THE GUYANA-ALCAN CONFLICT AND THE NATIONALIZATION OF DEMBA*

1. THE HISTORY

The Demerara Bauxite Company was incorporated in British Guiana in 1916, to hold and work a significant number of bauxite concessions which had been acquired by the Aluminium Company of America in the British Colony over the previous three years. Bauxite had been discovered along the banks of the Demerara river by the Geological Survey Department of the Colony in 1910. Efforts to interest British and European companies in exploiting the deposits met with no success. and in 1913 the discovery came to the attention of Arthur Vining Davis, President of Alcoa. Davis sent Mackenzie to British Guiana to capture as much bauxite as quickly as possible, under the guise of buying land for a citrus plantation. By 1916 Alcoa through their agents had secured the bulk of the rich British Guiana deposits accessible to river transport, on the Demerara River. (1)

Alcoa ‘s interest lay in securing a reliable and high-grade source of bauxite to feed its aluminium production in the United States. The company had been formed in 1888 to work the Hall patent for the electrolytic reduction of aluminium, and since that time it had become vertically integrated through the building of an alumina plant at East St. Louis and the acquisition, of bauxite mines in Georgia and Arkansas. By the time of the first World War the Company was seeking foreign sources of bauxite mainly in British and in Dutch Guiana, in order to augment its domestic reserves and to pre-empt foreign bauxite from competing aluminium companies. Thus from the outset the bauxite of Guyana and Surinam was made part of a corporate system which confined these countries to raw material production and appropriated processing, manufacturing and fabrication to North America. It also meant that the surplus produced by the industry was owned and utilised by Alcoa and that the bauxite industry was subjected to complete foreign control.

From the outset too there was manifested a conflict between the British Guiana authorities and the company. The possibi1ity of marrying Guyana’s hydroelectric resources and its bauxite for the development of a profitable and beneficial aluminium industry was uppermost in the minds of officers in the civil service, especially Sir John Harrison, the Director of Geological Survey. At that time however, few officials if any made any distinction between the interests of the colony and those of the British Empire, so that the concern was expressed in terms of protecting and preserving the “Imperial asset” for “Imperial” interest. Almost certainly for this reason Alcoa incorporated the Demerara Bauxite Company locally in British Guiana in 1916 and went to great pains to how that its Directors, Officers and parent company were British. Also in deference to lmperial sensibilities it promised to build an alumina plant to process, British Guiana bauxite “on British soil”.

Notwithstanding its legal personality and its promise Demba became a vital part of the Alcoa system, while remaining divorced from the Guyanese economy and Guyanese interests. Its bauxite was fed into Alcoa’s East St. Louis plant and the resulting alumina fed into Alcoa’s smelters powered by Alcoa’s hydro plants, and the aluminium used in Alcoa’s fabricators. And the opportunity to keep the promise in a manner consistent with Alcoa’s interests came when the company incorporated Aluminium Limited in Canada in 1928, transferring to this company its vast hydro-electric facilities and concessions in Canada, as well as most of its foreign properties including Demba. By forming Aluminium Ltd. (2) (parent company of Alcan) as a legally separate and independent company Alcoa’s owners were able to participate in foreign cartel. something which U.S. law prevented Alcoa from doing. And the promise to British Guiana was kept by building an alumina plant on British soil at Arvida on Canada, next to the smelter powered by Alcan’s hydro-stations! (3)

From 1928 through 19S0 Guyana· bauxite was the raw material foundation upon which was based the burgeoning power and position of Alcan as an aluminium company. This role was most especially marked during the period of the second World War, when the allied Governments lent U.S. $173 million to Alcan for the expansion of its facilities in order to supply aluminium to the arms industries. By far the bulk of the bauxite for this, expanded production came from Demba. Guyana’s bauxite therefore contributed markedly to the victory of the Anglo-American power system over that of German-Japanese, more specifically, it was the base upon which Alcan assets grew from U.S. $4S million in 1928 to U.S. $423 million in 1950. and its aluminium production grew from virtually zero to over 400,000 tons. For Guyana. wh3t this meant was that the country’s natural resources were wedded to the industrialisation of the North American economy and to the accumulation of the power and wealth of the Davis and Mellon families In the meantime Guyana remained under-developed, and Guyanese poor and economically impotent.

In the 1950s there unfolded what amounted to a second phase in the Alcan strategy for Guyana . This can be expressed in a single phrase: calcined bauxite. It should be explained that calcined bauxite is used mainly in the steel and other metal industries. for the production of refractory fire-bricks used to line furnaces. It is produced by the super-heating of bauxite which has a very low iron content, and in value is much greater than metal-grade bauxite but much lower than alumina, which is its main competitor as a refractory material. In the 1950s Alcan developed an important calcined bauxite operation at Demba. A relatively small alumina plant was also built in the late 19S0s to use some of the accumulated bauxite waste of the last fifty years, and exports of dried bauxite were maintained in order to feed the Arvida alumina plant. But progressively, AIcan less and less on Guyana as a source of material for its growing aluminium production.

What had happened was that Alcan was shifting to new bauxite countries. In the 1950s and 1960s Jamaica was the chosen one, two alumina plants, being built with a combined capacity of over one million tons per annum. In the 1970s Guinea and Australia will receive the benefits of the company’s blessings. While Guyana’s rich surface deposit were progressively depleted as a result of decades of mining, and costs increased, large surface deposits became available in these other countries.

There was also a shrewd element of political strategy underlying Alcan’s Guyana policy. In the 19S0s Guyana became what is known in the language of international companies as a “poor investment risk”. In 19S3 the nationalist-Marxist Peoples Progressive Party was voted overwhelmingly into office under a new constitution. Within six months the party was thrown out of office, and the constitution over thrown, by the British. Subsequently the movement split into what was essentially two factions, one East Indian (the PPP led by Dr. Cheddi Jagan) and one African (the PNC led by Mr. Forbes Burnham), and serious racial violence occurred in the 1960s. It was therefore in Alcan’ interest to depend as little as possible on Guyana. At the same lime it had an investment and an organisation in place, and bauxite concessions, so that it had an interest in maximising its profits from the Guyana operation. By developing calcined bauxite in Guyana Alcan was concentrating on a product which was profitable but upon which the company’s worldwide processing and fabricating facilities do not depend, as they do on bauxite and alumina production. Thus, the development of the Guyanese bauxite industry was planned so as to minimise Alcan’s investment risk and at the same time to promote its profits. As a direct result Guyana continued to be excluded from the high-valued aluminium production and relegated to a relatively small alumina production, so that the potential contribution of its bauxite resources to the country’s development remained considerably underutilised after over a half-century of bauxite production.

Demba’s production for the period 1917-1969 was valued by the company itself at G$90 million (6), bat alternative valuations using bauxite and alumina prices fairer to the country would put that figure at a higher level. Even at the company’s valuation however, the amount which actually accrued to Guyana was estimated to be a maximum of 39 percent(7). This is so because all of the dividends accrued to the foreign shareholder, and the majority of the current and capital input were imported and therefore paid out to foreign suppliers. What is more, a full evaluation of Demba’s contribution or rather lack of it. to the Guyanese economy, should take into account the value added abroad in transforming Guyanese bauxite and alumina exports into aluminium. Whereas a typical value of Guyana’ dried bauxite in the 1960s was G$18 per long ton, the alumina produced from it could be worth $65 and the aluminium from that over $250. Consider that Demba’s shipments of dried bauxite for 1917-1969 amounted to nearly 50 million tons, and of alumina 2.2 million tons, and we begin to comprehend the export of income from Guyana to North America over the period.