This chapter has shown that I&S industry in Ciudad Guayana could be categorized as a state-anchored district according to the hypothesized features proposed by Markusen (1996). The role of the state has been addressed; it was shown that national state have played an important role in promoting and sustaining the district; it was found a weak local government in promoting core industries as hypothesized by Markusen. The role of large firm, notably FMO and SIDOR, in shaping district business structure has been addressed; it was shown their success in attracting private sector investment both upstream and downstream. Local and non-local embeddedness has been analysed; it was found that local commitment is higher than that of non-local. Although, not all features have been tested and the district has shown that some features are contrary to that of state-anchored district, but according to Markusen:
A real-world district may be an amalgam of one or more types, and over time districts may mutate from one type to another (Markusen 1996: 296)
This chapter has also shown that I&S industry in Ciudad Guayana has undergone a trajectory that can be split into three historical periods where a distinct form of ownership was prevalent. The first stage of state ownership was dominated by the presence of FMO and SIDOR both under the egis of CVG (the state agency with mandate to develop Ciudad Guayana) which appears to have succeeded in inducing initial competitive advantages in district. The second stage of private ownership depicted a district which seems to have further developed competitive advantages from previous stage as to show voluntary co-operation (joint action) which according to literature, it is expected for an industrial district to succeed. The third stage of state ownership with workers’ self-management shows a district in redefinition. MIBAM took the lead in coordinating nationalization process of former private–owned firms which seems to have created a climate of uncertainty among firms, especially from briquetting sector.
Chapter 5
Ownership Structure and Other Factors 5.1 Introduction
The aim of this chapter is to answer the last two research questions. It explores how ownership structure influences inter-firm interactions in Ciudad Guayana’s I&S industry as well as other factors. The analysis is based on interviews undertaken with key respondents during fieldwork and substantiated with desk review. First, it draws on how ownership structure influences inter-firm interactions in Ciudad Guayana’s I&S industry. Second, other factors are explored to explain changes in inter-firm interactions.
5.2 Changes in inter-firm interactions due to ownership structure
This section builds on the question of how ownership structure influences inter-firm interactions. It aims to find out whether nature of interactions has changed among sectors that have experience changes in ownership. Those sectors are: mining, briquetting and steel-making. The hypothesis is that ownership structure influences nature of co-operation: state-ownership is expected to bring about coerced co-operation while private ownership is deemed to produce voluntary co-operation, as it is implied in the bulk of industrial district analysis. As a result, it is envisioned to observe different pattern of inter-firm interactions due to changes in ownership structure.
5.2.1 Mining
As seen in previous sections, state-ownership over iron ore mining was consolidated in 1975 when FMO was created and maintained thereafter. Prior to 1975, iron ore mining was dominated by two private-foreign-owned firms: Orinoco Mining Company and Iron Mines Company of Venezuela, subsidiaries of US Steel and Bethlehem Steel, respectively, both North American transnationals. From one respondent’s elaboration it is possible to observe how nature of interaction between FMO and SIDOR changed, when FMO experienced change in ownership leading to more integration between them:
By the late 1960s, between the middle and late 1960s, when the plan started, FMO was owned by two foreign enterprises, iron mining concessions were given to Bethlehem Steel and US Steel, both North American firms. What happened in the interim? Nationalization of iron ore mining came. Why? Because it was necessary, you had a policy…you wanted to create value added, that was the mandate that was given to CVG. The concessions were given to CVG and CVG created FMO for managing the concessions…then SIDOR was created and FMO was used to develop SIDOR, FMO constructed SIDOR’s ports, and so on, the two firms were always seen as totally integrated…the state was fixing everything in such a way the two firms (were integrated) (Interview 15, emphases added)
The respondent continued her elaboration stressing what FMO and SIDOR exchange:
Actually SIDOR’s iron ore courtyard was constructed in FMO…FMO had to make SIDOR a train, FMO did it, had to support to develop SIDOR, FMO did it. Because FMO was the first firm in the locality it owned the land…and it was the only income-generating firm as it exported mineral, so the revenues it generated were used to develop everything, of course, along with state grants since FMO alone could not do it, but it was to develop SIDOR and the rest of mining (Interview 15, emphases added).
The interaction between FMO and SIDOR can be regarded as coerced since they were driven by CVG as a centralized policy leading to FMO mandate to develop SIDOR.
FMO commitment to the district can be depicted through the uses of iron ore production. It seems that commitment to district has changed due to change in ownership. Figure 5.1 shows destiny of production of iron ore in Venezuela from 1968 to 2010. As can be seen, during the decade 1968-1978 when iron ore mining was mainly private-foreign controlled, the production was almost entirely committed to external markets.
Figure 5.1
Destiny of iron ore production in Venezuela 1968-2010
Source: (British Geological Survey., Banco Central de Venezuela. 2011). Own elaboration
During the fieldwork was gathered the opinion that mining commitment was primarily export-oriented since it was developed to satisfy the demand of transnational corporations. One respondent elaborated:
In the case of the Venezuelan southern region, what I can remember when we were told about a growth pole, is that it was meant to supply raw material to transnational corporations, namely it was not meant to develop a region that had an immense amount of natural resources that could have served to develop the country, to industrialize the country. Instead of that, it was to guarantee raw material to transnational corporations and developed countries. (Interview 13)
However, as seen in Figure 5.1 the trend of iron ore production dedicated to exports have decreased substantially from the decade 1968-1978 to the decade 1998-2008 when exports stabilized at round 40% of iron ore destiny of production. Currently, almost two third of iron ore production is used locally by SIDOR and briquetting sector. Since this trend has been driven by the state-owned FMO as from 1975, it can be argued that for mining activity, change in ownership structure from private-foreign ownership to state ownership seems to have influenced fostering of local embedded networks leading to integration of district.
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