Las Brisas gold project becomes yet another casualty of Chavez ‘socialist vision'

It costs billions to fuel Hugo Chavez's socialist global vision, some of which comes from Venezuelan government expropriation of natural resources including gold mining projects funded by western foreign investors.

Author: Dorothy Kosich
Posted: Wednesday , 28 Oct 2009

RENO, NV -

When the now defunct major gold company Placer Dome packed its bags sold its Kilometer 88 mining district holdings and left Venezuela forever in 2001, international mining companies and their investors should have taken notice of the perils of foreign investment in Venezuela.

As Spokane-based Gold Reserve announced Tuesday that its Brisas property had been officially seized by the Venezuelan Government, the junior miner joined the legion of foreign companies-representing everything from farms to parking lots to food staples to utilities to steel to oil to mining properties-whose facilities dot the Venezuelan landscape and help financially support President Hugo Chavez's "socialist vision."

Over the years Gold Reserve President Doug Belanger had made a painstaking effort to consistently communicate with and work in harmony with the Chavez Administration and the various government bureaucracies involved in the regulation of the gold-rich Kilometer 88 Mining District in southern Venezuela. Neighbor Crystallex also engaged in a similar painstaking effort concerning its Las Cristinas gold project, as did Hecla Mining for its La Camorra operations in the region.

However, the reality Chavez faces is that it takes money to fund the programs and dole out the individual favors or gifts that keep Venezuelan voters loyal enough to keep him in power. It also takes billions of dollars, which can't be entirely supplied by the domestic oil industry, to help subsidize foreign governments who shares Chavez's socialist world vision.

Venezuela's former representative to Transparency International identified three major areas of corruption that have emerged in the Chavez Administration: grand corruption derived from major policy decisions; bureaucratic corruption; and systemic corruption taking place between government and the private sector.

In the name of socialism, the Chavez Administration has expropriated billions of dollars in foreign-owned and even domestically owned assets, which help fuel his domestic and international political agenda. The Latin American Herald Tribune estimated that Venezuela's unsettled compensation claims from various forms of Chavez Administration expropriations now total at least US$15 billion.

Despite the seizure of its neighbor's mineral reserves and facilities, Crystallex insisted Tuesday the company is "in possession and control of the Las Cristinas project" and has been since it was awarded the concession by the Chavez Government in 2002.

Hugo Chavez was elected president of Venezuela in December 1998, promising to fight poverty and social exclusion and to eliminate corruption. However, it is feared that the years of Chavez's of presidency may have unleashed the highest levels of government corruption ever in a nation with a history of political and financial corruption.

In June 2008 U.S. silver miner Hecla Mining was fortunate enough to get compensation to the tune of $25 million in cash and stock for its La Camorra gold unit from new owner Rusoro Mining as Hecla said goodbye to Venezuela. Rusoro's Russian ties are viewed more favorably by the Chavez Administration, which is working to strengthen partnerships with Russia.

Crystallex Vice President Richard Marshall told Mineweb Tuesday in an e-mail that the company "is seeking a prudent resolution/solution to the Las Cristinas dispute. On November 28, 2008, Crystallex delivered a letter to the Government of Venezuela notifying it of the existence of a dispute between Crystallex and the Bolivarian Republic of Venezuela under the Agreement between the Government of Canada and the Government of Venezuela for the Promotion and Protection of Investments.

If the negotiations and discussions between the parties prove unsuccessful, Marshall said, "Crystallex believes in would have a significant claim for compensation and damages through the ICSID (The International Centre for Settlement of Investment Disputes)."

In spite of efforts by western mining companies, such as Gold Reserve, to seek international arbitration or take legal action, Venezuela's nationalization track record is not good in terms of compensating foreign companies for their losses. Although the Chavez Government has successfully navigated the takeovers of the national phone company and the utilities sector, the government has yet to compensate other industrial sectors such as steel, cement and aluminum.

A popular theory in western political circles is that a chunk of Venezuela's record oil income may be going directly into Chavez's pockets. Chavez is a master of keeping the Venezuelan voters loyal in a nation where poverty and social exclusion remain. He also engages in expenditures and promises made to foreign leaders and their countries in order to secure their political loyalty.

Over the past decade Mexico, Peru, Argentina, Chile and Paraguay have expelled Chavez's ambassadors for interfering in their internal politics.