The once-thriving heavy industries of Ciudad Guayana are now starved of investment and hampered by labour disputes

This article is more than 6 years old

This article is more than 6 years old

This article is more than 6 years old

Long before Hugo Chávez launched his socialist revolution, government planners came to Ciudad Guayana on Venezuela’s eastern frontier, where the Orinoco and Caroni rivers converge, and envisioned an industrial workers’ paradise.

President Rómulo Betancourt, a key partner in John F Kennedy’s Alliance for Progress, founded the city in 1961, inviting his countrymen to turn the place into a tropical Pittsburgh.

More than a city, “it felt like you were building a country”, said Alfredo Rivas, who arrived as a young engineer and went on to become president of the huge steelworks. A half-century later and 15 years after Chávez came to power, Ciudad Guayana’s factories are crippled, starved for investment and riled by labour disputes.

So faint is Betancourt’s vision that his own monument has rusted and stands amid weeds and knee-high grass in the city’s Founders’ Park, where national guard troops are bivouacked.

The troops fired on protesting steelworkers on 11 August, injuring three. The workers’ standoff with President Nicolás Maduro – Chávez’s successor and a former union leader himself – has turned Ciudad Guayana into a crucial battleground for the socialist government as it faces economic meltdown and political infighting.

The labour tensions have left a government that prides itself on its proletarian bona fides sitting uncomfortably on the management side of the bargaining table – and its representatives sounding increasingly like the beleaguered executives they have spent much of their political careers opposing.

When it was founded, Ciudad Guayana and its state-run heavy industries were Venezuela’s best hope for breaking the country’s overwhelming dependence on crude oil exports. It had the raw materials on hand: iron ore, bauxite and gold; timber and farmland; and huge rivers to supply cheap hydropower for smelters and factories.

Planners from MIT and Harvard came to lay out the streets. Loans from the World Bank helped finance the dams. The city grew to more than a million residents. The steelmaking company at the core of the Ciudad Guayana project, Sidor, produced a record 4.3m tonnes before it was nationalised by Chávez in 2008.

Today, most of its furnaces sit cold, deprived of raw materials, new technology and reliable labour. The last contract for its 14,000 steelworkers expired four years ago.

Maduro’s first task is resolving the contract dispute at Sidor, which is on track to produce just 700,000 tonnes this year, roughly the same as it did in the late 1960s.

Residents of a Ciudad Guayana neighbourhood block traffic with burning tyres to protest about a broken sewer main they say has been leaking into nearby homes for three weeks. Photograph: Nick Miroff/Washington Post

Like the rest of Venezuela, the Sidor workers’ union is split into pro- and anti-government factions. One bloc has signed off on a new contract from Maduro officials, but the other sees that as betrayal and threatens new work stoppages.

“They want to impose this contract on us to defeat our union and clear the way for their neoliberal adjustment plans,” said Mario Valor, a union delegate, who accuses the government of attempting to divide and conquer Venezuela’s workers in preparation for austerity measures.

National Assembly president Diosdado Cabello – Venezuela’s second-most-powerful figure after Maduro – has denounced union adversaries at Sidor as “mafias” in the service of US “imperialism”, offending many of the workers who consider themselves Chávez loyalists and true patriots.

Maduro officials say their proposed Sidor contract is generous, with salary increases that will more than double workers’ compensation over the next two years. It accommodates some extraordinary union demands: car insurance for workers’ personal vehicles and millions of dollars to buy holiday gifts for their children, with special union committees to pick out the video games, dolls and stuffed animals they want.

Despite repeated strikes and work stoppages, the government has continued to pay salaries at the ageing plant, including for more than 2,000 union officials who draw wages but don’t produce an ounce of steel.

Still, with annual inflation in Venezuela topping 60%, steelworkers say their quality of life has plummeted. They blame government corruption and mismanagement by know-nothing military officials whom Maduro has placed atop state companies to ensure loyalty.

Wilmer Salazar, who has worked for 25 years at Sidor, said he used to be able to afford a new car with the equivalent of three months’ wages. “Now everything I earn goes to buy food for my family, and it’s still not enough,” he said.

And car production, in any case, has fallen more than 85% this year because assembly plants can’t get parts.

The Orinoco Mining Company, a subsidiary of US Steel, began extracting iron ore in the area in the 1950s, carving a port and company headquarters out of the jungle. But there was nowhere to process it.

Hydropower changed everything. By the 1980s, the Venezuelan government had built multiple dams on the Caroni river, including the Guri dam, which remains one of the world’s largest hydroelectric projects.

With cheap, abundant electricity, Ciudad Guayana added aluminium smelters, iron foundries and plants supporting other heavy industries. But its reputation for labour conflicts discouraged private companies from investing in more sophisticated types of manufacturing. The broader vision of the city as a value-added industrial juggernaut went largely unfulfilled.

Depressed oil prices in the 1990s forced the sale of Sidor to an Argentinian firm, Ternium. Under private management, production soared but labour relations soured, and steelworkers pressured Chávez to intervene when tensions peaked. He took over the company in 2008.

Iron and steel mill workers celebrate the nationalisation of the Sidor plant in 2008. Photograph: William Urdaneta/Getty

Then it stopped raining.

The worst drought in 100 years left the hydroelectric plants limping in 2009 as the government diverted power from industry to ease residential blackouts. Sidor workers sat idle and agreed to postpone contract negotiations.

Chávez’s death in March 2013 bought the government a bit more time, but negotiations snagged this summer after talks resumed.

At a union rally outside the Sidor plant recently, one group of workers signed petitions denouncing the new contract, while another headed to a company-sponsored barbecue to celebrate the arrival of bonus payments from the government.

“This is about a power struggle within the union,” said Wilmar Barreto, who, like many of the recent hires at Sidor, sides with the Maduro government. “We just want to get the plant running again.”

In private, government officials say Sidor will need to produce 250,000 tonnes of steel a month just to break even. Its current output is closer to 70,000 tonnes. Closing the gap will require hundreds of millions in new investments, and Maduro announced a $50m injection not long after the company barbecue.

Yet Venezuela’s foreign reserves are falling fast, down 32% since 2012, leaving the government more and more reliant on oil-backed loans from China. Some relief could come if Maduro proceeds with the sale of Citgo, the Venezuela-owned US chain of gas stations, refineries and pipelines worth an estimated $10bn to $15bn.

Victor Alvarez, who served under Chávez as minister of basic industry, said there were good reasons to invest in Sidor’s revival beyond the political and social benefits of keeping workers employed. Development plans left by Chávez call for new railroad lines, bridges and housing, all of which could be supplied with local steel.

But it would be a lot cheaper to get it from India or China.

One official close to the Sidor negotiations who was not authorised to speak publicly said it makes little sense for Venezuela to sink more money into inefficient steelmaking.

“We could let Sidor die and import all the steel we need,” he said. “And there would still be enough to pay the workers’ salaries.”

This article appeared in Guardian Weekly, which incorporates material from the Washington Post