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Chavez stated that the purpose of the company is to create employment and manage the nation’s resources, "efficiently and with responsibility." Chavez made the announcement during a screening of his weekly TV program, Aló Presidente. He also stated that the nation’s currency reserves are now $32.5 billion. From this amount, the government plans to spend $1 billion on funding the new steel project.

Venezuela used to own a steel processing company, SIDOR, but which was largely privatized in 1997, a year before Chavez came into office.

This new initiative comes after last week’s declaration that mining concessions will no longer be provided to either foreign or national private mining companies and that Venezuela would also create a new state-owned mining company. Speaking on Aló Presidente, Chavez said, "We decided to revoke mining concessions to reorganize the conduct of these resources."

The creation of the new steel enterprise is part of a series of policies intended to create, "a new model of social and economic development," said Chavez. The government set up a a development fund for this purpose, which is funded by “excess” foreign currency reserves. According to a recent revision of Venezuela’s Central Bank Law, reserves in excess of $24 billion may be transferred to this fund and spent on debt servicing and equipment purchases abroad.

In addition to possessing vast oil wealth Venezuela also has large amounts of iron and bauxite. As a result, mining is a major secondary industry in the country. At present much of this raw material goes abroad to be processed.

According to yesterday’s announcement, the new company will be under the authority of the Ministry of Basic Industries and Mines or MIBAM. Further details have yet to be announced.