While doing some re-search on the 2010 Budget and its impact on the bauxite industry, I stumbled on to some documents that concretise my conclusion that the bauxite workers of Guyana are in for a “long hard haul”. RUSAL was severely damaged by the world global crisis since it borrowed heavily to fund expansion with a model that was based on increasing demands for alumina driven mainly by China. The recession came, the demand evaporated and RUSAL had no choice but to cut its cost and pay down its debt. The end result – the more expensive bauxite operations were suspended from active operations. Guyana and Jamaica are the geographically furthest satellite operations from RUSAL main plants. Thus there was no strong commercial case to keep these operations open. The commercial decision was made to close the Jamaican plants (which produced 23% of RUSAL global output in 2009) and some other facilities in far away Siberia. Why not Guyana?
Guyana contributes just over 2% of the bauxite needs of RUSAL and thus with our country being geographically thousands of miles from the main smelters, it made no commercial sense to keep these operations open. It is costly to ship the bauxite from the Caribbean to Ukraine or Russia. So why keep Guyana open?
Guyana has a Unique Selling Point (USP). Our higher quality bauxite is a natural sweetener to improve the production performance of RUSAL’s Nikolaev Alumina Refinery in Ukraine. So although Guyana is one of the more expensive operations in RUSAL’s operations, we were the “the icing on the cake”. Plus, we have to give credit to President Jagdeo, since I was told by a reliable source that he lobbied the Russian President and Prime Minister to keep the Guyana operations open. What is not clear is what he offered in return? Is this the reason why the Ministry of Labour is very lethargic and complacent in its dealings with the current Union’s complaint?
At the end of February 2010, ninety percent of the world supply of alumina and aluminium are held off market by speculators in storage bonds. These unutilised supplies are being drip fed back into the consuming market as their forward contracts expire. Thus global alumina and aluminium productions are not expected to recover in 2010 since there is an oversupply in the market. Even if China picks-up, they have enough home grown production capacity and supplies to not buy any new products from RUSAL.
It is with this background; one would expect the 2010 national budget would have been planned. However, the 2010 budget chose to do what the Jagdeo regime has now become PhD’s at, ignoring the fundamental development challenges in Guyana. This Government has failed miserably to mitigate the risk faced by the bauxite workers and it is duty bound to do so. RUSAL will not pay one cent more than what they have committed to date and the Government of Guyana is powerless to do anything about that situation and this make it imperative that greater social support should have been more forthcoming from the Jagdeo regime to the bauxite belt (Kwakwani etc).
RUSAL (Guyana) has clear financial targets to meet and if it means breaking the laws of Guyana, they are prepared to do so and leave Guyana.
From what one can observe with respect to current employee/employer relationship in the Berbice River bauxite operations, one can clearly detect that the Jagdeo regime will pay no notice to these transgressions.
Promises were made to keep the operations open and that is what matters. Keeping the operations open is the politically sensible decision but greater support to the workers should have been more forthcoming from the 2010 Budget. This is the kind of stuff that a caring Government does in the real world.
On Page 18 of the 2010 budget speech in reference to bauxite, the Minister of Finance stated that “financial losses were exacerbated by unhelpful industrial relations developments”. This is a clear indication that the Government has made its mind up on the bauxite industry and has already chosen a side. There is no concrete commitment of the Jagdeo regime to bring all the parties together and secure a compromise position even if it means some temporary support in kind from the Government such as subsidised supplies of locally grown and manufactured products such as rice, cooking oil, margarine, biscuits and fruit juices, flour etc to ease the pressure on the disposable income of the workers. RUSAL will give no more, the workers disposable income continues to fall and a Government stands idly by with no action plan to help its people.
I have put forward evidence to support my conclusion that the 2010 bauxite market will not recover. This Jagdeo regime has made a countering assumption that the market will improve in 2010 with no evidence provided and this is what is being used to make policy on the bauxite industry. Where are the technical analysts in the Ministry of Finance who are suppose to be competently advising the Minister? On Page 18 of the 2010 budget report, the Minister of Finance stated that “the bauxite industry is expected to recover with a 9.1 percent growth to 1,620,000 tonnes, as the operations of both bauxite companies are expected to be scaled up in response to some expected renewal in demand on the world market for aluminium.” There is no justification in this statement. This is nothing else than burying of one’s head in the sand and hoping for a recovery in the global alumina industry without any proper analysis of the industry.
Well the market evidence clearly demonstrates that the industry is not expected to grow anywhere near 9.1% in 2010 and thus the Jagdeo regime should have done much better for the workers of the bauxite industry.
Guyana’s has a strong history with bauxite. We have come a far way from the best days of the 1970’s when it was normal to experience production of over 3 million tonnes. The 2009 production was 1.484 million tonnes and this is projected to be 1.6 million tonnes in 2010 but whether this is achievable is another story to tell? The bauxite industry earned Guyana US$79 million in 2009 and this is not expected to improve in 2010. However the 2010 budget fails to flesh out the real issues in the industry and has literally abandoned the workers to their own fate.
We continue to hear foolish talk of a deep water harbour but again no concrete strategy towards its realisation. No industry will benefit more in Guyana from these facilities than bauxite. Guyana is at a competitive disadvantage as a result of not having a standard deep water harbour. Yet we are prepared to waste billions on an ill conceived fibre optic cable from Brazil when those same billions could have been vital equity for the deep water harbour.
To give you a flavour of how the 2010 budget was planned with bauxite in mind, Kwakwani was not even mentioned in it with respect to bauxite. Need I say more?
Yours faithfully,
Sasenarine Singh
