The multinational Río Tinto Alcan wants to build an aluminium foundry that will consume 1,100 megawatts of energy, 60% of Paraguay’s total requirement (1,900 MW), and wants to negotiate the price to its own advantage. Only 20% of the investment will be used for contracting local companies. For the construction of its facilities Río Tinto needs a special law that will grant it guarantees to mitigate the risks attendant upon the investment and the connection to hydroelectric power sources. The incentive of employment is certainly not lacking: they are talking about fourteen thousand direct jobs.

Source: ABC newspaper

20/11/2010. Representatives of the electricity-intensive multinational Río Tinto Alcan (RTA), world leader in the smelting of aluminium, presented a new $3,500 million investment proposal to the Government for the construction of a factory in Paraguay; 20% of this money will go towards the contracting of local companies.

The project will permit the creation of some fourteen thousand permanent jobs and as many again indirectly, and will even help bring about the creation of new companies, because it will need to contract transportation, maintenance, storage and professional services, amongst others.

One of the requests made of the Paraguayan Government, explained Juan Pazos, the firm’s representative, is the promulgation of a special law that will guarantee them legal certainty and stability for their long-term investment. This does not imply either the reduction or waiving of taxes, the multinational’s representatives clarified.

The principal necessity for the functioning of the foundry is the trustworthiness of the national electricity system; to ensure this they need access to the interconnected system of hydroelectric plants across the Southern Cone.

In the project presented to the Government, RTA proposes the development of an industrial park with all the benefits that that implies, in line with what other areas have experienced and the study carried out by a consultant. The firm’s representatives had a meeting yesterday with the members of the Economic Team, and this afternoon at 6pm they will meet with local companies in the Sheraton Hotel.

Letter of intent

In the middle of December last year, the firm signed a letter of intent with the National Electricity Administration (ANDE). Representatives of the company and of the national Government have already visited the factory located in Becancour (Canada), and there are plans for other members of the Government to visit the factory constructed in Oman (in the Middle East). The letter of intent established an electricity requirement of 800 megawatts (MW) and an investment of US$ 2,500 million. Almost one year after that announcement, the new proposal contemplates an investment of US$3,500 million and an additional 300 megawatts of electricity – 1,100 megawatts. This quantity is almost the entirety of what our country currently withdraws from the hydroelectric centre at Itaipú (1,350 MW).

The firm possesses 27 aluminium foundries worldwide. The one in our country would be the 28^th, the difference being that it will be outfitted with the latest technology, unique in the world, according to the company’s directors.

One of the greatest benefits, apart from the export of the product, will be the creation of new jobs in the construction and operation phases.

According to the economic study, the annual benefits that the company will generate, in addition to the production of 670 tonnes of aluminium, is exports to the value of US$1,348 million, around US$62 million in taxes, local consumption while operating of US$140 million and during construction another US$750 million.

Operations are scheduled to begin in 2016. Between 2010 and 2011, an investment of US$5 million is foreseen for the study and planning period; from 2011 to 2012, another investment of US$25 million in engineering; between 2012 and 2013 the feasibility study and approval of the company’s board with an investment of US$70 million; and the construction of the foundry from 2014 to 2016.

The firm’s representatives did not discuss energy prices. That point, according to what they said, will be part of the task of the technical negotiation commission that will have to incorporate representatives of the Government and of RTA. The factory will have to be constructed on a site near to a power plant or to a transmission line.

The only one of its kind in the world

The factory that the multinational plans to construct in our country will be the only one in the world that possesses such cutting edge technology, with low CO2 (carbon dioxide) emissions. That is to say, its environmental impact will not reach the level of similar factories in other countries, its representatives explained.

The CO2 pollution will reach around 1.8 tonnes, much lower than what the company’s other factories emit at present (6 tonnes). Globally, in accordance with their explanations, emissions can reach 9 tonnes, and in China even 15 tonnes.

Mining.

Río Tinto also devotes itself to mining. In Brazil it extracts bauxite and alumina. It also mines zinc, silver, coal, uranium, talc, titanium, diamonds, copper, zirconium, gold, etc., in Africa, Asia and Europe.

