Mérida, 21st November 2013 (Venezuelanalysis.com) – The Venezuelan government and Samsung Electronics have announced a joint venture, with the South Korean electronics giant investing US$50 million in an assembly plant in the Andean state.
“We are signing onto what constitutes as a strategic alliance agreement between Samsung and the Venezuelan state,” Industry Minister Ricardo Menendez told state broadcaster VTV on Wednesday.
According to the government, the factory will manufacture electronic devices and home appliances, though the location and launch date of the plant are yet to be confirmed.
According to Menendez, a handful of sites are still under consideration, though he stated that a location will be decided by 15 December, and the factory will start producing smaller electronic devices such as cellphones and tablet computers early next year. In the long term, the factory will eventually manufacture televisions, monitors, washers, dryers and refrigerators, according to the minister.
Menendez said. the factory will have a “production capacity for both the domestic market and for export”.
The government will have a controlling interest in the venture, with a 51% stake. Along with initially providing the US$50 million, Samsung will also hold the other 49% stake.
“It's an honour to work with Venezuela,” Samsung's regional head Hyun Chil Hong stated.
During yesterday's signing ceremony, Vice President of the Economic Area and petroleum minister Rafael Ramirez also announced that 400,000 Samsung products worth around US$100 million will be imported in “the coming days”.
According to Ramirez, the products will include both home appliances and electronics, and will be sourced from Samsung factories in Brazil, Mexico and Argentina. Ramirez stated that the deal is part of a government push to close the “substantial” gap between the official value of the Bolivar and its black market rate; the latter of which has lost more than half its value this year.
“ All countries have their problems,” Hong told the press.
“I think we can overcome this type of situation with good collaboration,” he stated.
The deal comes on the heels of another import deal with Mexican appliance manufacturer Mabe earlier this month. According to the government, Mabe goods imported under the agreement will be sold at “fair prices”.
“Samsung produces everything, it's a giant. We have agreements with them in oil...for more than US2 billion...it's a very large company,” Ramirez stated.
Historically, Venezuela hasn't been a significant manufacturer of electronic goods, and almost all personal electronic devices available at retailers in the country are imported. However, one of the government's key objectives under former president Hugo Chavez was to increase domestic production of consumer goods, ranging from agricultural products to electronics. Under Chavez, the country began to assemble Canaima educational laptops, which are handed out for free to Venezuelan school children.
Venezuela's New Partner Accused of “Severe” Labour Abuses
Since 2009, Samsung Electronics has been the world's largest information technology company in terms of revenue.
However, in recent years the company has been accused of mistreating workers in its Chinese factories. In 2012, the US based China Labor Watch alleged child labour and workers clocking as much as 100 hours of overtime a month were found during an investigation into eight factories producing Samsung products in China; six of which were operated by Samsung's Chinese subsidiary, Suwon. According to the report, workers were found being forced to stand for 11-12 hours a day, and were subject to “verbal and physical abuse”. It also found cases of unpaid work. China Labor Watch described the alleged abuses as “severe”.
Following the report, Samsung denied child labour existed in its factories, though it conceded that other labour violations could have occurred, and pledged to improve conditions.
Last month, the company's activities in China again hit headlines; this time for allegations aired by state broadcaster Chinese Central Television (CCTV) that memory chips in its Galaxy S and Note series handsets were prone to malfunctions.
The company responded by stating it's committed to manufacturing high quality electronics.