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Venezuela mulls legal action against Cemex

Mar, 15 2010


CARACAS,  - Oil Minister Rafael Ramirez said on Friday that Venezuela is considering legal action to force Mexican cement firm Cemex to return ships it removed from the country during a nationalization dispute.


"We are close to announcing a deal with Lafarge and Holcim," Ramirez told reporters at a briefing that mainly touched on oil industry matters.

"We are taking legal actions to recover the boats that Cemex took from Venezuela, in the countries where they are."

An international court earlier this month rejected a request by Cemex to protect it from further expropriations by Venezuela after the 2008 takeover of its Venezuelan assets.

The Washington-based International Center for Settlement of Investment Disputes said it could not take "preventive measures" in favor of Cemex, the world's No. 3 cement maker. [ID:nN04144081]

Cemex had asked the ICSID to stop Venezuela from taking control of three Panama-based cement vessels that were under the control of Cemex's Venezuelan operations before the August 2008 nationalization.

Cemex was not available for comment on Friday. But the company has repeatedly said it is open to talks with Venezuela and that it will push ahead with arbitration at the ICSID.

Cemex is seeking $1.3 billion in compensation for the seizure of its assets. The government of President Hugo Chavez has offered about a third of that.

The flare-up in relations between Venezuela and Cemex does not bode well for the Monterrey-based cement maker's efforts to win back money it badly needs to pay off debt, analysts say.

Cemex hopes to use compensation from Venezuela to reduce its $15 billion debt load as it struggles with slumping U.S. and European cement volumes due to the global recession and a collapse in construction activity worldwide. Cemex took on big debts to finance its acquisition of Australia's Rinker in 2007, just before the U.S. housing crisis broke.

"The relationship between Venezuela and Cemex has been deteriorating, so it is going to take time, maybe years, for Cemex to get something for its Venezuelan assets," said Carlos Gonzalez, an analyst at Mexico City-based brokerage Ixe.

"Cemex will probably get something, somewhere between what the company wants and what Venezuela is offering," he said.

Chavez nationalized Cemex's Venezuelan assets, accusing the company of causing pollution that was harming local residents.

Cemex denies any wrongdoing, arguing it had invested heavily in its plants in recent years, switched its sales focus to the domestic market, cut exports, and increased its social program to help low-income families build homes.

Venezuela was a profitable market for Cemex, but the nationalization has not hurt the group's earnings because its sales volumes there were a very small part of its overall revenues.


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