Friday, April 04, 2008

The politics of credible threat Part 4

In February I wrote about the many threats Chávez was making about oil and domestic nationalization, but not carrying out. He has now carried one out by nationalizing the cement industry. I hadn’t included that on my list, but he did threaten nationalization a year ago. The industry, he argues, is exporting too much and selling too little to the domestic market at a time of housing shortages.

The three main foreign players in Venezuela are Mexico's Cemex SAB, France's Lafarge SA and Switzerland's Holcim Ltd.

Holcim operates two cement plants in Venezuela with a production capacity of roughly 2.4 million tons of cement a year, while Cemex runs three plants that also produce about 2.4 million tons annually. Lafarge has two plants that produce 1.5 million tons a year.

Given the intense debate over food shortages and hoarding, at what point will he take aim at food producers? Or will he?


Anonymous,  3:03 PM  

Just keep an eye on cement production in Venezuela. 10-to-1 that it goes done significantly over the coming years. There is nothing that the government has touched that has ended up producing more, or more efficiently than before. And the distribution of wealth argument falls flat whenever you look at real data on poverty. Sad.

Anonymous,  6:23 PM  

He will try and that will be his final day because he can't run any of these companies half well

Anonymous,  9:31 PM  

I really doubt that Venezuela nationalizes food production. They are trying a different strategy.

One, they've created a commission with Brazil to monitor food reserves (not really sure what this entails)

and two, they initiated a large agricultural technology transfer with Brazilian companies to improve technology and production.

If I can remember where I read this I will try to find a link.

Boli-Nica 4:45 AM  

what " intense debate" "about hoarding" is there? That is like debating the very existence of global warming, with Chavez as the crank denier. Most professional economists not named Marx Brainrot would say there is overwhelming evidence this is an artificial scarcity induced by irrational governmental policy. Arbitrary price controls set prices below the cost of production create disincentive to production. Further, government subsidies to imports via preferential exchange rates further distorted the market. Lastly, judicial insecurity, and the threat of exporpriation by Chavez have led to under-investment and neglect in in the private sector. Wasteful state corporations and co-ops have failed miserably at closing the gap, mainly serving as piggy-banks for corrupt Chavistas and sources of patronage.

But for the billions of dollars thrown at the problem, this huge mess would be much worse.

The very predictable result has been scarcity of basic goods, the trashing of the productive sector, and South America's worst inflation. This is the same type of policy that in South America contributed to the vicious inflationary cycle of the 70's and 80's. Nothing, not seen or studied in the past all over the world.

Greg Weeks 8:18 AM  

Having commissions and initiatives, however, is not the same as boosting domestic production in the short term, which is what Chavez needs.

Tambopaxi 2:15 PM  

...Reading other blogs on this subject, it's not clear that he's really, officially, carried out this nationalization action; decir, it doesn't appear to be a completely done deal yet.

Assuming it's some sort of negotiating ploy, I wonder what he's after? Just lower cement prices? A piece of what appears to be profitable actions on the basis of nothing more than threats and bluster?

Finally, I agree with Boli-Nica: Actions of this sort have never resulted in anything more than increased scarcities, black market prices and so on. It's a recipe for disaster with the only question being, how long will it take for the full, disastrous results to happen?

Greg Weeks 4:07 PM  

If he decides not to nationalize, then we'll come back to the original theme in the title.

Tambopaxi 4:23 PM  

Neat segue, Greg! Very efficient use of titles...

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