Our industry was the subject of international headlines last week. Venezuelan President Hugo Chavez announced his intention to nationalize seven cement plants. He offered several reasons for his proposed action.
Foremost is Chavez's concern that his nation's raw materials shouldn't be exported when his country needs low-cost construction materials to build homes and infrastructure. He said it's unfair for his country's non-renewable assets to be sold in foreign markets for higher prices, thus making them too expensive for Venezuelans.
For some time, Chavez has been warning the global cement community of his action. He had asked foreign operators to provide lower domestic prices that would help his country's development.
Chavez also is concerned that the multinational companies weren't investing in current technology that would lessen pollution and modernize operations.
This isn't the first time Chavez has taken on multinationals. He has nationalized the telecommunications industry. And his country is negotiating with several petroleum companies to determine a fair price in his effort to nationalize oil production.
From most published reports, this nationalization will not have an immediate effect on the U.S. construction market. Experts suggest Venezuela's total cement output is about 6.3 million tons. Cemex, LaFarge and Holcim have said that this amount reflects 1 percent of the individual producers' global output.
But I'm not certain we should discount Chavez's action. On an international stage, Chavez reflects a growing awareness of how international leaders may soon react to global commodity pricing forces. His socialist economic plan has been historically well received in Latin America. Unlike other leaders, Chavez has a healthy flow of money from oil sales to support his efforts.
With the growth of Eastern Europe and China, Latin America seemed to provide our nation's best alternative to our shortfall in domestic cement production capacity. Should other countries in the region adopt a similar us-first philosophy with their construction materials, U.S. potential growth could be restrained.
It may be time for the U.S. government to take a closer look at the cement industry. Our politicians are looking for ways to create jobs and ensure our nation's economic future. How about providing tax incentives to increase domestic cement production? Why shouldn't the U.S. be a cement exporter and thus a player in driving market forces, rather than importer subject to folks like Chavez?
