The Milenio Foundation has just issued an interesting and however stressing report on El Mutun, I thought about translating just the questions they raise at the end, however, I concluded that some of you would like the whole report, so here it goes:
El Mutun continues to remain an open question, No.151 – June 15, 2012
In November of 2006, the Millennium Foundation published a study with the title “The project of the Mutún, an unfinished dream?” at number 5 in its economic colloquia series; shortly before, the Bolivian Government and the company of the India, Jindal Steel reached an agreement which provided for the extraction of ore, production of iron (DRI) and steel of the Mutún for 40 years. The conclusion of that study was that project Mutún was an unfinished dream.
The first thing that caught the attention of that agreement was that Bolivia gave a great wealth without having an updated study of its potential. The final feasibility study was made in the 1980s by a Brazilian consulting company name COBRAPI under the custody and supervision of the former State-owned company SIDERSA. This study concluded that this exploitation, despite the richness of the deposits, was not profitable nor desirable for the following reasons: (a) the consumption of iron in Bolivia was small; (b) china sold (and sells) on the domestic market at a price impossible to compete; (c) the production with gas, charcoal (alternative recommended by the consultant) production was very costly and, finally, (d) the quality of the material, rich in phosphorus, added production costs in relation to holdings of other deposits.
In recent years, the price of iron rose rapidly, was $98 dollars per ton when they signed the contract with Jindal, to $148 per ton in April 2012. Domestic consumption of iron and steel products was 16 thousand tons when COBRAPI made his study, the year 2012 reached 300 thousand tons. It corresponds now to find out if this level of prices and domestic demand, if it is profitable to invest in water, gas and transportation (until now insurmountable obstacles) to make profitable this exploitation. The cost of the first investments Bolivia should assume in these fields exceeds $1 billion dollars.
The lack of a feasibility study was one of the great errors of Bolivia at the signing of this agreement. At the same time, surprised that President Morales delegate Mrs Celinda Soza, Minister of Production and Microenterprise and her technical team to negotiate with the Jindal to reach an agreement and that the Ministry of Industry, led by a mining cooperativist, Mr. Walter Villarroel, had one minor role in this task. The Minister of Public Works, Salvador Ric also had some participation in the drafting of this agreement, but some of his statements suggest that it was not entirely in agreement. Much more surprised, that Jindal entered this business knowing that Bolivia would not have gas to provide them, at least in the short term, that there were serious difficulties in the supply of water and that it would be long before that there was any way to transport the ore towards one of the two oceans.
Subsequently, the Millennium Foundation in its national report of juncture (INC) No 99 takes up the theme of the Mutún returning to call attention to this agreement and their questions not answered yet. Since then, the picture has darkened more still in the midst of orders, promises and inconsistent statements.
Jindal responding to the complaint of Bolivia at the lack of implementation of its commitment to investment, on the one hand, requests Bolivia that meets the offer to deliver six million cubic metres of gas per day. Bolivia responds that half of this amount could be provided when Jindal finished with the installation the steel plant, but it is clear that the plant not could be installed, with only half of the supply of gas and an uncertain term, because the country has no such amount available and does not know when it could have that.
Simultaneously, the Jindal speech continues to draw attention. INC No 99 from Millennium was mentioned in some little credible statements of their representatives in relation to prices and destinations of exports of the minerals it was making, which anyway are similar to those that carried out the old SIDERSA; even mentions, it is exporting the material this company extracted at the time. Also as time passes, the amounts declared by Jindal of effective investment rise, placing in June 2012 $650 million dollars. As this figure seems unlikely, the Bolivia Government ordered a probable late audit, and did not inform what it would be like. This last concern is relevant because the audits ordered by the Government (see for example, the case of the oil companies) have not yielded major elements.
