Venezuela relies on scrap exports to raise hard currency

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GUANTA/CARACAS, April 1 (Reuters) – On the outskirts of Venezuela’s eastern port city of Guanta, hundreds of trucks line up every day to unload tons of scrap metal as part of the government’s effort to turn waste into a resource of foreign currency.

Scrap collection and sales have boomed due to the financial needs of President Nicolas Maduro’s government, crippled by low oil production due to years of underinvestment in the industry and resulting barriers to the sale of the most lucrative exports. of US sanctions.

“Venezuela is getting lighter because they remove all the scrap,” said Douglas Lugo, a truck driver on the outskirts of Guanta who worked in the oil industry before moving scrap metal. His truck was loaded with scrap iron such as sheet metal, car parts and rusty doors.

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Pressured by Washington sanctions, Maduro’s administration has been exploring a range of revenue options. Although scrap used to be sold abroad in very low quantities, private companies have stepped up their efforts to export it from mid-2020.

In 2021, Maduro labeled scrap as “strategic,” paving the way for exports of any surplus, saying it “needs to be converted into foreign currency… to take advantage of every last resource out there.”

During eight years of economic chaos in Venezuela, state controls have increasingly slowed down industries such as manufacturing and construction, while mismanagement and underinvestment have hurt the OPEC member’s oil sector.

State-owned and private companies saddled with obsolete factories, equipment and machinery have found it increasingly tempting to sell them for scrap. While the state is behind some such activities, workers and others have also stolen equipment to sell for a profit, prosecutors say.

State-owned oil company PDVSA and other state-owned companies have been among the sellers as new projects have stalled and machinery has become obsolete, some 15 sources, including businessmen from various industries, carriers, workers and government officials, told Reuters.

The dismantling of equipment and trade has not been confirmed by authorities. The ministries of communications and production did not respond to requests for comment.

Yet port data shows that Venezuelan scrap is exported to countries such as Turkey, India and Taiwan.

Although state-owned Ezequiel Zamora controls much of the scrap in Venezuela’s ports, according to a document and two sources, it has signed contracts or “partnerships” with private companies to export it, circumventing US sanctions that prohibit Venezuelan state-owned companies from to trade abroad. †

The companies pay Zamora in foreign currency, in cash, and then arrange for the export of the material, two interviewed sources told Reuters. Zamora did not respond to a request for comment.

About 25 companies are officially authorized to transport and sell scrap metal, according to another document seen by Reuters.

According to figures from Import Genius, a consultancy that collects customs data, 45,500 tons of iron, steel and copper scrap worth $55 million were exported from two of the country’s main ports throughout 2021. year.

There are no numbers on the other ports. Bolipuertos, which manages the ports, did not respond to requests for comment.

Scrap sales “raised significantly in the months when the COVID-19 pandemic was most severe, when state revenues were low,” local company Ecoanalítica said in a report in February.

In the international market, depending on the type of material, the scrap that the local private companies buy for between $80 and $120 a ton can be sold for $300 to $700, two sources and two carriers told Reuters.

Tanks and pipes are being dismantled in northern Monagas, an oil zone in the eastern Andean nation, said an oil sector source and two workers who watched these materials being cut in warehouses.

“Today nothing is being repaired, everything is for sale,” said a source on condition of anonymity for fear of reprisals.

Equipment is being dismantled in other oil areas such as Zulia and Anzoátegui, another industrial source said. Neither source has specified who within PDVSA is ordering such moves.

But with the scrap metal business booming, some such sales are outright theft, according to police and prosecutors’ reports.

Truckers who once worked for oil or coal companies told Reuters they are increasingly drawn to hauling scrap as they can easily earn 10 times the monthly minimum wage of $30 in Venezuela.

“Everyone works with scrap. You didn’t see that before (…)”, says Antonio Astudillo, who used to transport food from Brazil to several Venezuelan states and has been transporting scrap since December. to Guanta.

“You can make money to survive.”

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Reporting by Mayela Armas and Maria Ramirez; Additional reporting by Deisy Buitrago in Caracas, Tibisay Romero in Valencia, Mircely Guanipa in Maracay and Anggy Polanco in San Cristóbal. Written by Steven Grattan; Editing by Christian Plumb and David Evans

Our Standards: The Thomson Reuters Trust Principles.

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