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Venezuela Mining
Venezuela entered the 1990s poised to become a leading
international producer of coal, iron, steel, aluminum,
gold, and
other minerals. In the late 1980s, the industry employed
less
than 1 percent of the labor force, accounted for less than
1
percent of GDP, and contributed 13 percent of exports.
These
figures were likely to increase, however, as expanded
capacity
became operational in the 1990s.
The state historically played a prominent role in
mineral
policy and production. Beginning in the 1970s, the
government
obtained or established scores of mining enterprises in
its
pursuit of heavy industrial development. By the 1980s,
however,
the huge debts incurred by these ventures contributed to
the
government's decisions to reconsider restrictive foreign
investment policies and to liberalize mining laws in an
effort to
expand private-sector participation in mining. The CVG,
the
country's most prominent regional development corporation
and the
major player in mining, increasingly entered into joint
ventures
with foreign companies by the 1990s, when for the first
time the
CVG agreed to accept a minority share in some ventures. In
addition to its role as planner and coordinator of most of
the
country's mining, the CVG was one of Latin America's
largest
industrial groups, with 30 subsidiaries and 41,000 workers
in
1989. According to government sources, the CVG and its
affiliates
accrued US$1.3 billion in profits from 1985 to 1989 and
generated
US$3.3 billion in foreign exchange.
The bauxite and aluminum industry, traditionally
smaller in
size than iron and steel, installed significant new
capacity in
both mining and processing during the 1980s. As a result,
aluminum became the country's second leading foreign
exchange
earner. By 1990 Venezuela boasted the largest installed
capacity
in aluminum in all of Latin America. Moreover, the country
was
believed to be world's most economical producer of
aluminum
because of its vast high-quality bauxite reserves, its
abundant
and cheap energy, and its well-developed infrastructure.
Proven
bauxite reserves stood at 500 million tons in 1990, with
probable
reserves as high as 5 billion tons. Overall, the country's
smelters, including as many as 1,500 small foundries,
produced
approximately 443,000 tons of primary aluminum in 1988.
About 60
percent of production, or nearly US$1 billion by value,
was
exported.
Commercial bauxite production, begun in 1987, reached 1
million tons in 1988 and was expected to reach 4.5 million
tons
in 1991. Much of the bauxite of Bauxita de Venezuela
(Bauxiven;
wholly owned by CVG) was processed at the Interamericana
de
Alúmina (Interalumina) plant in Puerto Ordaz. Opened in
1983,
Interalumina produced 1.3 million tons of aluminum in 1988
from
its plant's annual capacity of 2 million tons. Jointly
owned by
the CVG and a Swiss company, Alusuisse, Interalumina also
controlled 50 percent of the Belgian Aleurope Aluminum
Company,
40 percent of the Costa Rican firm Alunasa, and 20 percent
of the
United States company Wells Aluminum, thus providing it
with
worldwide marketing outlets.
Alcasa, the country's first aluminum processing plant,
contained plants in Ciudad Guayana and Guacara in Carabobo
by the
1980s. Alcasa's installed capacity, on the rise throughout
the
1980s, was intended primarily for specialized overseas
aluminum
markets. In 1990 Alcasa had a 120,000-ton annual capacity
for
manufacturing primary aluminum. Alcasa's expansion plans
for the
1990s foresaw a more than doubling of that capacity to as
much as
300,000 tons per annum.
The country's other major smelter, the Industria
Venezolana
de Aluminio C.A. (Venalum), was also undergoing rapid
growth in
capacity. Although the CVG enjoyed majority ownership of
Venalum,
a consortium of Japanese industrial interests held a
considerable
minority stake.
The iron and steel industries represented the core of
the
mining sector before aluminum's rapid growth in the 1980s.
Large-
scale commercial mining of iron ore in Venezuela began in
the
early 1950s, when the Pérez Jiménez regime granted iron
ore
concessions to two United States steel companies,
Bethlehem Steel
and the United States Steel Corporation. Huge iron
reserves,
located near exploitable hydroelectric resources, combined
with a
growing national demand for steel to set the stage for the
creation of a steel mill in 1955 near the confluence of
the
Orinoco and Caroní rivers. With the creation of the CVG in
1960,
the state gained a greater role in the country's only
major steel
plant, which at that time produced mainly seamless pipes
for the
oil industry. One of the landmarks of the government's
expanding
role in the economy during the 1970s was the
nationalization of
the Orinoco Steelworks (Siderúrgica del Orinoco--Sidor)
steel
mill on January 1, 1975. Funding from the Venezuelan
Investment
Fund (Fondo de Juversiones de Venezuela--FIV) made
possible a
smooth settlement with the American steel companies.
The nationalized steel industry set ambitious goals for
itself, goals it ultimately failed to meet. Slower
internal
growth dampened local demand, and the proliferation of new
steel
mills in other developing nations by the late 1970s
reduced
international demand. As a result, plans to build two new
steel
complexes were postponed indefinitely by the late 1980s.
After years of delays, technical bottlenecks, and
government
mismanagement, Sidor's expansion made the country
self-sufficient
in steel by 1982. By 1985 steel exports exceeded steel
imports
five-fold. High initial capital investment, however, made
the
Venezuelan industry unprofitable, and Sidor accrued a huge
debt
estimated at US$5 billion to US$10 billion, a substantial
portion
of Venezuela's debt burden in the early 1980s. Not until
1986 did
Sidor show its first profit, US$70 million, but this fell
to
US$26 million in 1987. In 1990 the government reportedly
was
considering privatizing Sidor.
