Guyana's bauxite produced great wealth for Alcoa

Stabroek News
June 12, 2001

Dear Editor,

The bauxite industry in Guyana has almost come full circle with Alcoa's proposal to grab Bermine's reserves and its good and selected operating assets, closing Everton in the process and sending home 269 workers immediately and 554 workers overall. The intention of this letter is to bring to the attention of the masses of the Guyanese populace the fact that Alcoa was here before, to give them a brief history of its activities and to give a short commentary on its legacy. The sources of the historical data contained within are (i) 'Corporate Imperialism: Conflict and Expropriation' by Dr. Norman Girvan, and (ii) 'Nationalization of Guyana's Bauxite: The Case Of Alcan' by Dr. Mohammed Shahabuddeen.

Alcoa began life in 1888 as the Pittsburgh Reduction Company which had secured control over the patent rights for the electrolytic production of aluminium.

The name of the company was changed to the Alumi-nium Company of America (Alcoa) in 1907. By 1909, when the patents expired, Alcoa had acquired a virtual monopoly over bauxite deposits in the USA and had come to control several important hydroelectric power sources that were crucial for reliable, low-cost aluminium production. The company was vertically integrated from bauxite mining through aluminium semifabrication and even the fabrication of finished goods such as kitchen utensils. Alcoa continually sought to reinforce its position in the face of domestic and foreign competition by the aggressive acquisition of foreign bauxite deposits and hydropower sources. Alcoa's behaviour was characteristic of emerging transnational monopolies exporting capital during the first expansionist phase of Imperialism (1880-1914).

Alcoa effectively became involved in the aggressive acquisition of bauxite lands in Guyana, then British Guiana, in 1914. Following a 1912 due diligence investigation of the bauxite deposits described by Sir John Harrison between 1897 and 1910, Arthur Vining Davis, President of Alcoa, sent George Bain Mackenzie and later, WC Neilson, President of Republic Mining and Manufacturing Company, a second-generation subsidiary of Alcoa, to acquire as much land as possible, as fast as possible, by any and every means possible. By 1916, Mackenzie and Neilson had acquired about 20,000 acres from private owners either by transport or under leasehold titles. Mackenzie and Neilson bought these lands at prices which ranged from BG$2 to BG$5 per acre, telling the owners that their lands would be used for growing oranges (Shahabuddeen, pages 84-85).

The Colonial Government was slow to learn of Alcoa's activities until Republic Mining and Manufacturing Co. applied for Crown lands whereupon the government suspended the issue of rights to explore and mine bauxite because the exploitation of the resources of this strategic mineral- this great Imperial asset-was reserved for British companies.

Alcoa manoeuvred around this hurdle by incorporating Demerara Bauxite Company on September 18, 1916 as a subsidiary of Northern Alu-minium Company, Alcoa's Canadian subsidiary. Through this stratagem, British interests appeared to be protected in Guyana. In 1925, Northern Aluminium Company became the Aluminium Company of Canada Ltd., which was the original owner of the Alcan trademark, which later came to be used by other Alcan companies (Shahabuddeen, page 66).

In 1928, Aluminium Limited (Alted) was incorporated in Canada for the purpose of taking over the majority of Alcoa's foreign assets. Aluminium Company of Canada Ltd. and Alcoa's subsidiaries in England, Ger-many, Guyana, Italy, Norway and Yugoslavia became subsidiaries of Alted, which functioned in relation to them as a holding company in place of Alcoa. Alted later changed its name to Alcan Aluminium Limited, generally called Alcan.

However, US anti- trust laws did not allow Alted to be a legal subsidiary of Alcoa and so it was necessary to devise a mechanism which achieved the appearance of formal independence while ensuring factual control of a kind that was legally defensible. Alcoa then, in order to break the nexus, immediately distributed its common stock in Alted to its own shareholders on the basis of one share in the new company for each three shares held in Alcoa. As a consequence, 52% of the Alted voting shares went to four shareholders who held correspondingly large equity holdings in Alcoa. A solid block of equity continued in the tight ownership of a small number of people who, because of their common interests in both companies, were thus able to maintain a significant degree of co-ordination in the operations of the companies notwithstanding the oft-pleaded fact that the companies had no common directors or other common officers. Factual control, therefore, continued although the corporate relationship between the two entities was formally severed (Shahabud-deen, pages 69-70).

From the onset, Alcoa was determined to capture as much of Guyana's bauxite as it could and allow no potential competitor to obtain a foot-hold. Before 1920, Alcoa's supremacy in Demerara was threatened twice and in each instance it acted promptly and effectively to remove any threat of competition. The only genuinely non-Alcoa company to enter the local industry was American Cyanamid Company which began operations in 1939 at Kwakwani through the Ber-bice Company Ltd., its local subsidiary. In 1953 the Ber-bice Company Ltd. was sold to Reynolds Metals Company which was nationalized with effect from January 1, 1975, thus placing Guyana's bauxite industry completely under state control since the Deme-rara Bauxite Company was nationalized on July 15, 1971.

Guyana's bauxite produced great wealth for foreigners, little for the state and little for the masses of the Guyanese working people. Between 1917 and 1969, the transnational corporations extracted approximately 50 million tonnes of bauxite valued at about G$1,200 million, then equivalent to US$600 million in 1969.

The government's revenue from royalties and export tax duties amounted to 1.6% of this amount while income taxes added a further 1.8%. In Guyana value added was limited to the production of calcined bauxite and the establishment in 1961 of a small alumina plant, for which Alcan secured pioneer industry tax concessions from the Colonial Government al-though it had been operating here for over 40 years. The one-sidedness of this relationship is revealed by the fact that between 1928 and 1950, when Guyana's bauxite was the only source of raw material for Alcan, this offspring of Alcoa grew during that period from virtually nothing to become the second largest aluminium company in the world, with assets of over US$400 million (Girvan, pages 119-120).

Alcoa began the process of structurally integrating the Guyana bauxite industry into the vertically integrated structures of transnational aluminium companies. This eventually led to the massive exploitation of Guyana's bauxite as the bulk of the value added was not done in Guyana, the periphery, but rather in the USA and Canada, the centre. In this manner, Guyana's bauxite industry stands as a perfect example of the unequal international division of labour so characteristic of the international capitalist system. This lopsided relationship was always to Guyana's disadvantage as its resources were plundered mercilessly while its people remained poor.

Arthur Vining Davis died in 1962 leaving a fortune of US$400 million, his wealth having been generated almost entirely on the basis of bauxite from Guyana, Jamaica and Suriname from which was extracted the aluminium produced by Alcoa and Alcan, the companies responsible for his great wealth. Davis willed most of his money to a foundation on one condition: its funds could not be used for the benefit of citizens of the Caribbean bauxite-producing countries or any country other than the USA and its possessions (Girvan, page 99).

Those appointed as custodians must realise that history will not absolve them if they allow Alcoa to destroy Bermine and generations to come will say of them, to their eternal dishonour, that never in the history of the peoples' patrimony was so much taken away from so many by so few.

Yours faithfully,

ECR Persaud,
Lecturer, University of