Nationalized Cement Companies hitting up the treasury for cash in 3…2…

What a surprise. The nationalized cement company formerly known as Cemex – now Cementos de Venezuela – is strapped for cash. With cement prices fixed by administrative fiat, the company can’t generate the cashflow it needs to pay workers and suppliers and meet demand for the government’s newly discovered housing crisis. The result, on top of stagnating production, has been serious labour trouble.

Who could have guessed?

Ex-Lafarge, (now Fabrica Nacional de Cementos) is not doing much better, by the way. Their equipment is getting pretty old, but strapped for cash, capital improvement is one of the easier money-saving strategems…at least for the short run. Now, having pushed their machinery to breaking point, they’re both out of money and facing interminable delays getting import permits and Cadivi dollars to upgrade their physical plant.

Except, remember, these days housing is the government priority, Chávez having belatedly recognized that the long festering shortage is now a major political problem for him, and one that’s been getting worse year after year since 1999, as home-building has never come close to keeping up with fast-growing population numbers. So the government really, really needs cement now.

Which way do you figure this cookie’s gonna crumble?

It’s too obvious, and too depressing. Ex-Cemex and Ex-Lafarge are going to end up hitting up the treasury for an emergency cash infusion. And, under pressure from Gran Misión Habitat (or whatever it is they’re calling their latest doomed foray into the sector), the Finance Ministry is going to find it politically impossible to say no.

And so, the infernal logic of using Bs.6 worth of lemons to make Bs.5 worth of lemonade marches on triumphant. A little bit more of the oil revenue stream that might have gone to the things the public sector does well and the private sector does badly will go instead to something the public sector does badly and the private sector does well.

Soft budget constraint, thine homes are many

38 thoughts on “Nationalized Cement Companies hitting up the treasury for cash in 3…2…

  1. I cannot help but think that this is one of the things that makes me optimistic about a quick turnaround in Venezuela. The argument for privatization writes itself so easily, it’s not even funny…

    Of course, this will only happen when (and if?) there is a new leadership in Miraflores.

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    • The problem lies with the many Venezuelans who have a stake or a hope in inefficient, subsidized public enterprise and the State.

      Some like their free gasoline and/or regulated parking rates and balk at the idea of paying the real price of things. Some benefit from CADIVI rates of exchange and balk at the idea of bidding for and selling currency at market values. Some are actually employees of say, SIDOR or bloated ministry, and balk at the idea of actually producing for money.

      And no one wishes to be the first, given that inflation is still out of control and the State is anything but transparent.

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  2. We are at the moment in the USA on a road trip through the central & eastern states. One of the things that has struck me is the number of pre-fab or mobile homes that exist in the USA.

    Why would the government not contract to load the returning oil tankers with this form of speedy, ready made & relatively inexpensive form of housing for Venezuela’s poor.

    They are insulated & much larger then the small little houses that the government is planning to build. All you need to do is run in the services, put down a concrete slab & hook up the house.

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  3. General OT Comment – has anyone ever stopped to think that if everything is as bad a Francisco points out in Venezuela then how on earth can the country continue functioning? No cell phones 8vergatario), no cement, no cars, no food, electricity blackouts, no water, too much rain – Homicides, robbery, no work ethic, everyone wants to earn commissions without working (or many do), anyone will cheat you if they can, nothing is ever done well, education down the toilet…..and so on. But at least CANTV is an excellent company as is PDVSA, even thjough it is bankrupt – true Fransico?

    Logically if all this were perceived as true there would be another uprising. It strikes me that people are happy with their lot since they do not know how the Norwegians or Germans live.

    Two neagatives make a positive and all that is happening is that there are so many negatives being thrown around for reasons of political discrediting that there is a bounce back effect against the opposition.

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    • You need to consider why we have had Capital flight, brain drain and a general malaise in terms of development.

      These are not caused by paranoid people reading blogs.

      You would be a lot more respectable if you at least recognized that
      A: Many of our gravest problems could have been solved with 1 Trillion dollars over 12-13 years.
      B: That the government you defend has cheated you and all Venezuelans time and again with empty promises and terrible execution.
      C: That monolithic thinking and squashing of dissent within PSUV only produces mediocre performance

      Your president and his party have failed to recognize their mistakes and mismanagement for way too long. You had your chance and y’all f’ed up royally.

      You’re done, and we’re done with you and your POS comrades.

      Don’t let the door slam your ass on the way out.

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    • This is yet another entry in the “you know how I know Arturo has never actually set foot in Venezuela?” files.

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    • how on earth can the country continue functioning?

      From terribly to barely at all.

      As it is right now.

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      • Actually I *am* rather impressed with the line workers in the electric industry keeping a modicum of electric power going. There must be a lot of dedicated people in that industry.

