Archive for April 8th, 2008

The almost next to last look at the cement nationalization story

April 8, 2008

I thought I had cemented the whole issue of the nationalization of the
cement industry, but the level of improvisation and ignorance is so
high that I have to revisit the issue maybe for the last time.

First, as I mentioned in the earlier post, President Chavez said
yesterday that he was only going to nationalize those cement companies
that used to be owned by the Government and were privatized. Except
that oops, that leeaves no company to be nationalized, as none of the
three companies in foreign hands was ever owned by the Government. The
only company that was ever in Government hands was Cementos
Andinos, which was nationalized last year. So, Government officials had
to backtrack a little today, without clarifying that Chavez never knew
what he was talking about,

Then, the President’s ignorance was matched by that of the Minister of
Energy and Mines and the man now in charge of food, oil, cement and
what have you, Rafael Ramirez. Ramirez said that the Government would
like to have a “minimum” of 60% of the cement companies, which is as
nonsensical as they come.

First of all, I doubt that any of the foreign companies that control
these cement companies in Venezuela would like to remain as partners
with a Government with little experience with the cement industry, but
Ramirez seems to ignore a small part of the equation: The Law, in this
case the Capital Markets Law.

You see, in order to protect minority shareholders, the Venezuelan
Capital Markets Law establishes that the entity trying to take control
of a public company, in this case the Government, has to tender for 100%
of the shares of the company. Thus, it is not up to Ramirez, Chavez or
the Government to decided they want a minimum of 60% or not, they have
to tender for all the shares and the people will decide whether they
hand them over or not, you can’t force them.If only 52% tender, tough luck, it’s the law.

But of course, nobody wants to be partners with companies of a “social”
nature, managed by an incompetent Government and Cemex and Lafarge (the owners of the two public companies)
are likely to tender their 80%+ stakes in their companies and most other
minority shareholders are likely to do the same.

The problem is that Rafael Ramirez in his ignorance wants to make
grandiose nationalistic statements that collide with Venezuelan
legislation, but he does not now better, he just has a limited
experience with PDVSA and his failed policies of the last years. So,
you can’t ask for much more.

Al of these statements are so confusing and contradictory, that in any
other country if the Government were a private company, it would be
fined by regulatory authorities for misleading and confusing statements
that hinder the ability of investors to make rational decisions and may
have induced some to lose money in the process.

But ignorance rules in Venezuela since 1998 and such matters, as the
rights of investors or citizens for that matter are simply irrelevant.

The revolution is above it all, including knowledge and people’s rights.