Cash-strapped Venezuela relies on scrap metal exports to raise hard currency

GUANTA/CARACAS, April 1 (Reuters) – Hundreds of trucks line up outside the eastern Venezuelan port city of Guanta every day to unload tons of scrap metal, as part of the government’s bid to transform waste into a source of foreign currency.

The collection and sale of scrap metal has exploded due to the financial needs of President Nicolas Maduro’s administration, crippled by low oil production resulting from years of underinvestment in the industry and obstacles to the sale of scrap metal. its most lucrative export due to US sanctions.

“Venezuela is going to get lighter, because they’re taking out all the scrap metal,” said Douglas Lugo, a truck driver from the outskirts of Guanta who worked in the oil industry before he started hauling scrap metal. His truck was weighed down with iron scraps like sheet metal, car parts, and bits of rusty doors.

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Under pressure from Washington sanctions, Maduro’s government has explored a range of revenue options. Although scrap metal has been sold abroad in very small quantities before, private companies have stepped up their efforts to export it from mid-2020.

In 2021, Maduro designated scrap metal as “strategic”, paving the way for the export of any surplus, saying it was necessary to “transform it into foreign currency … to take advantage of all the last resources available”.

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 member’s oil sector of OPEC.

Public and private companies struggling with obsolete factories, equipment and machinery have found it increasingly tempting to sell them as scrap. While the state is behind some of this activity, workers and others have also stolen equipment to resell it for a profit, prosecutors say.

State-owned oil company PDVSA and other state-owned companies have been among the sellers as new projects stall and machinery has aged, about 15 sources, including businessmen from various sectors, told Reuters. , carriers, workers and government officials.

The dismantling of the equipment and its trade have not been confirmed by the authorities. The communication and production ministries did not respond to requests for comment.

Yet port records show that Venezuelan scrap metal is exported to countries like Turkey, India and Taiwan.

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

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

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

For all of 2021, 45,500 tonnes of scrap iron, steel and copper worth $55 million were exported from two of the country’s major ports, according to figures from Import Genius, a consulting company that collects customs files, more than double the previous volume. year.

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

Scrap metal sales “increased significantly during 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, scrap metal that local private companies buy for between $80 and $120 a ton can sell for between $300 and $700, two sources and two carriers told Reuters.

In northern Monagas, an oil patch in the east of the Andean nation, tanks and pipes are being dismantled, said an oil industry source and two workers who witnessed how the materials are being dismantled. cut in warehouses.

“Nothing is restored today, 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 industry source said. Neither source specified who within PDVSA was ordering the moves.

But with the boom in the scrap metal trade, some of those sales amount to outright theft, according to police and prosecution reports.

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

“Everyone works with scrap metal. Before, you didn’t see this (…),” said Antonio Astudillo, who transported food from Brazil to various Venezuelan states and has been working in the transport of scrap metal since December. at Guanta.

“You can earn 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

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