Venezuela's tragedy: How nationalisation has brought the country to its knees

Venezuela's tragedy: How nationalisation has brought the country to its knees

by Joshua Curzon
article from Monday 3, December, 2018

CEMENT IS A VITAL BUILDING MATERIAL that is largely unavailable in Venezuela due to the collapse of the state-owned cement industry. Venezuela’s massive cement scarcity has resulted in the ruin of the construction industry.

Hugo Chavez nationalised the cement industry to increase production in the ‘strategic’ sector. The Venezuelan assets of the four major private cement companies were expropriated in 2007-08, and construction of a new state-owned cement plant was started in co-operation with Iran. Ten years later this new plant is not yet complete. Chavez merged existing enterprises into the state-owned Socialist Cement Corporation, which controlled 90 per cent of cement production in Venezuela. This move has been disastrous for the industry. Cement production plummeted by 42 per cent from 10.2 million tons in 2007 to 5.9 million tons in 2015. The current economic crisis has reduced production further—many cement plants barely operate.

This has had a deep impact on the construction industry. Octavios Campos, director of the National Federation of Construction Workers, lamented in 2016 that “the unemployment rate is between 70 and 74 per cent” in the industry. Two years later the situation is much worse. According to four Venezuelan unionsthe construction industry is operating at no more than 5 per cet of its capacity, causing unemployment, economic slowdown and mass migration.

This breakdown can be largely attributed to corruption and mismanagement. Once the cement industry was taken over by the state, military officers and party bureaucrats replaced professional experienced management. They were interested in political control and personal enrichment rather than the long-term health of the industry. Party bureaucrats were also given administrative roles throughout the industry, bloating the companies and eating into margins. 75 per cent of Cemento Cerro Azul’s employees are administrative staff.

Machinery regularly breaks downbecause of inadequate maintenance and lack of funds to import spare parts; while currency controls and shortage of foreign currency exacerbate every problem in Venezuela. There aren’t enough trucks to transport limestone from the quarries because of the failure of a new state-owned trucking monopoly (Entipisal). At one plant the union reported that of the 30 trucks previously serving the operation, only two or three were working.

Above all, price controls force companies to sell cement at ludicrously low prices, which has enabled the administrators to cash in by selling such cement that is still produced on the black market. National Assembly Deputy Joaquin Aguilar observed: “for every truck of cement that leaves the plant, Cemento Andino receives a little less than 90,000 bolivars while the Mafioso who sells it on the black market gets 1,350,000. That’s why Cemento Andino is a bankrupt company with rich administrators.”

It is thus today nearly impossible for consumers to acquire cement. Chavez destroyed the cement industry by nationalising it and packing it with cronies. The impact on the construction sector and the wider Venezuelan economy has been devastating. The literal building blocks of this once great country destroyed.

For further information on the Venezuela Campaign www.facebook.com/venezuelacampaign/  or its website

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