Bolivia's state steel company is feuding with the Chinese engineering firm that built its flagship plant and says it may seek to deduct some of the $100 million in losses from repayments to its lender, the Export-Import Bank of China.
Empresa Siderúrgica del Mutún entered into a $460 million turnkey contract with Sinosteel Equipment & Engineering Co. a decade ago for a complex to make products for construction. Mutún received about $400 million from China Eximbank to finance the plant.
Despite former President Luis Arce officially opening the complex a year ago, no steel has been produced, Mutún Chairman Álvaro Tejerina said in an interview. A recent audit found that acceptance certificates issued last year failed to comply with contractual requirements, with about 300 technical issues still outstanding, Tejerina said.
While Mutún hopes to settle the dispute with Sinosteel with the assistance of the Chinese embassy, the state company intends to enforce terms of the original contract, he said.
"The intention is not for Bolivia to become a bad debtor," Tejerina said Thursday. "But through the Attorney General's Office, we must argue why we should at least deduct all the expenses, costs and penalties incurred by Sinosteel."
The dispute is playing out as the new government of center-right President Rodrigo Paz scrutinizes initiatives undertaken by his socialist predecessors that had included a push for Chinese investment in mining and energy. The reassessment coincides with moves by the US and other Western nations to reduce reliance on China for supply chains tied to strategic minerals.
"These are not political matters," Tejerina said. "They are contractual matters."
Representatives from Mutún, Sinosteel, the Chinese embassy and Bolivia's mining ministry are scheduled to meet in Santa Cruz on Monday to discuss the contract. If an agreement is reached, the plant could begin trial operations early next year.
On Wednesday, Mutún received a 200-page response from Sinosteel -- part of China Baowu Steel Group Corp., the world's largest steelmaker -- asserting it had fulfilled the contract, while indicating it was open to addressing the outstanding issues, Tejerina said.
Calls and an email to the Sinosteel unit seeking comment went unanswered during the Lunar New Year holiday. The Chinese embassy in Bolivia didn't reply to requests for comment.
The steel complex was built atop the Mutún iron ore deposit in eastern Bolivia for a total cost of $540 million. As it works to bring the mill online, the state company is seeking to expand iron production, hiring a consultant to map the deposit with plans to open extraction to private investment, he said.