ECONOMISTS predict increased construction activity in Venezuela in 2001. That's good news for cement producers and the trucking companies that serve them, but they've heard it all before.
This country of 23.2 million people has struggled to fulfill its economic potential despite a wealth of petroleum reserves and other natural resources. In recent years, numerous public projects, ranging from massive home construction efforts to nationwide infrastructure improvements, have been announced with big fanfare and then canceled abruptly.
The Venezuelan economy is beginning to crawl out of its worst recession in decades. The government has forecast economic growth of 2.2% - a modest amount but a major improvement over the 7% shrinkage of the economy that was recorded in 1999.
Like other industries, trucking took a beating during the recession. "We believe that as much as 25% of Venezuela's total truck fleet shut down over the past three to four years," says Carlos Fernandez, president of the Consejo Nacional del Transporte (National Transport Council). "However, the economy is growing again, and that should help trucking. It will be a key component of any economic growth in Venezuela."
Spending Program In an effort to speed recovery from the recession, the administration of President Hugo Chavez has embarked on a massive spending program. The government says it intends to spend 28% of the country's gross domestic product without increasing the budget deficit more than 1.5% to 2%.
The money is going to infrastructure projects, public schooling, and a 20% wage hike for government workers. New housing projects also are on the list. The infrastructure and government-funded housing plans are of particular interest to the cement industry.
Infrastructure projects include repairs to roads and other systems that were devastated by severe storms slightly over a year ago. A new subway is being constructed in Valencia, Venezuela's third largest city and its manufacturing capital.
Cement Demand Demand for more government-financed housing is intensifying. Only about 15,000 homes were built under government programs in 2000, and government statistics suggest that there is a nationwide need for several hundred thousand houses. The shortage is growing more acute, especially in urban areas.
All of these projects will need cement, which processors hope will push demand above the 4.1 million tonnes (4.5 million US tons) produced in 2000. Total production was down by almost half from the 8.8 million tonnes (9.7 million US tons) turned out in 1998.
Three Main Producers The three most active cement producers in Venezuela are Cementos Caribe (a Holderbank subsidiary), Cementos Vega (a LaFarge subsidiary), and Vencemos (a Cemex subsidiary). Vencemos, which stands for Venezolana de Cementos, dominates the market with five plants. Cementos Caribe is next with three plants.
All of the cement producers rely on trucks for domestic transportation and distribution. With less than 400 miles of tracks, rail service is virtually nonexistent.
Industrywide, bulk shipments now account for about 35% of the cement transport activity and are growing. Cementos Caribe provides a good example of the shift to bulk. "We're at 20% now, and our objective is further increases in bulk sales," says Luis Navarro, manager of the Cementos Caribe terminal in Puerto Cabello. "We're seeing small annual increases."
To help encourage the shift to bulk, Cementos Caribe provides customers with portable silos. Constructed of carbon steel, these vertical silos have a 33-tonne (36.3-US-ton) capacity.
Cementos Caribe markets four different types of cement in Venezuela - two varieties for oil well applications, a finishing cement for construction, and a product called Super/Sand Cement that contains iron filler and is used as a floor topping and in other related applications.
Shipments of the oil well cements average 800 kilometers (497 miles). Construction cement is shipped nationwide, but most of the Super Sand/Cement product goes to customers within a 500-kilometer (310-mile) radius of the plants.
The products are distributed - both in bulk and bag form - by contract carriers. Cementos Caribe works with seven carriers that handle 80% of the shipments. Customer trucks also transport some of the loads but are limited to 20% of the total volume.
"We just started to limit the volume of customer-supplied transport," Navarro says. "We feel it's important to support our own carriers. We need a strong distribution system, which makes it vital that our carriers survive. We're seeing some resistance from customers, but we haven't lost any business."
Caribe Trailers Under the Cementos Caribe program, the cement company provides the dry bulk and platform trailers, and the carriers are responsible for the tractors. Carriers also handle routine maintenance and service for the trailers.
With the push to boost the volume of bulk shipments, Cementos Caribe has been steadily expanding and modernizing its trailer fleet. The cement company bought 24 new dry bulkers in 2000 and plans to add another 24 this year. "We'll probably purchase only dry bulk trailers in 2001," Navarro says.
Dry bulk equipment in the fleet is extremely varied. Older trailers are of the three-cylinder design and are typical of dry bulk cement units that are still widely used throughout Venezuela today. Constructed of carbon steel by local manufacturers, these trailers have an average capacity of 24 cubic meters (847 cubic feet).
