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Venezuela takes over Mexican firm's plants

President Chavez makes good on his threat to nationalize Cemex's assets.

August 20, 2008|Marla Dickerson | Times Staff Writer

MEXICO CITY — Venezuelan officials early Tuesday seized control of the Venezuelan operations of Mexican building giant Cemex after negotiators failed to come to terms on a deal to nationalize the company's assets.

Backed by National Guard troops and cheering crowds, government representatives moved in on three Cemex plants at the stroke of midnight Monday, the end of a 60-day deadline set by President Hugo Chavez for imposing state control over Venezuela's largest cement maker.

Chavez has long criticized Venezuela's private-sector cement makers for high prices and tight supplies that he says have hampered government efforts to build housing for the poor. Nationalization supporters who had gathered outside a Cemex plant in eastern Venezuela sang the national anthem while fireworks exploded overhead, according to news reports.

"Our great plans for national development will now be able to be realized in the best way and with the efficiency that our people need," Energy Minister Rafael Ramirez told the state news agency Tuesday. "The interest of Venezuelans will prevail . . . over the commercial interest or the international strategy of any private group."

Cemex executives Tuesday declined to comment apart from a news release acknowledging the government takeover of its Venezuelan facilities. But Mexico's ambassador to Venezuela, Mario Chacon, made his displeasure clear. Chavez's hard line with Cemex, one of Mexico's most admired companies, has irritated the conservative administration of Mexican President Felipe Calderon.

"As a government we respect Venezuela's decision, but we are obligated to look out for the interests of our companies," Chacon said. "We believe there has been discriminatory treatment against Cemex and we don't understand why."

Chavez announced in April that the government would nationalize the country's cement industry. It's part of his strategy to impose state control over key sectors of the economy and channel its oil wealth into social programs.

Two other cement companies, Lafarge of France and Switzerland's Holcim Ltd., agreed to sell majority stakes in their Venezuelan operations to the government and to stay on as minority partners. But talks have stalled with Cemex, which controls about half of the Venezuelan cement market and employs about 3,000 workers.

Cemex has asked for about $1.3 billion in compensation, which Venezuela has deemed excessive, Ramirez said. He said the government would conduct an appraisal to determine fair value for the firm. Talks have been testy. This year Venezuelan tax authorities slapped Cemex with a bill, saying the company owed nearly $40 million in back taxes.

The bad blood between Mexico and Venezuela has been brewing for some time. Last year at the World Economic Forum in Davos, Switzerland, Calderon publicly chastised Venezuela for moving "toward the past" with "harmful" socialist policies.

Chavez countered that Calderon had jeopardized Mexico's future by making it "subordinate to imperialism" and called him a lap dog of the United States.

Venezuelan sales accounted for about 2% of Cemex's $21.7 billion in worldwide revenue last year. American-traded shares fell 55 cents, or 2.6%, to $20.65 on Tuesday amid fears that Cemex won't be adequately compensated for its Venezuelan holdings.

"Failed negotiations and expropriation probably weaken the company's negotiating power in reaching a reasonable valuation," Morgan Stanley analyst Nicolai Sebrell said in a statement. "The company could receive nothing."

The Cemex takeover is part of Chavez's "socialism for the 21st century" agenda to redistribute the nation's wealth and remake its economy.

Supporters credit Chavez with reducing poverty and boosting health and literacy in the South American nation of 26 million. Critics say his economic meddling has fueled skyrocketing inflation and created shortages of basic goods, and that the state has proven an inept manager of crucial industries such as oil.

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marla.dickerson@latimes.com

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