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 Business News | April 2008 
Mexico's Congress Urges Calderon to Defend Cemex From Chavez
 Adriana Lopez Caraveo and Thomas Black - Bloomberg
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Mexico's lower house of Congress urged President Felipe Calderon to defend the country's companies from Venezuelan President Hugo Chavez's efforts to nationalize them.
The non-binding resolution calls for taking "legal and diplomatic" actions against Venezuela, which announced yesterday it will take controlling stakes in all cement companies, including operations of Monterrey-based Cemex SAB.
Cemex, the largest cement producer in Venezuela, said in a statement yesterday that it was willing to negotiate with Venezuelan officials to reach an agreement to sell the 60 stake demanded by the government. It asked authorities to guarantee the safety of its employees and the integrity of its plants.
Cuauhtemoc Sandoval, a congressman from the opposition Party of the Democratic Revolution, said he was encouraged that negotiations will be held.
"We hope it will be the case that they reach a satisfactory agreement," he said.
Agustin Carstens, Mexico's finance minister, said last week that the rights of Mexican companies abroad must be respected. The Foreign Ministry has said it will do everything possible to protect the interests of Mexican companies abroad.
Fomento Economico Mexicano SAB, Latin America's largest beverage company, operates the largest Coca-Cola bottler in Venezuela. Gruma SAB, Mexico's largest corn-flour producer, and Grupo Bimbo SAB, Mexico's largest breadmaker, also have operations in the South American country.
To contact the reporter on this story: Adriana Lopez Caraveo in Mexico City at adrianalopez(at)bloomberg.net; Thomas Black in Monterrey, Mexico, at tblack(at)bloomberg.net
Venezuela to Take Over Top Foreign Cement Companies
Enrique Andres Pretel - Reuters
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Caracas - Venezuela will take a majority stake in top foreign cement companies' assets in a renewed nationalization drive, the government said on Monday, a move expected to reinforce a tough climate for foreign investment in the oil state.
The socialist government will take over at least 60 percent of the local units of Mexico's Cemex, France's Lafarge and Switzerland's Holcim, in a scheme similar to the takeover of oil projects in 2007.
The move, which comes despite the companies previously agreeing to limits on their activities, is likely to worry investors already nervous after a string of nationalizations last year and warnings against the food, steel and banking sectors.
The three companies are the world's top cement makers and dominate Venezuela's cement industry. The nationalization will leave a few small domestic cement companies in private hands.
Oil Minister Rafael Ramirez fleshed out a plan, first announced last week, to put the state in charge of the industry after meeting with officials from the three companies.
"We are sure that in the very short term we can progress in this negotiation with these companies, which will be done bilaterally with each one of them," Ramirez told state television.
Despite the Mexican government's condemnation of the move, Cemex said it was open to talks with Venezuela to reach a mutually acceptable solution over the nationalization.
President Hugo Chavez nationalized telecom and electricity companies last year with the goal of lower prices and extended coverage in poor neighborhoods.
Chavez has been criticized by supporters for not building low-cost housing quickly enough to meet demand. He says control of the cement industry will help him meet construction goals.
The government says the big firms export too much cement, leaving domestic industry with too little material. Cemex - by far the largest operator in Venezuela - cut exports last year to stave off the threat of nationalization. It says its Venezuelan net profit dropped 47 percent to $65 million as it focused on the local market.
Last year, Chavez launched a multibillion-dollar takeover drive that affected energy and utility assets,
Four oil companies accepted the government's offer to take over at least 60 percent of their operations in the Orinoco oil belt in 2007. But Exxon Mobil and ConocoPhillips left the OPEC nation and are seeking compensation through international arbitration.
Many sectors of the economy are booming as high oil prices and government investment put money in pockets.
But business groups say price caps, land reform policies and currency controls, as well as nationalization concerns, dissuade companies from making long-term investments - especially foreign companies, although the government does not detail foreign investment figures.
Chavez's 2007 nationalizations were a disincentive to new foreign investments, according to economists.
After a December referendum defeat on socialist reforms, Chavez has focused more on quality-of-life issues such as crime and trash collection.
But the cement decision shows he has not abandoned his aggressive policies against the private sector.
CEMEX SHARE RISES
Cemex's Mexico City-listed stock rose 3.7 percent to 28.86 pesos, holding on to earlier gains stemming from comments by Chavez that implied the Monterrey-based company might escape the nationalization.
Being forced out of Venezuela will not deeply affect Cemex's overall profitability. The Venezuela operations only accounted for 4 percent of the group's total earnings before interest, tax, depreciation and amortization (EBITDA) in 2007.
But Venezuela is a growth market and Cemex Venezuela is the nation's largest cement producer with annual output capacity of 4.6 million tonnes.
This unit's share price has risen in Caracas on the nationalization news because investors hope the government will pay a good price for the takeover, traders said.
Analyst Miguel Octavio at Caracas's BBO Financial Services said the three subsidiaries together had a capacity of almost 8.3 million tonnes of cement per year, estimating the value of the companies at $200 per tonne of cement.
By such a measure, the government's nationalization would cost it about $1 billion if it takes 60 percent in each unit.
Chavez has promised to reverse privatizations that happened under previous governments ever since he tried to seize the presidency in a failed coup in 1992. After taking office democratically in 1999, he has implemented much of his pre-coup program.
(Writing by Frank Jack Daniel) |
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