Three months later, on 10 August 10 2011, after several meetings between Ferrominera and Wisco, the parties concluded that the projects should be executed by companies specialised in these areas. Wisco finally admitted that it did not have sufficient experience to undertake engineering work to expand the operational capacity of the Palúa dock or to dredge the Orinoco. It therefore informed Ferrominera that both projects were to be handed over to third parties, awarding the dredging project to China Railway Engineering Corporation Group (CRECG) and China Communications Construction Company (CCCC), which, as Diálogo Chino has shown, has more than 50 projects in Latin America. The expansion of the operational capacity of the Palúa wharf was awarded to China Railway 10th Engineering Group Co., a subsidiary of CREC.
Wisco would thus be left with only one of the three projects mooted in the original agreement, for the purchase of machinery and spare parts for the mines.
On 5 September 2011, Ferrominera signed a contract with China Communications Construction Company (CCCC) for the maintenance, dredging and deepening of the Orinoco River channel, between miles 0 and 42 of its outer channel and miles 42 and 196 of its inner channel. On the same day, the Venezuelan state-owned company gave the go-ahead to China Railway N° 10 Engineering Group Co, Ltd to begin a number of works at the the Palúa wharf. These included the construction, installation and commissioning of receiving hoppers for fine and coarse iron ore, conveyors, a transfer house, a stacker with a capacity of 3,500 tn/h, a reclaimer, a mud loader, a stacking yard, and the construction of 2.5km of closed-circuit railway track for the entry, unloading and exit of trains.
Both works were due to start in October 2011 and slated to be completed fourteen months later, in December 2012.
But while the infrastructure improvement projects did not materialise, Ferrominera faced increasing delivery commitments and difficulties in meeting them. In 2011 it had to deliver a quota of six million tonnes, or 35% of total production that year. For 2012, that quota rose to 6.5 million tonnes, some 43% of production which, as it turned out, would barely reach 15 million tonnes, according to the Ministry of Basic Industries report from that year.
In the end, the Palúa wharf was the only project to be completed, some five years behind schedule and after Hugo Chávez had died. Marcial Arenas, the then vice-minister of Industrial Planning and Strategic Investments, and Isaías Suárez Chourio, president of the state mining company inaugurated the work on 31 January 2017 on an episode of the during the TV show “Contacto con Maduro”, along with CREC representatives.
6.5million
tonnes of Venezuela’s iron ore, a figure nearing half its total production, was committed to Chinese buyers in 2012 under the 2009 agreement
The year 2013 marked the definitive collapse of the iron ore industry, with millions in debts to be collected. Nationalised in 1975, a year before the oil industry, the exploitation of the iron ore deposits in Bolívar state was the first pillar of a state plan of successive democratic governments to turn the southern bank of the Orinoco River into a global hub for steel and heavy industry. Ferrominera, built up from operations previously held by US companies, was fundamental to this vision.
In 2013, the president of Ferrominera, Radwan Sabbagh, admitted in a public interview that the company faced difficulties even in its paying electricity, gas, social security and contractual commitments assumed through the National Bank of Housing and Habitat (Banavih). At the same time, an important part of production was mortgaged by the contract with China, which left no the company with no direct profits. The international price of iron ore that year averaged US$135 per tonne, whereas Venezuela had accepted a deal in which it was delivering a tonne at $23. Caracas had squandered a decade of soaring commodity prices driven, ironically, by China’s appetite.
Worst of all, the suffocating commitment had further to run. By 2013, the promise of ore deliveries amounted to 6.5 million tonnes. That year, Ferrominera’s total production was 10 million tonnes. In other words, 620 grammes of of every kilogram of iron produced in 2013 was had been “paid for” long before by its Chinese customer.
The 2013 official document titled “Memory and Account”, drafted by the Ministry of Basic Industries, gives as an explanation for the sharp decline in national production of iron and steel. This was due to “the accumulated effects of the old capitalist management scheme that prevailed, as well as the historical disinvestment of the old management model of these factories, in equipment and scheduled maintenance to ensure the availability of the equipment necessary for the sustainability of production and sales”, it read.
But that statement was not credible. Something else must have been going on. To find out, Caracas dispatched an intelligence agent to Ciudad Guayana, at the juncture of the towns of San Félix and Puerto Ordaz, where the Caroní River meets the Orinoco and where CVG’s headquarters are located, he heart of Venezuela’s heavy industry. It was the beginning of a corruption scandal that ended up engulfing the agent himself: -Juan Carlos Álvarez Dionisi, also known as “The Shark” and a colonel in the Bolivarian National Guard.
