By Jeremy Morgan
Latin American Herald Tribune staff
CARACAS – The government of Venezuela has agreed to make a first payment of compensation for assets to one of three foreign-owned cement producers that were taken over on President Hugo Chávez's orders a little over a year ago, but uncertainty swirled over what was happening about the other two.
Infrastructure and Housing Minister Diosdado Cabello is reported to have said that the government would pay a first instalment of $118.5 million to Lafarge of France for the assets taken over under the cement industry nationalization abruptly announced by Chávez on June 29 last year.
The minister said Wednesday that the payment to Lafarge would be made within five days, and represent 40 percent of the total compensation of $267 million that had been agreed with the French company.
Cabello then went on to indicate that the remaining $148.5 million would be paid over the next four years without interest. Lafarge operated two plants in Venezuela, Fabrica Nacional de Cementos and Cementos Táchira, before the takeover move, which formally got under way in August last year.
The other two companies affected by the nationalization are Holcim of Switzerland and Cemex of Mexico, reputedly the third largest cement producer in the world and the biggest in the Western Hemisphere. The government is at seriously odds with both of them, although contradiction swirls around what’s happening with Holcim, which is described as the second largest cement company on the planet.
Cabello was reported also to have said that the government was still negotiating with the Swiss producer.
But on Thursday, Holcim issued a statement baldly declaring that no such talks were under way. “We are not in discussion with the Venezuelan government,” a spokesman said. “We are still focussing on settling the dispute at the Court of Arbitration at the World Bank in Washington.”
The statement confirmed hitherto unconfirmed reports that Holcim had resorted to international arbitration, in contrast with Cabello having implied that the two sides were still at the talking stage in their differences over compensation.
In July this year, Holcim turned down a government offer of $552 million in overall compensation as legally and financially unacceptable.
To date, Holcim has not received any compensation for its assets in Venezuela. Last year, the government told Holcim that it would be paid 40 percent of the total of $552 million for 85% of its Venezuelan operations. The rest, the government added, would follow over the next four years without interest being paid.
It was this last condition which is now thought to have pushed Holcim to go down the arbitration route at the World Bank tribunal. In this, it followed the example of Cemex, which looks like the hardest nut to crack from the government’s point of view in the wake of the cement nationalization.
Cemex was estimated to hold about half of the Venezuelan cement market prior to nationalization, with Lafarge and Holcim sharing most of the rest between them. By December last year, it was public knowledge that Cemex had gone to the World Bank arbitration tribunal.
Cemex filed a demand of $1.3 billion for compensation. The government’s reaction to this was that the company would not get a cent over $400 million – a figure that looks decidedly low when set against the failed proposal to Holcim.
Later, and amid a still defiant tone in Caracas, Venezuelan officials were said to have discreetly offered double that amount. The answer from Cemex was again no deal, and the impasse continues.
Cabello tacitly confirmed that this was the case on Wednesday this week. "We have not been able to sit down with Cemex,” he said.
Chávez originally justified his nationalization move on the grounds of “economic sovereignty” – as he has in takeovers in other key sectors including telecommunications, power, steel, petrochemicals – and most notably of all, oil, which accounts for about half of Venezuela’s economy and four–fifths of its export revenues.
The president has also said nationalization would help the government tackle Venezuela’s persistent shortage of housing. This has become an endemic problem in the country, but one which the government is deemed by its critics not to have acted upon with any effectiveness during its 10 years in power.
Five years ago, unofficial estimates suggested that Venezuela was short of around one million adequate homes. Based on a family of five, that indicated that five million or more people out of a total population of around 28 million did not live in proper homes.
Despite this, industry figures show that annual new housing starts in the state sector have averaged around 60,000 at most in recent years, and not all of this necessarily directed at the very poor – those who need homes most of all. Unconfirmed reports say there’s been no notable change in the underlying trend in state sector housing construction in the year since cement was nationalized.
The Caracas Stock Exchange suspended the trading of shares of Fábrica Nacional de Cementos on the news for forty-eight hours. The Head of the Comisión Nacional de Valores said that the Government had to start a tender for the public shares of the company within sixty days. However, a similar statement was made when Banco de Venezuela was taken over in early July and the tender has yet to take place, in violation of the Capital Markets Law.