Bolivia: reality contradicts cement trade announcement

Bolivia: reality contradicts cement trade announcement
Published: 01 September 2010

Bolivian productive development minister Antonia Rodriguez surprised many this week when she announced that the country will begin importing cement from Venezuela. The cement shortage and economic slowdown in both countries leaves doubts about the feasibility of the scheme.

Rodriguez said the Venezuelan imports will help reduce the stress on the cement demand in a number of Bolivian cities, particularly Santa Cruz, where real estate has boomed in recent years.

Construction may be on the rise in Bolivia, but the industry is by no means rock-solid. President Evo Morales said recently that the government is looking to create an entity to expropriate private property that fails to fulfill an economic or social end.

The public works, services and housing ministry has denied that such a measure is on the cards. However, Morales’ words mean the threat of expropriation will always be hanging over any new construction venture.

But the shock that Rodriguez’s announcement caused was not only related to Bolivia’s uncertainty regarding private property. It is rather curious to learn that Venezuela is in the position to export any cement at all, given the shortage of cement available for construction on a national level.
Venezuela nationalized three major cement firms in 2008: Holcim, Lafarge and Cemex, arguing that it could boost productivity and improve workers’ quality of life, while preventing what President Hugo Chavez referred to as abusive revenues.
Cement production has dropped 20% since the nationalization, according to Caracas-based consultancy Ecoanalitica. The Central Bank of Venezuela (BCV) also reported a 10% drop in cement production during Q1.

Venezuela’s cement shortage is already affecting its construction sector. BCV reported that construction in the country fell by 25% in Q2, mainly due to the scarcity of raw material, including cement. The problem is compounded by the fact that most cement is used for large-scale projects.
According to reports, around half of Venezuela’s cement is being used to build the Tocoma hydroelectric facility and a new bridge over the Orinoco river, leaving little cement available for smaller-scale construction.

The price of cement in Venezuela has increased by about 30% in hardware stores despite the government’s attempt to regulate the market by establishing official prices.

Where will Venezuela get enough cement to export it to Bolivia without stalling its own construction industry altogether? The key figure here will be the amount of cement required. However, officials from Venezuela’s science and technology ministry, which overviews cement production, were not available to comment when contacted by BNamericas.

Officials from the Bolivian ministry also declined to comment on how much cement is expected to be imported, or when the material is expected to be delivered.

With so much uncertainty behind it, the announcement is far from being a concrete step towards solving the cement shortage in either country, and may well prove to be an empty political gesture. It would not be the first time Chavez has chosen Bolivia to show off Venezuela’s regional political and economic influence, even if it means making a move that affects the country’s internal market.