frustration with the high cost of construction materials and threatened to seize control of companies that fail to provide low-cost cement for the domestic market.

Last year, he said many of Venezuela's cement factories prefer to sell their product abroad at higher prices and warned: "If the cement factories do not (sell in Venezuela), we will occupy them."

The president's critics, including leaders of local business chambers, argue the nationalizations will hurt Venezuela's economy by scaring off foreign investors. Chavez's political allies argue the takeovers are necessary for the success of the government's development plans.