Venezuela to Expropriate Steelmaker if Indemnity Not Resolved

Mérida, April 28, 2008 (venezuelanalysis.com)– If a “just” price is not agreed upon this Tuesday for the nationalization of the Sidor steel plant, Venezuelan President Hugo Chávez will sign a presidential decree expropriating the company, Chávez declared on his weekly Sunday talk show Aló Presidente.

An indemnity dispute has stalled negotiations between government ministers and officials from the Argentine company Ternium, which owned 60% of Sidor operations prior to the April 9th nationalization.

The Techint group, which controls Ternium, has estimated the value of its shares in the company to be $3.6 billion. Venezuela’s Minister of Basic Industries and Mining, Rodolfo Sanz, said the payment should be no more than $800 million, according to a thorough “economic diagnosis of the company” conducted by the government’s negotiating team.  

“What do the owners of this company think, that we are morons?” asked Chávez Sunday. About the company’s indemnity proposal, Chávez commented, “I laughed at that. I am not going to pay that amount because this company is not worth that much.”

According to the Argentine daily Clarín, Techint seeks compensation for the opportunity cost, not just the market value of the company. Techint claims its indemnity estimates reflect the cost of purchasing another plant similar to Sidor, possibly in Brazil.

The government would deduct from its compensation offer the value of environmental damages, false accounting, outstanding company debts, and the pending collective labor contract, the dispute over which led to the nationalization.

“I think we have to have a thorough discussion,” Minister Sanz announced Saturday, adding that the 15-month delay on the collective contract with more than 4,000 permanent steel workers is “the fundamental responsibility of the company.”

Also, the cost of incorporating Sidor’s 9,000 non-unionized contract workers, whose precarious employment position Sanz called a “scheme of super-exploitation” crafted by Ternium in violation of Venezuelan laws, shall also be deducted from compensation.   

When Sidor—originally a state-owned company—was privatized in 1997, Ternium bid $2.3 billion for 100% of the operations, while the base price set by the government was $1.535 billion. But Ternium ended up paying $1.2 billion for 60% of the company after pending state debts were discounted and Ternium promised to invest in needed technological improvements and environmental protection.

The national coordinator of the National Workers Union (UNT), Stalin Pérez Borges, alleges that the company never made the promised investments, while the Venezuelan daily El Universal claims Ternium has invested $926 million in the modernization and digitalization of the plant, and increased liquid steel production by 50%.

Adel El Zabayar, a National Assembly legislator from Bolívar state where Sidor is based, described the labor and environmental damages caused by Ternium as “incalculable.” Moreover, El Zabayar called for Venezuela’s Attorney General to launch a criminal investigation into the Techint group and prohibit Techint officials from leaving the country in the meantime.

“If an investigation is launched,” El Zabayar told the National Assembly’s energy and mining commission, “these foreign owners would actually be in debt to the nation and face the real possibility of a criminal trial that would have serious consequences.”

Borges denounced that Ternium’s indemnity estimate is “yet another mockery” and that the company is asking for “a prize for having sacked our country.” On behalf of the workers who had been “semi-slaves,” the union leader supports expropriation “unconditionally.”

Meanwhile, collective contract negotiations between the government’s transition commission, headed by Minister Sanz, and Sidor workers represented by the United Steel Industries Workers Union (SUTISS), are on the upswing.

The government agreed to the workers’ daily wage increase demand of 53 bolivars ($24.65), which had been rejected by the management and the Labor Ministry prior to the nationalization. The government and the workers also agreed on overtime pay, paid vacations, and bonus incentives for extra production.

However, the government offered 5,000 bolivars ($2,326) less in back-wages than the workers claim to be owed, prompting SUTISS General Secretary Nerio Fuentes to comment that “the struggle continues” for a just collective contract.

Also, retirement pensions and the incorporation of Sidor’s contract workers into the collective contract have yet to be negotiated.

There are signs the government seeks to control the entire production and distribution chain of metallurgy and mining industries in Venezuela as part of its “socialist” national development plan. “With the adquisition of Sidor,” said the Venezuelan Minister of Basic Industries and Mining Jesus Paredes last week, “we complete a chess move.”

Likewise, Minister Sanz told the press that the government had explained to Sidor that the nationalization is “in accordance with a policy of national interest,” but that “there is no reason or motivation for not continuing our [commercial] relationship. We are going to become part of MERCOSUR … and we are going to strengthen our national industry, not only in the area of steel but also of aluminum, to move toward the markets of the South.”

Sanz also indicated that in future negotiations Sidor workers may need to sacrifice some demands for the good of the nation. Borges, on the other hand, insisted in an interview Monday that “they are the ones, those heroic workers, the ones who decide among the workers, the ones who have the right and the capacity to make the company run correctly… now is the hour of the workers and the people of Venezuela.”