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Mexichem and Pemex resurrect VCM deal

By: Stephen Downer

January 17, 2013

MEXICO CITY -- Mexichem SAB de CV, the largest manufacturer of PVC pipe, vinyl resins and compounds in Latin America, said Thursday it will form a vinyl chloride monomer joint venture with state oil company Petróleos Mexicanos (Pemex) after all, less than two months after withdrawing from the $556 million project.

The joint venture in Pajaritos, Veracruz state, "will allow the vinyl chloride productive chain in Mexico to remain competitive, despite being at a disadvantage in terms of integration and size with its North American competitors," Mexichem said in a Jan. 17 filing with the Mexican Stock Exchange.

"For Mexichem it's an opportunity to face up to the competition through the use of synergies and operating efficiencies in the whole production chain and to reduce our dependence on foreign competitors for the supply of our main raw material."

Mexichem had withdrawn from the JV on Nov. 22, at the time complaining that Pemex had delayed financing the deal.

Now it appears the sole reason for the earlier delay was the imminent change in government. Mexican President Enrique Peña Nieto succeeded Felipe Calderón Hinojosa on Dec. 1 and a new set of senior directors is running the oil company today.

Pemex approved the JV on Jan. 16 at a special meeting chaired by Energy Secretary Pedro Joaquín Coldwell and attended by, among others, Pemex's new managing director, Emilio Lozoya Austin.

As part of the plan, the whole VCM complex in Pajaritos will be modernized, Pemex said.