In its drive to modernize, Cementos Caribe has turned to foreign trailer builders. The newest dry bulk trailers in the fleet were built by Brazil-based Recrusul S/A and were purchased through T&T Trailers de Venezuela CA. T&T Trailers also sells Drum blowers.
Recrusul builds the 26-cubic meter (918-cu-ft) dry bulkers under license from Spitzer-Silo Fahrzeugwerke, a German manufacturer. They are constructed of carbon steel and have 450mm (17.7-inch) domelids, aeration pads for unloading, a discharge rate of one ton per minute, and a two-bar (29-psi) pressure capability. Tare weight is around 5,800 kilograms (12,780 pounds).
Also part of the Cementos Caribe fleet are eight aluminum Heil Super Jet bulkers that were purchased through Pneumatic Exports Inc in 1999 and 2000. Pneumatic Exports is based in Miami, Florida, and is part of the Southeastern Pneumatic Inc group.
The 1,040-cu-ft bulkers have 20-inch cast aluminum domelids, Sure Seal butterfly valves and aeration, and Knappco check valves. Running gear includes a Reyco 21B nine-leaf spring suspension, Meritor axles, and Meritor WABCO antilock braking.
Government Obstacles Companies such as Cementos Caribe have an easier time modernizing their fleets than do the for-hire trucking companies that serve them, according to the trucking association's Fernandez. "Although trucks handle virtually all of the cargo transportation in Venezuela, the government gives little or no support to the trucking sector," he says. "The sector is punished with high taxes and high interest rates."
The tax rate for commercial trucking companies is 35%, but small independent operators with one or two trucks are exempt. Interest rates in 2000 were 35% to 38%, and that was a significant improvement over the previous year when rates as high as 60% were recorded.
"Company owners can't afford new equipment, and the fleets are getting older and older," Fernandez says. "The average age of trucks and trailers in Venezuela is 25 years. Bureau Veritas did a survey that showed 95% of the trucks in Venezuela did not meet minimum international standards.
"The government doesn't realize how important truck transport is in Venezuela. The economy as a whole will be hurt if trucking doesn't modernize. We have huge opportunities for the government to promote a massive fleet modernization effort.
"The economy is down right now, but it is getting better. Fleets are already having trouble meeting demand. If the economy grows by even 3% in 2001, we will see an acute shortage in transport capacity."
New Rules Needed Fernandez's association (known by the acronym Consetransporte) wants the Venezuelan government to adopt and enforce a number of new rules to promote higher quality in trucking. Most importantly, the association wants the rules to apply to all operators of commercial vehicles.
Independent operators are a big problem, according to Fernandez. They account for perhaps 40% of the commercial vehicles in the market. The government apparently has no idea how many independent operators are in business and makes no effort to regulate them.
Stiffer requirements on vehicle and driver safety are needed for the whole industry. New weight limits have been adopted, but there is no enforcement. "Police checkpoints don't have truck scales," Fernandez says.
Under the new laws that were adopted last year, six-axle tractor-semi-trailer rigs can carry a maximum gross combination weight (GCW) of 48 tonnes (105,820 pounds). Five-axle rigs are allowed a maximum GCW of 46 tonnes (101,400 pounds).
Used Trailer Ban Going hand-in-hand with enforcement of the weight rules would be a ban on imports of used trailers of all types. "Consetransporte is proposing a rule for the government that will stop used equipment imports from the US," Fernandez says. "We don't have a problem with imports of new trailers. We just want to stop imports of the very old units that cause safety hazards on our highways."
Safety isn't the only reason driving fleet modernization. Venezuelan truck fleets operate in a market that is open to foreign competition from Brazil and Colombia. "We have open borders that are bringing in rigs that are more modern than ours," Fernandez says. "This affects trucking as a whole, but not cement hauling."
Traffic and road conditions do affect cement haulers, though. Traffic congestion has reached the point that Caracas, for example, limits truck access at certain times of the day. Transportation activity and productivity are slowed significantly.
Ring roads don't exist, and the nation's road network feeds directly into the city centers. The result is that fleets often can't avoid the cities where time-of-day controls are in place.
Main highways are well maintained, but secondary routes need attention. Fernandez points out that it can take 12 hours to travel just 500 kilometers (310 miles) in some parts of the country.
"Infrastructure is not keeping pace with our population growth," he says. "As the government takes action to address this problem, cement haulers will be among the big winners. Not only will they get better roads, they will haul the cement that goes into those roads."