Hugo Chavez has nationalized another economic segment in Venezuela, expanding his socialist vision while his economy continues to contract. Instead of oil, Chavez has gone after cement, attempting to monopolize the construction component. Mexico objected to the nationalization as its Monterrey-based Cemex stands to lose in a dictated settlement, but Chavez appears not to care about foreign investors at the moment:
Venezuelan President Hugo Chavez is planning a government takeover of his country’s cement industry, his latest effort to impose state control over key sectors of an economy battered by shortages and inflation.
Chavez made the declaration during a televised cabinet meeting late Thursday. He has long accused foreign cement companies of keeping prices high and supplies tight by exporting their products to other countries while Venezuela is suffering a housing shortage.
“We’re going to nationalize the cement industry. Enough already!” Chavez said.
The action is a blow to Monterrey, Mexico-based Cemex, the largest producer in Venezuela. Industry companies LaFarge of France and Switzerland’s Holcim Ltd. would also be affected.
Chavez nationalized the oil and telecommunications industries in Venezuela already — and has not shown much skill in managing either. Few believe he can manage the cement industry any better. The kinds of shortages he uses as excuses for nationalization will increase, as his interference has produced in milk, meat, and sugar production.
If Chavez thinks the economy looks bad now, the latest nationalization will force foreign investors out more quickly than ever. Many overlooked the nationalization of the oil fields, as most nations have nationalized oil production. However, with what looks like a petulant and capricious decision to squeeze Mexican and European companies out of Venezuela through a discounted asset grab, Chavez is running out of potential allies. Mexico, France, and Switzerland will not just protest the decision but, without any economic incentives left, will rethink their diplomatic stance towards Chavez as well.
While the world awaits Robert Mugabe’s departure from Zimbabwe, we have watched the start of another Zimbabwe in the making in South America. Chavez has followed Mugabe’s economic playbook, and he will find the same results: poverty, despair, and shortages in a land that should produce surpluses. Hopefully Venezuelans will draw the appropriate lessons from Mugabe’s regime and rid themselves of Chavez before complete economic collapse. Otherwise, they too will learn what 150,000% inflation means.