Venezuela is in economic crisis. The cash-strapped country can’t maintain the equipment that keeps industry running. Production at the state-run steelmaker Sidor is expected to reach barely 20 percent of its capacity in the year ahead. In 2007, when the factory was privately owned, it put out more than four million tons of steel.
Mechanic Juan Carlos Goite has to be creative. He finds spare parts stripped from one broken-down machine to repair another. It’s a desperate attempt to keep a once-thriving iron ore mining company running.
“The machinery that we have, it’s worn out,” says Juan Arias. He is Venezuela’s minister of industry. The socialist government in Caracas sent Arias to the once-thriving factory town of Ciudad Guyana.
Venezuela was once the wealthiest country in South America. It sits atop the world’s largest oil reserves. But low crude oil prices, mismanagement by the socialist government, and a plunge in production have put Venezuela in an economic free fall.
In the 1950s, U.S. companies zeroed in on Venezuela’s vast iron and bauxite resources. Industry boomed. Workers from all over the country poured into Ciudad Guyana for jobs. The city—developed by planners at the Massachusetts Institute of Technology—flourished.
Nearly two decades ago, President Hugo Chavez launched his socialist revolution. In 2008, he began putting factories under the state’s control. Output steadily eroded even before the oil price crash.
Today, a massive dump truck that loads ore onto trains runs on a tire so badly worn that strips of rubber tread are missing. Twisted piles of train cars litter a hillside. They derailed when an engineer was travelling too fast on rails left unmaintained. At Sidor, only two of the four smelting ovens that make steel bars are functioning. Workers who used to operate around the clock put in just one shift a day now.
“Chavismo [the philosophy of Chavez] ran all of these companies into the ground,” says Ricardo Hausmann, a Harvard University economist and former Venezuelan planning minister. “This whole thing has been imploding catastrophically.” Hausmann says Venezuela’s industrial revival will require abandoning the socialist model. He favors replacing it with a market economy, motivated by supply and demand.
(AP Photo: A Sidor steel plant that was never operational stands rusting away in Ciudad Guayana, Venezuela.)