Cement in Central America: Global players in a local industry

The cement industry provides an ideal setting to explore how contact of firms across markets can reduce rivalry and how this contact might create value added for multinational investment. This note guides the instructor on how to use this case in class. The discussion is organized around three pastures. The first reviews the acquisition of cement assets in Central America by multinationals, analyzes the evolution of capacity and prices, and determines the level of cost asymmetry in each country. The second pasture introduces a simple model that shows how capacity and cost asymmetries affect the viability of cooperative pricing. The third pasture analyzes how contact across the Central American markets by the major multinational cement firms may enhance cooperative pricing and explores how this contact might explain the firms' investment in the region.