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As Venezuela produces excess cement, the Government will import some from Cuba

By Miguel Octavio

21.03.06 | Imagine a country with excess capacity for cement production. A Governor complains that no cement is reaching his state and this is limiting your ability to build public works. What do you do if you are President?:

a) Find out why this is happening,
b) Call cement producers and talk to them as to why this is happening,
c) Talk to the experts in your Government to understand the problem,
d) Start importing cement.

This is exactly what happened in Venezuela two weeks ago. The Governor of Vargas State complained to Chavez, in his reality show Alo Presidente, that there was not enough cement in his state to build housing and public works. Rather than finding out why this was the case and understanding the dynamics of the cement industry in Venezuela, Hugo Chavez had his Minister talk to the Cubans and announced that Venezuela would import 500,000 Tons of Cuban cement to cover the shortage.

Except that there is no shortage. Venezuela produces more cement that it can use. Currently, the country is exporting cement, as Cemex takes advantage of its Pertigalete deep port to export its excess production at prices which are actually lower than those you can get in Venezuela. So, you may say, what is the problem? Well, essentially there are two problmes: One, cement is very expensive to move around, that is why regional companies dominate their markets and it is very difficult for one company in one region to compete with another one in a different region if you have to ship the cement by truck . The second problem is easy, the Government is not very good paying its bills, so companies prefer to export or not produce rather than selling to the Government and having to wait for months to get paid.

So, you may say, how can Cuba compete? The answer is that it does not. Cuba can not compete, but rather than selling or using the cement locally in Cuba to build housing or public works for Cubans, it will sell it to Venezuela for US dollars, hard currency, something that Cuba is in desperate need of. Thus, this is not a commercial transaction.

Meanwhile, Venezuela exports cement and its plants are 20% idle (not the 60% the Government claims). Is this any way to run an economy?

Another brilliantly stupid economic strategy improvised by the autocrat himself in another flash of ignorance.

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