Foreign competition for exports remained the major
challenge
to Venezuela's steel industry in the early 1990s, as steel
production continued to increase, rising from 2.7 million
tons in
1985 to 3.6 million tons in 1988, and internal demand
remained
static. Complaints about the dumping of subsidized
Venezuelan
steel at below-average prices impaired greater market
penetration
in the 1980s. The government provided subsidies to the
Sidor
plant, mainly through special foreign exchange rates that
allowed
the company to purchase imported inputs at a low rate and
to pay
off its debts at a high rate. In 1982 the United States
Department of Commerce accused Sidor of selling its steel
in the
United States at a 40 percent discount. This complaint led
to a
1985 Voluntary Restraint Agreement (VRA) with the United
States,
which set a maximum export limit of 183,000 tons of steel
a year.
The two governments reestablished the VRA in 1989 at
280,000 tons
a year, two-thirds of which were finished steel products.
Venezuela also signed a VRA with the European Economic
Community
in 1987 after similar dumping allegations were made.
Although the state dominated the industry, some private
steel
milling went on in 1990. Sivensa, the country's only
private
steel mill, was generally profitable. In addition, the CVG
operated as a minority shareholder in a steel plant called
Metalmeg, which manufactured carbon steel products for the
petroleum industry. In the late 1980s, the Kobe Steel
Company of
Japan also converted its Minorca iron briquette plant into
a
direct reduction steel mill, further expanding steel
production
capacity.
The basis of the country's controversial steel industry
was
its enormous iron ore reserves. As of 1990, the government
estimates of iron reserves for the state of Guayana were
2.8
billion tons of high-grade ore (80 percent iron). The CVG
iron
subsidiary, Ferrominera, controlled iron ore mining at
numerous
mines, most notably El Cerro Bolívar (southwest of Ciudad
Guayana), El Pao (south of Ciudad Guayana), and San
Isidro.
Ferrominera's total installed annual capacity was 20
million tons
in 1990. Iron production fell sharply after its peak year
of
1974, but was on the rise again by the late 1980s. Iron
ore
production was 18.9 million tons in 1988. Ferrominera's
completion of a floating transportation complex on the
Orinoco in
the late 1980s facilitated the industry's use of large
shipping
vessels, thus increasing exports and lowering costs.
Exports of
iron ore reached 11.7 million tons in 1987, with the
United
States, Europe, and Japan the leading purchasers.
Coal production also expanded rapidly during the 1980s.
As
with iron and bauxite, the country enjoyed large reserves
of
highly pure coal. The state of Zulia alone, for example,
contained 900 million tons of proven coal deposits, with
probable
reserves as high as 2 billion tons. This made Zulia the
largest
underdeveloped coal field in the Americas. Besides Zulia's
coal
deposits, the country also possessed significant coking
coal to
fuel the newer steel mills, coal for thermal electricity
generation, and various deposits of clean-burning "hard
coal."
Most coal deposits were found in the west near the border
with
Colombia or in the Orinoco Basin.
Three major coal mines accounted for most coal output
in the
late 1980s. Although not yet fully operational in 1990,
the
Carbones de Zulia (Carbozulia) mine was already the
nation's
largest. PDVSA owned roughly half of Carbozulia; a
consortium of
United States, Italian, and private Venezuelan companies
accounted for the balance. The mine produced 822,000 tons
of coal
in 1988, and plans called for 6.5 million tons-per-year
capacity
by the mid-1990s. By contrast, the entire country produced
only
62,000 tons in 1987. The United States, Italy, and Spain
represented the major markets for Carbozulia's coal. The
second
major mine was the Minas Carbón at Lobatera in Táchira
near the
Colombian border, with reserves estimated at as much as 60
million tons. The third-leading producer, in Naricual in
Anzoátegui, boasted reserves of approximately 50 million
tons. In
addition to these operational mines, Venezuela had several
other
key coal zones that remained untapped in the 1980s.
Gold, known to exist since colonial times, did not
become a
major commercial endeavor until the 1980s. Miners long
ignored
the country's gold wealth because of its oil. Furthermore,
the
gold deposits were found mainly in the remote border
regions with
Brazil and Guyana. The government, however, increasingly
prized
its gold reserves, which stood at 11.5 million troy ounces
in
1990, or roughly 12 percent of world reserves. Gold
existed in
Venezuela as an ore with quartz and in alluvial deposits
found
naturally with diamonds. The government acquired the El
Callao
gold mine in the state of Bolívar in 1974 to better
regulate gold
prospecting and sales. The state succeeded in raising
official
gold production threefold from 1984 to 1989, pushing
exports to
over US$300 million a year. This made gold the second
leading
nontraditional export. Unofficial production, however,
remained
as high as 70 percent of total output.
After a decade of closely controlling private gold
interests,
the state opened up gold prospecting to foreign interests
in the
1980s. In 1986 the CVG, in a joint partnership with a
Bermuda-
based company, formed Monarch Resources Limited to mine
gold in
the El Callao region. Private Venezuelan entrepreneurs
also
exploited the nation's gold reserves.
Venezuela also possessed varying amounts of other
metals and
minerals. For example, the country was a major producer of
industrial diamonds, although diamond output fell steadily
throughout the 1980s. The country also contained deposits
of
copper, nickel, zinc, lead, uranium, titanium, palladium,
silicon, manganese, and chrome. Quarrying for industrial
minerals
such as feldspar, gypsum, hydrated lime, salt, nitrogen,
phosphate rocks, gravel, barite, pyrophyllite, asbestos,
bentonite, and magnesite was also common.
Data as of December 1990
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