CARACAS, Venezuela (AP) -- President Hugo Chavez's government said Wednesday it will nationalize Venezuela's largest steel maker, bringing one more key industry under state control in its drive toward a socialist economy.
The action comes after months of difficult negotiations between the steel maker Sidor and its workers, who have been demanding better salaries and benefits. It also comes only days after Chavez announced a state takeover of leading cement companies.
Vice President Ramon Carrizalez said the nationalization is meant to protect workers' rights and complained that the company showed "great arrogance" in the talks.
"The president has instructed me to inform the company that the government is taking control of the business," Carrizalez told reporters.
He said the government tried to help Sidor and the workers reach a solution, but "there was no will on the company's part to settle the conflict."
The vice president said one option would be for the government to assume a controlling share of about 60 percent, with the company's owners keeping 20 percent. He said the government will negotiate and pay fair compensation.
The nationalization of key industries has been a centerpiece of Chavez's socialist agenda. The government took majority control of telecommunications and electricity companies last year, along with Venezuela's last remaining privately run oil projects.
Chavez also announced plans to nationalize major cement companies last week, and his government is in talks on the terms with Mexico's Cemex SAB, France's Lafarge SA and Switzerland's Holcim Ltd. The government says those companies also will be allowed to stay on as minority partners.
Venezuela will reduce the cost of the takeover by allowing the foreign firms to stay on as minority partners while gaining control over key industries that should help tackle a housing shortage, said Patrick Esteruelas, a Latin America analyst at the New York-based Eurasia Group.
"Taking control over the cement and steel industry will allow the government to control prices and production (and) speed up public works projects," said Esteruelas, who estimated that total compensation for all four companies would reach approximately $3 billion.
Sidor's parent company, Luxembourg-based Ternium SA, is controlled by Argentine-Italian conglomerate Techint Group.
In a letter apparently written before the announcement, Techint president Paolo Rocca urged Chavez to help find a solution, saying the company had agreed to increase salaries and pension payments and hire 600 contractors as full employees.
"We advance this proposal to make possible an agreement, in spite of Sidor's financial limitations," Rocca said in the letter. The company did not immediately issue a response to the takeover announcement.
Ternium currently owns 60 percent of Sidor, while the Venezuelan government holds 20 percent and the remainder is in the hands of current and former employees.
The company Sidor - whose formal name is Siderurgica del Orinoco - was privatized in 1998 and is the dominant steel maker in Venezuela. Ternium's shares on the New York Stock Exchange were down more than 10 percent following the news.
A leader of the Unified Union of Steel Industry Workers, Nerio Fuentes, told the Venezuelan television station Globovision that company workers have taken control of the steel plants in the eastern state of Bolivar.
Workers have repeatedly held protests at Sidor's steel plants in recent months, at times clashing with police.
Chavez on Sunday referred to the labor dispute and asked his vice president to meet with union leaders, saying the government "has to demand with great firmness that any company ... comply with Venezuelan laws."
Last year, Chavez warned Sidor's owners that he might nationalize the company, complaining it was selling the bulk of its production overseas instead of giving priority to Venezuelan industry.
At the time, Chavez said if Sidor didn't agree to supply the domestic market first, "I'll grab your company ... and I'll pay you what it's worth."
Sidor produces about 85 percent of the 5 million metric tons of steel produced annually in Venezuela, according to the Belgium-based International Iron and Steel Institute.
No recent figures were immediately available to clarify how much of the steel produced by Sidor has been exported, or how much has been sold domestically.