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Lagniappe
VenEconomy:
Another of the “revolution's” failures
Besides the well-known failures of the Castro- Chavista “revolution,” such as PDVSA and the health sector, there are others that are less well-known that also demonstrate the government's deplorable performance, its total lack of managerial capacity, and its lack of foresight.
Among these lesser-known failures are the basic industries in Guayana.
One example is Sidor, now de-privatized. This company plans to produce 838,000 mt of steel this year, 80% less than the 4.3 million mt produced under Techint-Ternium's management, a drop of more than 80% in barely three years.
Even more revealing is the disaster in the aluminum industry. According to official figures (not necessarily reliable), domestic aluminum production was 46% below normal during the first five months of 2010.
Today, the erstwhile dynamic aluminum sector, which was capable of supplying the domestic market, is being forced to import given the huge drop in production. According to Reporte Diario de la Economía , Venalum has started procedures to import between 30,000 tons and 50,000 tons of aluminum to “cover domestic market requirements.”
To make matters worse, it turns out that the government used the same mortgaging tactics it employed at PDVSA, with future sales of the raw material. A large part of the meager production that is being exported this year has already been paid for and the money frittered away in 2008 and 2009, so the little that is being exported is only generating expenses.
Another problem is that the collapse of the basic industries has dragged down other private domestic aluminum processing companies in its wake, among them companies that produce aluminum foil, aluminum shapes, and other inputs for the construction industry and companies that manufacture auto-parts, rims, for example.
Today, those products will inevitably disappear or be available only if they are imported, which, in turn, will lengthen production time, increase costs, and put up retail prices.
The same ills that led to the deterioration of Venezuela's oil industry and its electricity sector have also contributed to the collapse of the basic industries: the cocktail of a communist project, with a long history of failures, combined with very bad management, laxness, inefficiency, and rampant corruption.
To top it all, in the case of the basic industries, there are also the labor disputes being promoted by the parallel trade unions that the government is financing and the more than 100 trade union leaders who have been killed over the past five years.
Some analysts claim that the collapse of the basic industries is due largely to the collapse of the national electricity system, which prompted the government to order the partial shutdown of these companies. Others are of the view that this decision by the Executive simply served to cover up the destruction that the “revolution” had already wrought in the sector.
In any event, the government can no longer deny the obvious.
VenEconomy has been a Venezuela's leading specialized publisher on financial, political and economic data since 1982. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by Veneconomy , July 09, 2010. Petroleumworld reprint this article in the interest of our readers
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Use Notice: This commentary was originally published by
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Petroleumworld News 07/12/2010
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