Venezuela Government Takes Over Building Materials Cos; Cemex Resists

The seizure of local assets of Mexico's Cemex SAB (CX), which was unable to reach a price agreement with the government, also highlights Venezuela's strong- arm tactics when negotiating with its nationalization targets.

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With the cement takeovers, Chavez now has a grip on the country's construction industry, as he also controls the country's largest steel mill. Earlier this year, he seized the local unit of Argentine conglomerate Ternium SA (TX), for which compensation could reach $1.65 billion, Argentine daily Clarin reported Tuesday.

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With the nationalization of the cement industry, Chavez is trying to deflect criticism for the shortfalls of his housing programs and direct output to some of his key infrastructure projects, said Fernando Azpurua, President of Venezuela's Construction Chamber.

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Chavez has been unable to resolve Venezuela's housing problem as sprawling shantytowns continue to expand in the country's major cities. Chavez had blamed Cemex and the other companies for diverting resources away from his projects.

The government will need to run the nationalized cement companies efficiently if it wants to solve the problem, Azpurua said.

But the government's track record in managing nationalized companies suggests that is unlikely to happen. Oil company PdVSA is the prototype of what Chavez wants out of state firms. It has been stretched into uncharted territory, and now runs dozens of social programs as well as its own grocery chain.

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After seizing the telecommunications and public utilities companies last year, consumer complaints have surged for the phone company, and power shortages have increased in some areas of the country.