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When Brazilian President Fernando Cardoso visited Venezuela recently, his Venezuelan counterpart, Hugo Chavez, took him on a tour of Sidor, the country's largest steelmaker, as evidence of a successful privatization that has turned around a dilapidated state-run company. Since then, Chavez has repeatedly touted Sidor's 40 percent first-quarter sales increase as a signal that Venezuela's year-and-a-half-long recession is coming to an end. "He even mentioned on television that I was Argentine!" laughs Daniel A. Novegil, Sidor's president and CEO, clearly flattered by the presidential attention.
Compliments aside, he does have reason to feel pleased, and for reasons far more substantial than Chavez's kudos. Under Novegil, Sidor has returned from the dead.
With a worldwide slump in steel demand and Venezuela's worst recession in a decade, the late '90s were rocky years for Siderurgica del Orinoco (Sidor). Multimillion-dollar losses in both 1998 and 1999, leading to a default on debt payments, caused some serious rethinking.
Novegil has his work cut out for him. In the midst of the dismal business environment, he had to reshape Sidor from the ground up since its privatization in 1997. Amazonia Consortium -- a group of major Latin American steel producers led by Techint (Argentina's Siderar and Mexico's Tamsa), Mexico's Hylsamex, Brazil's Usiminas, and Venezuela's No. 2 steelmaker Sivensa -- bought a 70 percent stake in the company for US$1.1 billion. The remaining 30 percent was, and is, still owned by the state-controlled Venezuelan Corporation of Guayana (CVG). CVG founded the steel company on the banks of the Orinoco River in southeastern Venezuela's industrial city of Puerto Ordaz in 1958, taking advantage of huge iron ore deposits nearby.
The deal, the last privatization of a state-owned steel …