Mexican cement maker Cemex SAB said on Wednesday it would seek World Bank arbitration over Venezuela’s move to nationalize its local cement plants this week — a step it called flagrantly illegal.
The Monterrey-based company announced in a statement that it will file a claim before the International Center for Settlement of Investment Disputes, an autonomous division of the World Bank in Washington.
Cemex, the world’s third-largest cement maker, called the confiscation of its assets a “flagrant violation” of Venezuela’s Constitution and its expropriation laws.
It said Venezuela’s offer of US$650 million in exchange for its local operations “significantly undervalues its business in Venezuela.”
Government officials, backed by National Guard troops, seized control of Cemex’s plants in Venezuela on Monday night as a deadline for negotiating terms for their takeover expired. The move marks left-leaning Venezuelan President Hugo Chavez’s latest step to nationalize key sectors of his nation’s economy.
Cemex spokesman Jorge Perez said the company would file its arbitration claim imminently, although he gave no exact date. Cemex will ask for what it considers fairer compensation, he said, without specifying how much the company is seeking.
Venezuelan Vice President Ramon Carrizalez said that Cemex had demanded US$1.3 billion, a figure he called “well above its real value.”
Venezuela’s government had no immediate reaction to Cemex’s announcement late on Wednesday.
Cemex says its Venezuelan assets include three cement plants, 30 smaller concrete plants, a shipping terminal and other facilities.
It entered the country in 1994 when it bought out a Venezuelan cement company, and it until this week had some 3,000 employees there.
Two other cement companies, Lafarge SA of France and Switzerland’s Holcim Ltd, agreed to nationalization terms for their own Venezuelan units this week. Venezuela will pay US$267 million to Lafarge and US$552 million to Holcim for majority stakes in their operations. Both companies will stay on as minority partners.
Given its production capacity and earnings, Cemex said the offer it received was proportionally lower than the other two companies’.
Of the three, Cemex has the largest presence in Venezuela and accounts for about 40 percent of the country’s cement production.
“The Venezuelan government’s actions highlight a lack of respect for the principles of international law and the treaties relating to reciprocal protection of investments,” Cemex said in its statement.
The company, which has operations in more than 50 other countries, has seen its US traded shares fall 1 percent to US$20.78 on the New York Stock Exchange since the takeover in Venezuela.
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