Courtesy May 16th Hat Trick Letter..

◄$$$ VENEZUELA CONSIDERS NATIONALIZATION OF GOLD MINING INDUSTRY. CHINA AND RUSSIA HAVE COMMITTED TO SNATCHING ALL NATIONAL GOLD OUTPUT WITHOUT CORPORATE TAKEOVERS. CHAVEZ THREATENS TO SEIZE GOLD MINE PROPERTIES. $$$

President Hugo Chavez has threatened to nationalize gold mining concessions in Venezuela, under the facade of mining companies damage to the environment and violate worker rights. Both might be true, but they are false pretenses to seize. He must believe that Gold is either a savior to his nation or a great target for corrupt theft by his gang of henchmen thugs. Chavez ranted and raved about capitalist greed and laying waste to pristine jungles. His strongman regime has nationalized businesses in the steel, telecommunications, electricity, cement, and oil sectors. The gold industry lies in his path. Clashes have occurred repeatedly with international and national gold mining companies in recent years during the permit process. The country's southeastern regions are rich in gold and diamonds. Chavez has vowed to gain greater state control over the Venezuelan mineral resources in a manner to supplement the nation's faltering income from the dominant oil industry, which has been the object of nearly a decade of mismanagement, corruption, cronyism, and gross inefficiency. Past battles have involved the US-based Gold Reserve Inc (over 10.2 million oz gold deposit), and Canada-based Crystallex (over 17 million oz gold deposit). See the Yahoo Finance article (CLICK HERE) and the Bloomberg article (CLICK HERE).

A second side to Chavez thug behavior was seen, as Venezuelan police raided FOREX offices in Caracas, arresting one man. Analysts have warned this strategy might backfire and create a fourth illegal market for USDollars. The raid could possibly hasten another devaluation by the government. The Bolivar was devalued recently in January. See the Reuters article (CLICK HERE). Curiously, nations can have multiple illegal markets. My understanding is one illegal market is used directly by Venezuelan Govt officials, sort of an official wholesale black market, not too greedy, but plenty of profit. The other illegal market can be pure black market with no ties, run purely by independents. The government players actually operate an unofficial arbitrage, buying & selling for profit, protected by their friends on the police force. By the way, the Credit Default Swap market is currently forecasting a 50% default rate on Venezuelan Govt debt.