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  4. que estè en pèrdida es verdad,,,pero alguien sabe lo que significa la palabra “subsidio”?
    …o es que hay que seguir el ejemplo de los paìses màs ‘adelantados/desarrolados’ en donde todo està privatizado ya? en este caso cual buen pendejo me pregunto cuàl co#o es la razòn de existir del estado en sì…

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    • Sí vale, bien pendejos tendríamos que ser para copiar el ejemplo de países donde las vainas más o menos funcionan…

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      • Ah, es verdad y concuerdo con la fina ironìa, pero acuèrdate que al pueblo no es que le interese mucho si las vainas ‘funcionan’ o menos cuando el bolsillo està medio vacìo.
        Y sì, lo ideal (y como que utòpico) serìa un buen funcionamiento de las instituciones y empresas nacionalizadas dentro de un marco de precios bajos, aunque sean subsidiados (gasolina docet, desde decenios ya).
        p.d.
        sin ànimos de ofender: menciòname un paìs donde las vainas sì funcionen, pero dentro de ese paràmetro por favor.
        Cordiales saludos

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        • OK, sin ánimos de ofender: el punto es que se puede subsidiar a la persona, y no a la industria. Uno le puede transferir plata en efectivo todos los meses a las mamás pobres que cumplan con su deber de mandar a los chamos a la escuela.

          Esa rueda no hay que inventarla, ya está inventada:

          http://web.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTRESEARCH/EXTPRRS/EXTCCT/0,,contentMDK:22040461~pagePK:64168427~piPK:64168435~theSitePK:5757745,00.html

          Utópico?…para nada! Ya hoy se está haciendo en Brazil, Mexico, Nicaragua, Ecuador, Chile, Camboya, Kenya y como 20 países más. (Y en Petare también!)

          Sí se puede generar equidad y bienestar social sin causar dislocaciones y distorciones económicas que desperdicien recursos que hacen falta para otras cosas, sin desincentivar la inversión, sin generar inflación y sin generar escasez. No es utopia. Es la realidad cotidiana de países como Brazil, que hace 20 años eran más pobres que nosotros y dónde hoy la mayoría es clase media.

          He dicho!

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          • Ah,de World Bank ? Wolfowitz y ahora un tal Zoellick,… na guebonà, tremendo ejemplo, junto al FMI (o es la misma vaina?), los panas protectores de los pobres y de las injusticias de la humanidad, jejeje..
            Mira que por cierto le acaban de ‘prestar’ 4500 millones de los verdes a Egipto y 1500 -nada màs- a Tùnez (pero “su desembolso estará ligado a que avance la modernización de ambas economías.”….pa’ mi que se volvieron locos, pobrecitos, esos àrabes nunca le van a devolver esos reales ni se van a modernizar, pero bue…). Y si no me equivoco, lo mismo hicieron con Argentina no hace mucho, entonces habrà que preguntarle a algùn che a ver como quedò la cosa…

            De acuerdo con Petare, que Carlitos es clase aparte y hasta socialista parece el muchacho, (pero de los buenos, si es que todavìa existen, que lo dudo). Por los demàs mejor no opino, sabrà Lula y su pana Ortega.

            Bueno, yo en cambio modestamente te propongo este otro link, que no es ni cubano ni norvietnamita (porsia):

            http://mises.org/

            y tambièn este documentario (por si no los has/han visto ya, es màs largo que suèter de culebra, pero creo que vale la pena dedicarle un tiempito):
            http://topdocumentaryfilms.com/lets-make-money/ ….pero està tumbado, aunque todavìa se puede ver la parte 1 (y las otras que son como 6, creo) en youtube: http://www.youtube.com/watch?v=WoWchJN8O50&feature=related

            referencia en wiki: http://en.wikipedia.org/wiki/Let%27s_Make_Money

            Cordiales saludos, y me perdonan la medio perorata esta.

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          • Chévere, descontaste el link antes de leerlo. De pinga. Se te sale la apertura de mente por los poros.

            Trabajando en decenas de países, cientos de investigadores han producido miles de páginas documentando en detalle como estos programas han sacado a millones de personas de la pobreza sin distorcionar la economía, pero como no te gustó un link prefieres revolcarte en tu ignorancia.

            Well…it was almost worth my time.

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        • Y quien subsidia a los subsidiadores?

          Los precios se pueden mantener bajos, como se mantenian antes de que la bombilla Socialista se prendiera en la cabeza de nuestros ilustrados dirigentes, en 1976:

          Inflacion muy baja, una moneda estable. No tener un Estado deficitario que imprima dinero inorganico para pagar deudas insostenibles.

          Y si, es utopico. Un dia la fiesta se acaba y hay que pagar las cuentas.

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    • It’s not that they are not subsidizing a lot of things and a lot of that is stupid and unfair, like most agriculture subsidies in the EU and the States.

