Venezuelan President Hugo Chavez Nationalizes Gold Industry, Repatriates Gold Reserves

Article excerpt

As Venezuelan President Hugo Chavez's image in the polls has begun to climb again and he has retaken the political initiative by enacting several important measures--including nationalizing the gold industry and repatriating gold reserves--the divided opposition seems to be betting its future on the Revolucion Bolivariana leader's demise. Chavez has been convalescing from a cancer operation and receiving further treatment since June. The opposition's campaign includes disputing everything that the government does or says (including carrying out a census) and spreading the direst rumors about the president's health. And for that, it counts on efficient allies abroad, in the press and in the political world.

The positive signs seen several weeks ago regarding an eventual normalization of the always-tense relations between Venezuela and the US seemed to go up in smoke recently, after the US Department of the Treasury, without providing any proof, sanctioned several Venezuelans, including a diplomat, for allegedly supporting terrorist organizations. Venezuela's foreign-trade figures make it clear, however, that the differences between the two countries exist only in the strictly political realm. The US continues to be, as it has been for decades, Venezuela's principal trading partner.

The Venezuelan government, which had become paralyzed when Chavez underwent emergency surgery in Cuba in June for a pelvic tumor (NotiSur, June 24, 2011), has been particularly active in recent weeks. On Aug. 17, the president announced the nationalization of the gold industry, a measure finalized on Sept. 16. On Sept. 18, he announced the decision to repatriate the country's gold reserves deposited in banks outside the country, mostly in Great Britain.

The following day, the government made it known that private banks that had received large benefits--specifically a reduction of the reserves requirement from 17% to 14%--in exchange for providing financing for a government housing plan and had not done so could face sanctions. What the sanctions might be is not yet known, but Chavez made it clear that "the screws are tightening," and the bankers know very well that that if they do not fulfill the agreement, the government has the wherewithal to force them to do so or punish them.

Five days after his first announcement, Chavez signed the gold-industry-nationalization decree and said that, in a few weeks, Venezuela would begin repatriating 211 tons of gold reserves, worth some US$11 billion. The majority of the reserves are in British banks. The Bank of England holds Venezuelan gold deposits worth US$4.7 billion; Barclays Bank PLC, $2.1 billion; HSBC, US$1.4 billion; and Standard Chartered, US$1 billion. Venezuela plans to repatriate 57.7% of its total US $18.3 billion in international gold reserves.

Chavez signed the nationalization decree within the framework of a special fast-track authorization (Ley Habilitante) that allows him to govern by decree during a certain period. It establishes that "all gold obtained from mining operations in national territory must be sold and turned over to the state." It adds that the state "will exercise a monopoly on gold production and sales." In another section, the decree foresees a "process moving toward joint ventures for concessions, authorizations for small-scale mining, and contracts for the exploration and exploitation of gold." It also sets a 13% royalty "on quantities of gold extracted from any mine or deposit."

Energy minister defends government actions

Minister of Energy and Petroleum Rafael Ramirez, one of Chavez's closest advisors, analyzed the context in which the nationalization of the gold industry and, particularly, the repatriation of the gold reserves should be evaluated. Ramirez said that every country whose reserves are deposited in fragile or unstable financial systems should opt for protecting their assets. In speaking of reducing exposure to risk in the face of the global crisis, he referred explicitly to the US and Europe. …