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Venezuelan election should be a good result for Caribbean Cement Company Limited

World Cement,

As we reported last week, Caribbean Cement Company Limited (CCC) has been counting on a new supply agreement with Venezuela to reboot sales and reinvigorate its cash flow. With the prospect of a change of administration looming, it seemed likely that the PetroCaribe agreement, of which the supply deal is a part, would, at the very least be amended.

Following his victory in the Venezuelan national elections on Sunday – 07 October 2012 – Hugo Chavez could potentially extend his rule as President to 20 years. After already-substantial delays to the Venezuela/CCC agreement due to Chavez’s health, there were worries that a new government would put an end to the plan entirely.

One of the expectations of this extension to Chavez’s rule, though, is that he will consolidate his control over Venezuela's economy, possibly by continuing with the nationalisations that have been seen over the last ten years. The nationalisation of the country’s oil sector after his last victory in 2006 gave the country tens of millions of US$ that has been piled into social investments that ranging from free health clinics to newly built apartment complexes. Naturally, this investment has required the support of better infrastructure, and therefore, it has been a boon to the construction sector as well.

Recently, Chavez’s administration has planned to invest further in housing, with a scheme in the pipeline to build 300 000 houses pa over the next six years, as well as developing the associated infrastructure. While it should be noted that the country’s nationalisations also include its cement plants, such ambitious plans for growth will no doubt require the support of foreign imports. Due to diminished local demand, and the associated drop in capacity utilisation, CCC is in a position to help feed Venezuela’s cement requirements.

Alongside reports that Chavez has stated that his health is no longer an issue, his victory is likely to be good news for CCC.

Written by Jack Davidson.

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