The mineral industry of venezuela

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The Mineral Industry of Venezuela

By Alfredo C. Gurmendi

Venezuela’s gross domestic product (GDP) based on purchasing power parity decreased to $349.1 billion in 2009 from $356.7 billion in 2008, or by 2.1%. This decrease and lower crude oil prices affected the Government’s budget and private consumption. In addition, consumer prices decreased by 27.1% in 2009 compared with 30.4% in 2008.Venezuela’s natural resources sector continued to be dominated by the hydrocarbon sector, which was also negatively affected by drought and the effect of the drought on electricity production. In 2009, petroleum and natural gas production represented about 30% of Venezuela’s GDP, more than 94% of its exports, and more than 50% of the central Government’s revenues. The mineral sector’s output(which consisted primarily of, in terms of value, bauxite, alumina and primary aluminum, iron ore and steel, gold, and diamond) represented less than 1% of Venezuela’s GDP. The state-owned petroleum company Petróleos de Venezuela S.A. (PDVSA) continued to control the exploration for and production of asphalt, natural gas, and petroleum and its derivatives. PDVSA is a member of the Organization of thePetroleum Exporting Countries (OPEC) and an active participant in the global crude oil market. Venezuela also accounted for almost 2.4% of the world’s alumina and bauxite output, almost 1.5% of the world’s aluminum output, and more than 0.8% of the world’s nickel output in 2009 (table 1; Banco Central de Venezuela, 2010, p. 120; Bray, 2010a, b; International Monetary Fund, 2010a, p. 61, 168; 2010b;Kuck, 2010; Petróleos de Venezuela S.A., 2010a; U.S. Central Intelligence Agency, 2010).

Minerals in the National Economy

The Venezuelan Government is a dominant player in the country’s economy. PDVSA controls the petroleum sector. Government companies also control the electricity sector and important parts of the telecommunications and media sectors. The Government nationalized the cementand steel sectors in 2008 and nationalized assets in the banking, chemicals, and the crude oil industries (including assets owned by U.S. oil services companies) in 2009. The nationalization process and an uncertain macroeconomic environment characterized by high inflation and foreign exchange controls have led to reduced private investment. In 2009, the country’s leading mineral resourcesincluded, in order of value, petroleum, natural gas, coal, iron ore, gold, diamond, and bauxite. Petroleum exports accounted for 15.5% of Venezuela’s GDP; the manufacturing sector accounted for 16.5%; construction, 6.9%; and mining, 0.6% (Banco Central de Venezuela, 2010, p. 120; Petróleos de Venezuela S.A., 2010a).

Government Policies and Programs

Under the Venezuelan Constitution, all mineraland hydrocarbon resources belong to the state. The mining law (Decree No. 295 of September 5, 1999) establishes the rules for all mines and minerals (except hydrocarbons and some industrial minerals not found on Government lands) within Venezuelan territory. These rules influence the exploration, development, production, marketing, and transportation of minerals. The Ministerio del Poder Popularpara las Industrias Básicas y Minería (MIBAM) is responsible for all matters related to mining operations. Mining is allowed by the Government through concessions or under production authorization issued to artisanal miners, mining cooperatives, and other small-scale mining operations. The General Regulation of the Mining Law (Decree No. 1234 of March 9, 2001) establishes terms, conditions, andadministrative procedures in support of Decree No. 295. Most industrial minerals found on private lands continue to be governed by Articles 7 through 10 of the Mining Law of 1945 until the individual States establish regulations. The Ministerio del Poder Popular para la Energía y Petróleo (MPE) manages the crude oil and natural gas sectors. The hydrocarbon law, which is known as the Decree with...