Capitalizing on Venezuela's natural advantages must also extend to its natural resources and to revitalize industry you need to start with Venezuela's industrial heartland Bolivar state.
Bolivar state leads the country in the production of iron ore, aluminum, steel, bauxite and gold.
It is also the seat of Venezuela’s basic industries.
Closely tied to the fortunes of Bolivar is the Corporacion
Venezolana de Guyana (CVG), the state run heavy
industry holding company. "The Guyana regional development
was visionary in its time. The city was built with
excellent infrastructure in conjunction with the
largest hydroelectric dam of its time. The city
sits on the banks of the Orinoco River which provides
a major river "highway" connecting the
area with markets around the world," says Fred
Drew , a director at the private mining chamber
Camiven and former representative of Australia's
Broken Hill Proprietary (BHP). The state’s massive
aluminum complex, the Venezuelan Aluminum Corporation
(CAVSA), provides 3% of the world's aluminum needs.
In December it signed a $260 million contract with
France's Pechiney to increase production at its
bauxite mine, Bauxilum.
Orinoco Iron , a joint venture between the Australian BHP and the Amazon consortium including Venezuela's Sivensa, began constructing its hot iron briquette plant in 1998. With a price tag of $900 million the plant's two production trains are set to be fully operational by the end of 2000. It is the largest private investment ever in Venezuela. Orinoco Iron uses natural gas to remove oxygen from iron ore to create pure iron which can then be used to make steel. The company is aiming for 2.2 million tones of production annually with 62-65% of exports going to the U.S.
International Briquette Holdings (IBH) the division of Sivensa that was created to group two other iron briquette plants plus Orinoco Iron will have captured 27-28% of the world market once the new plant is up and running, according to Alberto Hassan , the CEO of Orinoco Iron . "We are going to consume over six million tons of iron ore. We consume an enormous amount of natural gas and electricity, which is generated in the area. By the time the plants are fully operational we will be exporting between 450 and 500 million dollars," says Hassan who expects Orinoco Iron to export 100% of its production. Thanks to advantageous pricing of basic materials, Orinoco Iron is largely protected from the vagaries of Venezuela's economy. "Our company is shielded from the ups and downs of the Venezuelan economy with the exception of labor. Gas, energy, and iron are priced in dollars so we are rather protected from the inflation," Hassan explains. Orinoco iron has a 22-year contract with the state industries which supply electricity, gas, water and the iron ore. "If there is a moment to invest in Venezuela it is now, provided you believe that things are going to change and the government will support investments, and you can get enough labor to construct your facility and an appropriate supply chain," he adds.
In addition to iron ore and aluminum production Bolivar state is also home to the country's mining industry. Mining is one of the strongest areas where President Chavez can have a major impact after almost 30 years of inactivity in the sector due to a lack of political will and bad laws. It is now being floated as a flagship industry by the administration, which is conscious of the fact that mining provides 8-10 times the number of direct jobs versus the petroleum sector. The former Energy and Mines ministry estimates that Venezuela needs $6.4 billion by 2004 to develop the industry, which currently makes up less than 1% of GDP. Gold reserves are estimated 10,000 metric tones or 12% of the world's known reserves. Despite nature's blessing, foreign investment has been scarce.
The decision by Canada's Placer Dome to pull out of the $850 million Las Cristinas gold mining project last year, which looked to mine 9.5 million ounces of gold over 20 years, cast a long shadow over an already depressed industry. And while Placer Dome said that freefalling international gold prices made the project untenable local industry said government bureaucracy was to blame. One year later it is hoped that the advent of a new mining law will give greater confidence to investors. Scrapping the 1945 mining law was seen as a positive step towards that success.
Included in the law is the creation of a centralized office to deal with applications for mining concessions, seen as one way to cut miles of red tape. When Peru changed its mining law in 1995 revenues rocketed from $200 million to $3 billion in the space of five years with a promise to streamline bureaucracy and fast track contract approvals. The government estimates that Venezuela could produce up to 40 tones of gold a year. State mining company Minerven which is currently auctioning off exploration and production concessions in south eastern Bolivar state says that within its El Callao mine there are 910 tones of gold.
VENEZUELA
Mining
