Guayana’s lost industrial future…

…is an irreparable setback for Venezuela’s economic development.

It took President Hugo Chavez and his corrupt, incompetent gang of Bolivarian “revolutionaries” less than a decade to ruin two generations of extraordinary industrial growth in Bolivar state.

The first time Caracas Gringo visited Ciudad Guayana in 1978, the Matanzas Industrial District where the basic steel and aluminum industries are located was the largest contiguous cluster of industrial construction projects then under way anywhere in Latin America, and perhaps the world. The total combined capital expenditure on these projects was about $25 billion in 1978 prices.

Sidor’s Plan IV steel expansion was under way in 1978. Ferrominera was expanding its iron mining operations and adding pelletization capacity in Puerto Ordaz.

Venalum’s aluminum smelter was being built in 1978 as were Interalumina and Carbonorca. Alcasa was completing an expansion, and making new plans to install Line V in the early 1980s.

Edelca was in the final stage of the Guri Dam’s construction.

Several hundred privately-owned metalmechanics companies were setting up operations in the region. The Guayana region was also rich in reserves of gold and other rare metals, topped only by South Africa and Russia.

International market intelligence firms that follow the ferrous, non-ferrous and precious/rare metals industries worldwide singled out Venezuela in the 1980s-1990s as an emerging world-class exporter of iron, steel, aluminum, gold and other metals.

Ciudad Guayana –consisting of the Puerto Ordaz-San Felix twin cities – was a boom town in 1978.

Today Ciudad Guayana is a vast rusting junkyard of wasted opportunities and lost dreams.

After ten years of Chavez’s interminable Bolivarian destructiveness, all of the state-owned basic industries in Ciudad Guayana are collapsing, without a single exception.

All of Ciudad Guayana’s essential public services have collapsed, including electricity, education, health care and law enforcement.

The residents of San Felix suffer more frequent and longer lasting power blackouts than practically any other city in Venezuela, yet the Guri Dam is less than 100 km away.

San Felix was a small, poor community at the confluence of the Orinoco and Caroni rivers in the 1960s when the development of Guayana was launched by Romulo Betancourt (who actually carried forward a series of projects already begun with foreign investment during the military regime of Marcos Perez Jimenez).

San Felix grew apace with the expansion of the basic industries in Puerto Ordaz – the CVG Group of power, iron/steel and aluminum producers which were marketed by successive Ad and Copei governments as a vital cornerstone of Venezuela’s long-term plans to diversify its export base away from mostly petroleum.

But the CVG is now in the process of being chopped to pieces by Chavez , who before moving in 2008 to dismember the CVG deliberately neglected for a decade to maintain the basic (i.e. strategic) industrial capacity that existed when he came to power – and now San Felix is also falling apart as a result.

Chavez already moved hydropower utility Edelca last year from the CVG group over to Corpoelec, which in turn reports directly to the energy minister.

Chavez also plans to move Sidor (nationalized last year) and Ferrominera from CVG over to the newly created Socialist Steel Corporation (CorpoAcero).

Reportedly, Venalum, Bauxilum and Carbonorca will be moved in coming weeks from CVG to the newly created Socialist Aluminum Corporation (CorpoAluminio). It’s unclear what moving these companies over to CorpoAluminio will accomplish, since Bauxilum and carbonorca are operating at less than 50% of capacity due to little/no maintenance spending

But Alcasa apparently is beyond salvation. There are persistent but unconfirmed reports that Chavez plans to break up Alcasa into three or four components restructured as Empresas de Production Social (i.e. worker cooperatives without a hope of ever breaking even).

However, chopping up Alcasa won’t be cheap. The company owes its local and foreign suppliers, plus Bauxilum, Carbonorca and Edelca close to $1.5 billion. Moreover, since the parts of Alcasa the government reportedly wants to “rescue” need at most only 500 workers, which means some 2,500 workers must be fired.

Alcasa’s current president, Cesar Aguilar, says Venezuela’s oldest smelter can be saved with an injection of $1.5 billion.

But Aguilar’s optimism requires a caveat: he doesn’t know anything about the aluminum business, and likely couldn’t even find aluminum foil in a supermarket without asking a grocery clerk for directions as to which aisle the foil is in.

However, Aguilar is adamant about one thing: he is a proven revolutionary.

Basic Industries and Mining Minister Rodolfo Sanz says the government has a rescue plan almost ready, any day now it will be announced.

What’s the bottom line? Sanz says the plan will require “everyone… to make sacrifices.”

A guesstimate of the “sacrifices” the regime will impose: (a) Suppliers/creditors will be required to slash 30-50% off their bills, and (b) workers will be required to abandon claims for payment of past-due debts owed by the government, accept steep pay/benefits cuts.

It’s likely that several thousands of CVG workers also will be fired from their jobs… by the very revolution which guaranteed lifetime employment for the Bolivarian faithful.

By the time the labor purge is over, the traditional unions will be broken, their ranks decimated, and new chavista unions will be “recognized” by the Labor Ministry.


About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
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