They need as much power as four of the dams on the river Acaray could provide.

The Canadian company Río Tinto Alcan needs as much power as four Acaray dams and its own transmission line, the Paraguayan interim director general of Itaipú, Gustavo Codas, revealed yesterday.  That was after the meeting held in the López Palace between President Fernando Lugo, the ministers of the executive and representatives of the multinational.

The company Río Tinto Alcan is interested in constructing an aluminium foundry near to the cross-border dams in the South of our country. Codas revealed that Río Tinto does not only want to construct a factory but also an industrial park around its factory for aluminium processing.

He said that initially they had discussed a figure of 800 megawatts of power and now it had risen to 1,100 megawatts, “which is an important quantity but which means industrializing an area of Paraguay that currently remains completely undeveloped. That is the decision that the Government has to take.”

The 1,100 megawatts of power that Río Tinto needs is equivalent to four of the dams on the Aracay river or one and a half turbines from Itaipú or nearly nine turbines from Yacyretá.

Transmission Line

Codas also explained that the multinational company will need its own transmission line. “But the problem is that our society must decide if the benefits of this investment are attractive to Paraguay in terms of technology, employment, professional training, exports and increased GDP – attractive enough to justify dedicating an important quantity of Paraguayan energy to this investment. Those points will be clarified in the studies”, he explained.

In order for the investment to be beneficial for our country, energy must be sold to the company at a cost price of US$43 per megawatt/hour, because if the energy is subsidised as is the case with Petropar, the State will end up losing out again.

They propose to increase the investment

Representatives of the Canadian firm Río Tinto Alcan yesterday increased their proposal for investment in Paraguay and the figure rose from US$2,500 million to US$3,500 million. These numbers were revealed yesterday morning in the López Palace by one of the company’s directors, Juan Pazos. It was after holding a meeting with the President Fernando Lugo, the Vice-President Federico Franco (who travelled to Canada to see the central factory) and the ministers of the Executive.

Pazos also revealed that he had extended the agreement signed last December with ANDE for the provision of electricity. He mentioned that Río Tinto wants to begin construction in 2014 and plans to complete in 2016.

In their plans they intend to produce 670,000 tonnes of aluminium per year, generate 14,000 jobs directly and indirectly and contribute at least an additional US$60 per megawatt beyond the standard energy cost.

He indicated that similar investments by the company last almost 100 years. “That is to say that this is a project that will affect many generations of Paraguayans and will also attract other industries that will provide goods and services, with the goal of enjoying a higher added value”, he added.

Pazos entered the presidential office accompanied by Pascual Rubiani, Roberto Codas and Patrick Tobin.

As far as the workforce is concerned, he promised that 85% of those contracted will be Paraguayans, and that figure will increase to 90%.

The Minister for Industry and Commerce, Francisco Rivas, declared after the meeting that the total investment is of US$3,500 million and in the course of this year US$5 million will be invested in a feasibility study. Another investment of $US 25 million is foreseen for 2011, and US$100 million for 2013, which will be earmarked for the feasibility study the companies want to carry out for their investment. The Paraguayan Government has not yet accepted the investment.

A project that will allow the creation of companies

The development of an industrial park within the sphere of influence of the aluminium foundry will allow the simultaneous founding of new small-scale companies, according to explanations from the representatives of Río Tinto Alcan.

In accordance with the research carried out by the consultant at the request of the project leader and the company’s past experience in creating other foundries, as for example in Canada and Oman (in the Middle East) among other countries, the simultaneous founding of a park will allow the creation of 500 SMEs (Small and Medium Enterprises) because it will require the purchase of materials and the hiring of services, whether medical, professional or social.

This will be in addition to the company’s other requirements for the provision of services: transport, purchase of cables, wires, packing workers, vehicle spare parts, construction materials, casting machinery, steel manufacture, fuel distribution, and others (see graphic). All this will allow the creation of more jobs, as many as 70,000 over a period of 15 years, within a immediate radius of 50km together with a further 15km radius covering neighbouring communities, according to the study.

The area where the aluminium foundry will be constructed, which might be Alto Paraná, Itapúa or Misiones, will constitute a new centre of economic growth.