The Chairman of the Jindal Mr Naveen Jindal, declared that Bolivia make a big mistake by failing to give his company greater facilities as if it had made, the Bolivian economy could grow between 10 and 18 percent in a period of ten years (La Razón, 06/05/12) and Bolivia, with the help of a major investment exceeding the committed to Jindal (rather than $2,100; it would have invested $3 billion), could have become [Bolivia] one of the “largest exporters of iron and steel in the world”. These statements are not consistent with macroeconomic figures of the world market for these products, they collide with the common sense and shows some contempt on the level of knowledge and understanding of the Bolivian people. On the other hand, this man said that no financial institution wants to give funds to Bolivia, which is not true, so their investments are financed with their own resources (Bolivia has no reason to be interested in the origin of the Jindal investment resources). A company would be, and as large as allegedly Jindal is, embroiled in a court trial for failure to pay 42 months of rent for its offices in the building Tacuarai of Santa Cruz. Its representative in Bolivia was a resident of Indian origin who had a small business near the Abasto market in that city. [from a tiny business to manage the largest and most important investment in Santa Cruz department; now I understand why we couldn’t “communicate” between each other, some six years ago, when he started office. I was using CSR and Sustainable Development best practices and theory but couldn’t get through him, was very disappointing; only today I understand why there was such a gap in our communication…]
Sooner or later the disagreements reflected in trials and regional protests. Bolivia is not in a very comfortable situation to claim Jindal the fulfillment of the contract or to impose sanctions in addition to displaying low efficiency in the defense of national interests. To this purpose Luis de la Reza says: “A test of the sovereign contempt for the legal crossroads where the country is positioned manifests itself in the”silence” maintained by ESM (meaning Bolivia) against the arbitration process started several months ago by Jindal to the International Court of Arbitration in Paris, demanding the return of two ballots of warranty for a total value of $18 million dollars that were cashed by ESM for breach of Jindal to the amount of investment committed within the stipulated time. ESM has been cited with this demand and should have appointed its arbitrator that establish the corresponding Arbitral Tribunal. Inexplicably ESM (Bolivia) has left overcome the legal deadline for this designation, being obliged the Court to appoint an arbitrator on its own initiative, so the arbitrage action does not stall and continue until its conclusion” (Los Tiempos 03/14/12).
Belatedly, the President of COMIBOL, Hector Cordova and the Mining Minister Mario Virreira have made known their discontent on the work done by the Jindal but without making mention of the failure to comply with Bolivia and the material impossibility of performance of the contract with that company. Former Minister of Mining, Jose Pimentel held a similar position. The President of the steel company of the Mutún (ESM), Sergio Alandia, said (La Prensa 05/18/12) that the “effective” results generated by the Mutún iron and steel project since the signing of the contract (6 years ago) only reached $40,000 dollars. “The effective fruit (of the project) is the export of about 20,000 tons of concentrated ores”. The statements by the President of YPFB, Carlos Villegas with regard to the demand for gas in the Jindal seem to suggest that he thinks it is excessive and unprecedented. Jindal, in turn, threatens to withdraw from Bolivia and lay off 200 workers hired. Faced with these threats, Minister Virreira responded that it would be very nice for Jindal to leave. In contrast to the obvious difficulties of exploiting the Mutún, Vice President García Linera in statements to the press ensured the provision of gas to the Mutún (Pagina Siete, 04/11/12).
The 15 provinces of Santa Cruz require the continuation of the exploitation of iron by the Indian company, and Santa Cruz Civic Committee threaten to block roads if the company withdrew from the project. The Civic Committee of Puerto Suarez has been and is particularly active and aggressive in the struggle to maintain the project of the exploitation of the Mutún knowing that material conditions are not given to make this possible.
The President of the ESM was fired in May 2012, by pressures from the Civic Committee of Puerto Suarez. His successor, Ricardo Cardona wrote many optimistic articles about the steel industry around the Mutún. The facts will give him reason or will cause his malaise.
This context naturally leads to a difficult and complicated exercise of political economy with more questions than answers. Among the questions are: 1) why Bolivia and the Jindal signed the contract for the operation of the Mutún knowing that there was no gas, water or transport facilities?, was ignorance of the ones and the others or is there some explanation unknown for the moment?, 2) why a feasibility study was not done?, 3) is there damage to Bolivia?, in what amount?, who are responsible for?, 4) what is the motivation of the Civic Committee of Puerto Suarez to insist on continuing with the Jindal?, 5) is it possible to dismiss the Jindal and do a feasibility project to relaunch the project?, 6) who in the Government is in favor of the Jindal and who thinks that it should go?
This is the full article: Coy_151_-_El_Mutún_sigue_siendo_una_incógnita_-_pdf in Spanish
first person: “the Mining Minister said that Bolivia doesn’t lose anything with the contract recision with “Jindal” in the “Mutun”… how do you see it..?”
second person: “..how could that be! …. and the six lost years while trying.. aren’t they nothing..?”