Chapter9 THE PERUVIAN ODYSSEY 177 three days later, Maldonaldo announced the nationalization of Marcona’s mining and processing properties and accused the company of causing “serious damage to our country by actions typical of the immoral conduct that the great multinationals traditionally exercise.” This decree created a new state enterprise, Hierro-Peru, that took over Marcona’s operation, froze company bank accounts, and rendered all existing contracts null and void. Perhaps the most serious short-term consequence was the freezing of bank loan guarantees secured by corporate assets, including ships, and the withdrawal of the Samarco line of credit. The bankers asked Utah and Cyprus to guarantee Marcona’s debts in exchange for freeing up Marcona’s assets. When Cyprus management refused, Marcona declared bankruptcy. Utah then stepped in, bought Marcona out of bankruptcy by repaying its loans, kept Samarco alive, and quietly folded the remains into the parent company. The official justification for nationalizing Marcona’s Peruvian assets was a charge that the company was guilty of “grave noncompliance with its contract obligations.” Specifically, the government charged Marcona with failing to maintain adequate iron ore reserves, failing to maintain and replace equipment, failing to pay taxes and royalties, and profiteering on sales and shipping while showing a loss on the mines to dodge Peruvian taxes. It later charged Marcona with manipulating sales commissions, claiming illegal depletion allowance deductions, and engaging in recordkeeping irregularities. Utah’s executives instantly labeled the charges outright falsehoods and mere pretexts. Beyond all of the rhetoric, the nationalization of Marcona probably happened for two simple reasons—to gain access to revenue and to rally popular support. Velasco hoped that state operation of Marcona would ease the nation’s growing foreign and domestic economic problems and help Peru chart a course of recovery. Ironically, quite the opposite occurred. When Marcona withdrew its ships from service, Peru was unable to replace them, and many of Marcona’s Japanese customers refused to sign contracts with Hierro-Peru. Thus, as company officials had predicted, Peru had neither customers for its iron ore nor ships to transport it.