      I can talk for some parts of Europe. You have excellent state schools here. Children get their books from the state (as a loan). There is a rather good health system here (and it varies a lot, there is more than a sea of difference between Britain and Flanders or Germany, for instance). There are lots of subsidies for courses designed for adults (evening classes, etc). And police forces here are usually not bad: well-trained, you don’t see them showing their weapons around but they pop up when needed. Max-Planck-Institutes in Germany and their counterparts elsewhere get some dosh from subsidies.

      HeidelbergZement does fine as it is in the private sector.

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    • Las razones de existir del Estado en si cuando han sido objeto de un debate racional, generalmente versan sobre aquello que los particulares no quieren o no pueden hacer, o donde el servicio es indispensable. La pregunta es entonces, si algunas cosas valia la pena hacerlas o no. Seguridad social, salud, lanzar cohetes al espacio, guerra.

      Hasta mas o menos 1922-4 cuando dos grupos de pervertidos orgullosos de su mentalidad totalitaria y extremista crearon Estados que funcionan como canceres, y no se como convencieron a mucha gente que ese era el camino del futuro. Viendo los resultados…

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  5. And so, the infernal logic of using Bs.6 worth of lemons to make Bs.5 worth of lemonade marches on triumphant.

    Te la comiste brother, one of your best one liners ever!

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    • de pana… And the people who is asking about the existence of the “estado”

      IMO the state should have just 4 attributions: administracion de justicia, seguridad (no solo seguridad ciudadana, sino seguridad social, ambiental, laboral, monetaria, defensa de la nacion, etc) salud y obras publicas.

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  6. Another failure of the state nationalizations of the cement industry is that the quality of the cement produced has fallen, to where it is understood by anyone in the construction industry that one has to use about 50% more cement than previously to achieve the same standard of concrete strength. If they do not, they compromise the structural integrity, safety, and quality of the works in question. This drop in quality is adding additional demand for cement at a time when production is falling.

    I don’t have any sources to cite on this. It is just one of those things that “everyone knows” in the construction industry.

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    • This is gonna be China all over again. Remember that huge earthquake they had? The one where a boatload of schools came crashing down on top of their students? Shoddy construction practices all over the place.

      If what you say is true Roy, and I have no reason to doubt you, we can be facing huge problems down the road. I would not be surprised at all to find out that the geniuses running the cement plants are mucking around with the quality to stretch out the inventory.

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      • Roberto N,

        Without going into technical details, the production of cement is energy intensive. Heat energy needs to be applied to convert the base materials into the active ingredients in cement. By cutting the process short, you save energy, but produce cement with less of the active ingredients.

        (My apologies to the technical among us. That is the best I can explain it in non-technical terms.)

        When Venezuela was a major exporter of cement, it was necessary to make sure that the cement produced conformed to the applicable ASTM Standards for Portland Cement. Not to mention that Cemex, LaFarge, and Holcim had their own corporate standards to live up to. Private companies have a vested interest in maintaining the integrity of their brand.

        Now that energy is in short supply in Venezuela, and the expropriated companies are under management that is only politically motivated, it should come as no surprise that they are producing sub-standard product.

        Just for fun, ask a cement supplier for a certified test certificate of the cement he is selling. I guarantee you, the expression on his face will be priceless.

        The more responsible construction companies are adjusting for this by simply using more cement to achieve the required standards for their concrete. The “not so responsible” companies… Well, you know the answer to that.

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  7. Hey Arturo, congratulations on once again announcing you will speak off topic, at least your manners are improving, if not your trolling.

    But the corollary to your comment is: Arturo: Have you noticed Haiti is still functioning?

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  8. Off topic, but dang it, Quico, I keep waiting for your articles in the spanish blog, and I can’t bring myself to accept that it was some negative feedback that brought down that whole wonderful vision of yours to its knees. Please, get back to writing in Spanish. Heck, if I spend the time I spend still writing in pro of UCT, you have no excuse. Persevere!

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    • Thanks, Quico, for that post in Spanish. It was top notch. And that second comment you got proves you have no business staying away from posting in Spanish. Looking forward to your next one!

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  9. From the Central Bank report, trying to discredit the Government:

    Según estimaciones preliminares del BCV, para el primer trimestre de 2011 se contabilizaron en el ámbito nacional 137.315 viviendas sin iniciar, 97.765 en construcción 72.493 paralizadas, y 11.698 viviendas terminadas. El comportamiento del periodo en estudio se debe principalmente a la baja asignación de recursos por parte del Ejecutivo aunado a la escasez de insumos básicos para la construcción

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    • I love the concept of counting “viviendas sin iniciar”. It’s some weird epistemological mindfuck, that one. Personally, so far this year, I’ve undertaken no fewer than 27,189,399 viviendas sin iniciar…

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