COMMODITIES-VENEZUELA: No Buyers for Aluminium Sector

By Estrella Gutiérrez Reprint | | Print |

Estrella Gutierrez

CARACAS, Mar 25 1998 (IPS) - The Venezuelan government suffered a major setback when it was forced to suspend the public auction of the aluminium sector scheduled for Wednesday.

The conditions imposed by the only group interested in participating in the bidding forced a postponement of the projected privatisation.

But Planning Minister Teodoro Petkoff said the government had not changed its decision to transfer the four companies to private hands, adding that the auction could be held a month from now.

The group headed by the Anglo-South African company Billiton International Metals said it would be impossible to acquire the firms at the set price of 2.1 billion dollars without essential modifications in the contract of sale.

Petkoff underlined that the sale of the aluminium sector was “a necessity for the country,” because the state was not in a position to undertake the large investments needed to upgrade the four companies, which have been grouped in the Aluminium Corporation of Venezuela for the purpose of privatisation.

Waldo Negron, the coordinator of the aluminium privatisation process, said prior to the suspension of the auction that under the present conditions, the firms for sale would be unable to continue operating for even one more year, and their state of deterioration was such that in a short while it would be impossible to sell them, or to even give them away.

The secretary-general of the Workers Confederation of Venezuela, Carlos Navarro, said the government “acted with dignity” by rejecting the six conditions put forth by the consortium headed by Billiton.

Of the three groups which qualified for participating in the public auction – which according to Venezuelan law must be held to carry out privatisations – the first to pull out was the consortium headed by the world’s two aluminium giants, Alcoa from the United States and Canada’s Alcan.

Three days after Alcoa and Alcan withdrew on Mar. 16, the consortium comprised of Reynolds, another US firm, and Norway’s Norsk Hydro made a similar announcement.

The conditions set by Billiton and its foreign and Venezuelan partners include the possibility of immediately dismissing 1,000 of the 9,900 employees of the companies grouped in the Aluminium Corporation of Venezuela.

The contract approved by Congress stipulates that job stability must be guaranteed for a year, except in the case of senior executives, and that each employee dismissed in the following six months must be replaced.

The consortium headed by Billiton is made up of Picheney from France, Century Aluminum from the United States, and the Venezuelan firms Sural and Alentuy.

Another of their demands was a reduction of the cost of energy stipulated by the new contract. According to independent sources, the price set was higher than the international average, when the cheap energy available in Venezuela is precisely one of the aluminium sector’s most attractive elements.

The last minute rise in the cost of energy has not been explained by the government, which reportedly did not participate in the decision – in spite of the fact that Electricidad del Caroni, which controls 70 percent of the generation of electricity in Venezuela, is a state enterprise.

The aluminium companies are located in the jungle region of Guayana, some 800 kms southeast of Caracas and just a few kms from the Guri hydroelectric dam, the second largest currently operating in Latin America, with an installed capacity of 10,000 megawatts.

Venezuela produces 630,000 tonnes a year of aluminium, 3.9 percent of global production, which totals 16.3 million tonnes.

The Corporation includes two smelters, a company that produces carbon anodes used in the aluminium manufacturing process, and a firm that has the concession for bauxite deposits and an alumina plant, the raw material and basic component of aluminium.

The government also rejected Billiton’s demand that the concession for the bauxite deposits included in the sale – which ensures the buyer 13 percent of the existing reserves of the nearby Pijiguaos mines – be extended for 13 years.

Billiton and its partners also asked for extended deadlines for settling the companies’ foreign debt and a lower sum for the environmental liabilities the buyers must take on, and made several demands in case hidden debts were found after the companies were purchased.