Archive for December 2nd, 2011

Did Venezuela Really Compensate Cemex For Only Half of What it Wanted?

December 2, 2011

Headlines are beautiful things. Just witness yesterday’s “Venezuela to pay Cemex US$ 600 million for its assets in Venezuela”. It really sounds like Venezuela got the good end of the deal, as Cemex had sought US$ 1.2 billion in arbitration and supposedly ended up with only half of that. But did they?

Not really.

First of all, Venezuela had said that Cemex Venezuela was worth only US$ 450 million when it first nationalized it. On the other side, Cemex was asking for US$ 1.2 billion for it. What is not clear is whether Cemex was asking for US$ 1.2 billion for Cemex Venezuela or for its 75.7% stake in it. That alone makes a big difference.

But let’s look at the numbers and the announcements:

1) Venezuela will pay Cemex US$ 600 million, US$ 240 million in cash and US$ 360 million in PDVSA bonds in 4 parts, each one of them of US$ 90 million in the next four years. I am guessing this means that next year Cemex will get a 2013 PDVSA bond, the next a 2014 PDVSA on and so on and so forth.

2) However, Cemex owed Cemex Venezuela US$ 154 million ( I think it is US$ 158 million, but that is a minor difference). You see, after the Venezuelan Government announced that it would nationalize the cement sector, Cemex Venezuela sold its parent Cemex, its subsidiaries in Dominican Republic, Panama and Trinidad for US$ 355 million. Cemex paid US$ 132 million of that amount with dividends that were retained in Cemex Venezuela, US$ 60 million that were assets of Cemex Mexico in Venezuela and thus Cemex owed Cemex Venezuela US$ 158 million. As part of the settlement this debt with Cemex Venezuela is settled. Thus, Cemex Venezuela gets the US$ 600 million in cash and bonds AND gets US$ 154 (or 158 in my numbers) million that it no longer owes, thus Cemex is getting US$ 754 million

3) Cemex did not own 100% of Cemex Venezuela. The public owns 24.3% of it. Thus, the Venezuelan Government that said that Cemex Venezuela was only worth US$ 450 million, is saying that the company is worth US 996 million. Under Venezuelan law, the Government is obligated to buy out these minority shareholders ( I am one) at the same price (in local currency, of course, Venezuelans are second class citizens, more so if they are oligarchic investors). Whether the Government will follow the law or not, it says that the 24.3% not in the hands of Cemex is worth US$ 242 million.

So, Venezuela has to pay about a billion dollars for Cemex Venezuela, closer to the US$ 1.2 billion that Cemex wanted, whether it wanted it for its stake or for the whole thing, than the US$ 450 million the Government was offering.

That this is more of a victory for the Mexicans than for the Venezuelan Government is confirmed by the fact that Mexican President Felipe Calderon said he was coming to Chavez’ CELAC shindig, only hours before it began and right after the agreement with Cemex was signed.

Oh, the pretty revolution!

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