Cemex Venezuela: we’re outta here

The $600m compensation agreement that Cemex finally reached with Venezuela’s government after its subsidiary was nationalised may be less than it wanted, and it may have taken the best part of four years. But at least it’s all over.

Frankly, the Mexican cement company should count itself lucky. Not only is it going to get almost half what it was said to be originally asking ($1.3bn according to the government); it also no longer has to put up with the stress of doing business in Venezuela.

In terms of compensation, others have not been so fortunate. In total there are about 20 international arbitration cases resulting from Hugo Chávez’s nationalisation spree.

Take the high profile cases dragging on between oil majors Exxon Mobil and Conoco Phillips and Venezuela’s combative government. The two companies were initially asking for more than $40bn in combined compensation, in stark contrast to state oil company PDVSA’s calculation of what the assets were worth: less than $2bn. In any case, energy minister Rafael Ramirez said this week that a verdict is expected before the year is out, so we will soon find out who gets the better of whom – even if the companies’ initial $40bn demand was admittedly borderline outrageous.

As for the stress of doing business in Venezuela, just have a look at what Italian milk producer Parmalat has had to go through recently. It had to stoop to writing a public letter of apology to Chavez this week, having provoked his ire after a very public spat over alleged milk hoarding.

“We respectfully address you to offer our most sincere apologies,” Parmalat’s letter began, explaining that in essentially accusing the government of shooting itself in the foot, the company had failed to communicate its position clearly after national guards confiscated over 200 tonnes of its milk.

“In no way did we intend to minimise the effort your honourable government and other public bodies make in favour of food supplies on a national level and the protection of consumers, of which we are co-participators and active collaborators for the good of Venezuelans,” Parmalat’s submissive statement continued. “Rest assured we will keep working positively… collaborating with all the important initiatives suggested by your government.”

At least Cemex has put that sort of thing behind it. Cement is a product that in Venezuela is just as politically sensitive as milk. There are often shortages of both. No prizes for guessing who gets blamed when that happens.

Related reading:
Venezuela v Multinationals, beyondbrics
Chávez wants out of ICSID (again), beyondbrics
The banks: Chávez’s next target?, beyondbrics
Expropriate it! The Chávez approach to Venezuela’s housing shortage, beyondbrics
Chávez: in the mood for nationalisation, beyondbrics