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Venezuelan heavy metals mining starved for cash | Business Recorder

Venezuelan heavy metals mining starved for cash

October 29, 2011
RECORDER REPORT

Business Recorder Logo At the start of 1960, a group of American urban planners arrived in the south-eastern Venezuelan state of Guayana to design an industrial city, a so-called 'Pittsburgh of the Tropics'.

The terrain was perfect.

Located where two major rivers meet, the Orinoco and the Caroni, and surrounded by a wealth of mineral resources, the region was primed for exploration, riches and jobs.

Fifty years later, Cuidad Guayana, the only planned city in Venezuela, is a far cry from its designers' vision.

The area holds important deposits of gold, iron and bauxite, yet the local industries, which employ 1.6 million Venezuelans, have languished in recent years.

"This government destroyed industry here," Pablo Perez, the opposition governor for one of Venezuela's richest states, Zuila, said on a recent visit to the area.

Perez is also a 2012 presidential hopeful looking to unseat President Hugo Chavez.

"They did not know how to act as administrators, they do not understand the industries and they've left them broken."

Five years ago, Sidor, the largest steelmaker in the Andean region and the Caribbean, produced 4.3 million tons of liquid steel and exported 35 percent of its product.

Production nose-dived in 2010 to just 1.8 million tons, the smallest amount in 14 years with just 12 percent exported after Chavez's socialist government nationalised Sidor in 2008.

Chavez's administration blamed the fall in production on a severe energy crisis, which it says obliged the government to ration the electricity used by the heavy metal industry.

However, others say the decrease can be blamed on economic factors in South America's largest oil exporter.

"All industry in Guayana is suffering greatly for lack of investment," said Ruben Gonzalez, the general secretary of the worker's union at state-run Ferrominera, a company that extracts, processes and exports iron.

The government says growth will resume this year, and that an energy shortage will not recur because the nearby Guri Dam, the third largest in the world, is near capacity

The dam provides energy to the majority of the country.

"It is important to invest not to save companies, but because it boosts industry in Guayana within the socialist model," said Labour minister, Maria Cristina Iglesias.

Guayana is not a shining example of socialist industry, but rather plagued by violence where many union leaders have been jailed or suffered assassination attempts in recent years.

According to the human rights organisation Provea, Cuidad Guayana, just east of Cuidad Bolivar, is the most dangerous place in Venezuela for union workers.

There are an average 30 assassinations per year in an area where the 12 percent jobless rate is well above the 8.8 percent national average.

Workers say the violence stems from disputes over "quotas" they are forced to pay unions in order to find work.

Two years ago the Chavez government announced their intention to create 'socialist corporations' to produce iron, steel and aluminium.

To reverse the crisis in the sector, which threatens to bankrupt several companies, the Chavez government wants to unify the production processes of the 15 metals companies under state control of the Corporacion Venezolana de Guayana (CVG).

As part of that consolidation, CVG would attempt to increase efficiencies, while cutting exports in order to divert its output to the domestic market.

This transformation of the industry is not supposed to be completed until 2019, and the heavy metal industry will continue to produce below capacity at least until then.

In response, the government is injecting $1 billion borrowed from China into the industry, in hopes it can avoid collapse.

For many analysts the cash injection is unjustifiable, but the government sees it as a definitive solution to the troubles in the heavy metal industry.

"These agreements demonstrate the government's commitment to reviving industry in Guayana and to consolidating Venezuela's industrial potential with the help of workers," said Mining Minister Jose Khan.

But industry deterioration is not the only problem facing the south-east of Venezuela, which is also one of the most bio-diverse places in the world.

A minimal police presence has led to an increase in drug traffickers exporting drugs in freight space, which was once used for heavy mineral cargo.

Last week, half a ton of high-purity cocaine, ready for shipment to Europe, was seized by police in the engine room of a ship in Ferrominera's port.

Four months ago, one of the largest drug seizures in history took place in the same depot.

Police found six and a half tons of cocaine, bound for Europe via the Orinoco River, one of the longest in America, "Today, instead of minerals, we export drugs," said a worker who wished to remain anonymous.

Copyright Reuters, 2011



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