Hugo Chavez Announces He Will Nationalize Venezuela's Entire Gold Industry By Tyler Durden |
08/17/2011 15:05 -0400
The first (of many) 21st century expropriations of the
only true money begins today, after Hugo Chavez just announced
that he will "nationalize the gold industry, including
extraction and processing, and use its output to boost the
country's international reserves." And who can blame
him: he is merely doing what FDR did so well back in 1933
with executive order 6102. Our only advice is that he should
wait before he sells: with the only option for the central
planners now that we are reentering the downslope of the
depression, being, as always, to print more money (it can
be called anything, but at the end of the day the principle
is clear), there is little probability of gold declining
substantially for the foreseeable future. As for foreign
investors in Venezuela who opened gold mines, we can only
hope they were not all that surprised: "The move follows
a dispute between his government and foreign miners who
say the rules limiting the amount of gold that can be exported
from the South American nation hurt their efforts to secure
financing and create jobs. The gold industry will be just
the latest part of the economy to be put under state control
by the socialist leader, who said he would issue the necessary
decree in the coming days and called on the military to
help control the sector." The good news: gold may finally
dip modestly which will simply provide yet another entry
point for everyone (increasingly more and more) who has
taken Jeremy Grantham's advice and is now fighting the Fed.
From Reuters:
Toronto-listed Rusoro, owned by Russia's
Agapov family, is the only large gold miner operating in
Venezuela. It produced 100,000 ounces last year.
"I have here the laws allowing the state to exploit
gold and all related activities ... we are going to nationalize
the gold and we are going to convert it, among other things,
into international reserves because gold continues to
increase in value," Chavez said in a phone call to
state television.
The announcement came a day after an opposition legislator
revealed a report showing the government's top finance
officials were recommending the repatriation of 90 percent
of Venezuela's gold reserves held abroad.
The government has not commented on the report, which
the opposition legislator said Chavez had yet to approve.
"We've managed to increase the international reserves.
We have close to 12 or 13 billion dollars in gold reserves.
We can't allow it to continue to be taken away,"
the president said, referring to reserves held in banks
overseas.
Some more on why this move is very beneficial in the long-run:
Venezuela has some of Latin America's
largest gold deposits, buried below the jungles south of
the Orinoco river. According to official figures, formal
mining in the country produces 4.3 tons a year.
Chavez agreed last year to let gold miners export up
to 50 percent of production, from 30 percent previously.
The other 50 percent must be sold to the central bank.
But that did not satisfy foreign companies like Rusoro,
which said the limits made it much harder for them to
secure financing abroad, develop projects and create local
jobs.
One victim of the dispute has been a huge but long-troubled
project called Las Cristinas. It has been in limbo since
the government canceled a development license with another
Canadian miner, Crystallex, in February.
Rusoro had expressed interest in Las Cristinas, which
has not been developed since the 1980s but has reserves
estimated at 17 million ounces. Locals once found a 1-kilo
(2.2-lb) nugget there.
Net, net: millions in ounces of potential
gold supply are about to be taken out of future circulation,
courtesy of the uber-modern Venezuelan extraction and mining
infrastructure. Which is why if gold does dip on expectations
of Venezuelan dumping, don't expect said dip to last more
than a few milliseconds.
