Archive for April 28th, 2014

Tales Of Bolivarian Inefficiency II: The “New” Venezuelan Steel Industry

April 28, 2014


Continuing on this short (or long, maybe) series of Tales of Bolivarian Inefficiency, this time we look at something that you may have missed during Easter or Holy week, as the Chinese Vice-Premier came to Caracas and signed a bunch of contracts with various Government institutions. As usual, the details are scant, but the steel and aluminum agreements are certainly intriguing and appear to be a waste of money.

The “New” Venezuelan Steel Industry

While many people were on vacation or resting over the Holy Week holiday, China’s Foreign Minister Wang Yi was in Venezuela and is usually the case in these visits he was accompanied by a number of representatives of Chinese firms and institutions to sign cooperation agreements.

Two of the agreements are loans, which are part of the Joint Chinese Venezuela Fund, which were signed by none other than Diosdado Cabello’s brother Jose David Cabello, who mostly announced them via Twitter. But there was a press release and as is customary in topics relating to Guayana, Damian Prat was on top of it.

The steel project is perhaps the strangest one. This contract with China Minmetals Engineering Co. Ltd, Chalieco, involves according to what little has been informed, to purchase and install a continuous smelter for round products in order to continue diversifying the steel products that Sidor produces. Supposedly, this will allow for the production of an additional 700,000 Tons of steel products. This steel will in turn allow for the production of pipes in a new plant.

Now, as Prat points out, this makes little sense. The Chavista Government nationalized in 2008 the Tavsa pipe plant and immediately proceeded to shut it down, in order to start importing the same pipes from China. the question is then, where is this new plant and why instead of starting a new project, doesn’t the Government revive Tavsa, which has received no funding and sits there languishing after six years.

But more importantly, where is the steel going to come from? When Chávez nationalized the Sidor plant, it was producing 4 million Tins a year of steel. Today, six years later, it is expected to produce less than 1.5 million Tons, the amount produced in 2013. This is insufficient to satisfy the demands of the Venezuelan market, let alone to supply any new plant. Why are they building something new, instead of using the money to restart Sidor and Tavsa and invest in parts and supplies to get them going?

What is most ridiculous is that, much like in the case of the sugar processing plants, Cabello, who is new in the Ministry for Industries said: “Recovering companies that were abandoned has been a characteristic of the Bolivarian Government. We will work as a team to fulfill this …”

Well, we don’t know what other companies he is referring to that have been recovered by the fake revolution, but in this particular case, it was his idol Hugo Chávez that nationalized these companies, which then began receiving no backing, no funding, no financing and were mismanaged. This is why they are  in the deplorable state they are in.

But the mystery remains about the new pipeline plant that Cabello referred too, as nobody knows of such plans. So, even if ture, if the new plant does not exist, what is the point anyway.

Separately, Cabello also announced a contract with Challieco for US$ 500 million (how easy they throw these figures around!) to recover production in Venalum. The same company was hired in 2011 to build parts in China for Venalum, which for forty years had been built in Venezuela. The debt was incurred, but as far as anyone can determine, nothing was ever installed and it is unclear what happened with the U$ 403 million.

In the meantime, this financing has to be paid someday by future generations and the revolution is deaf to the questioning about the projects. Where is the money? What was it used for? Did someone pocket it? Who made money when Tavsa was shut down and its production replaced by Chinese imports? Who is responsible for this disaster?

You can’t ask these questions because largely, the same actors that were in charge then are in charge now.

I wrote earlier about the book by Prat Guayana: The Upside Miracle, the destruction of Tavsa and Sidor is all documented there. But the decimation of the country continues in the name on the revolution. And nobody in Governemnt does or says anything. In fact, they continue the destruction and the mindless indebtedness of the country.

Next: Part III: Chávez’ Frozen Cuba Dream