Venezuela to nationalise gold industry

President Hugo Chávez said on Wednesday that he will nationalise Venezuela’s gold industry in a bid to stamp out illegal mining and boost international reserves.

“We don’t want war with anyone, but we have to defend our country,” said the former tank commander during an address to the army as he was presenting them with newly purchased Russian military equipment.

“I’m counting on you because the area remains in anarchy, run by mafias … We can’t keep allowing them to take it away,” he said, adding that he would sign a decree in the coming days approving the move. “Let’s convert it into our international reserves because gold is increasing in its value.”

The move follows opposition accusations that the Venezuelan government plans to transfer billions of dollars in foreign exchange reserves held in countries such as the US to banks in “friendly” countries such as China, Russia and Brazil in order to avoid its assets being frozen.

Analysts estimate that of Venezuela’s $29bn international reserves, the government will only be able to move about $5bn of its cash reserves.

But with some two-thirds of its reserves held in gold, amounting to 364 tons worth $18bn, the government is allegedly also planning to move the 211 tons of gold that it keeps abroad, worth $11bn, to the vaults of the central bank in Caracas, according to opposition lawmaker Julio Montoya.

“We think that China, Russia and Brazil have asked Venezuela to transfer the reserves to guarantee the loans that the government has received in recent years,” said Mr Montoya. According to local paper El Universal, Venezuela has accumulated some $34bn of debt with those countries over the past 16 months.

Despite sitting on one of the largest undeveloped gold deposits in the world in the south of the country, Venezuela has struggled to develop its gold sector for decades, which has been over-run by illegal miners and smugglers. Although Venezuela officially produces 11 metric tons of gold a year, illegal miners extract an additional 10 to 11 tons a year, according to Mr Chávez.

After nationalising the assets of three foreign companies, the only international company still extracting gold from Venezuela is the Russian mining company Rusoro.

Venezuela now faces several international arbitration suits, with Canada’s Gold Reserve announcing earlier this month that it has raised the amount it is claiming from the seizure of its two gold projects to $2.1bn from $1.9bn.