Hugo Chavez Announces He Will Nationalize Venezuela's Entire Gold Industry

Tyler Durden's picture

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.

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achmachat's picture

i was going to ask why you think there's going to be a dip... then I read your last sentence.

Sudden Debt's picture

first a liquidation of existing stocks

than, no more gold will be mined and supply get's stuck and gold flies to the moon.

Does Venezuela have silver mines to?

 

TheTmfreak's picture

I think a "Who is John Galt?" is in order.

Frog-And-Toad's picture

It truly is eerie how much that novel is parallel to today's events... 
Can Atlas really be placed in the fiction section? Simply replace the names with modern-day crooks and you've got the same story.  Even islands where people are rebuilding society:

 

http://news.yahoo.com/blogs/lookout/silicon-valley-billionaire-funding-creation-artificial-libertarian-islands-140840896.html

 

 

Troll Magnet's picture

i think a counter move by the US is in order.  first we should nationalize all lumber companies to secure our source of paper.  then we nationalize all printing companies...that'll show'em!

daxtonbrown's picture

I'm not sure if itAtlas Shrugged is eerie or just painfully truthful. A lot of people are going to be "Going Galt". http://www.futurnamics.com/goinggalt.php

Thomas's picture

Now we find out if Rickards is right: Is possession (of the gold) 9/10's the law? Will the repatriation of Venezuela's gold go off without a hitch? I have a hunch Hugo is wrong. The other question is whether Cesar Chavez will nationalize the grapes.

StychoKiller's picture

One thing's fer sure, London is gonna have to cough up SOME Au (or a litany of lame excuses!)

IQ 145's picture

Hugo Chavez; the friend of the poor; helps to create the workingmans paradise. I'm sure he promised them "change they could believe in". What a jerk-wad.

goldm3mb3r's picture

If you cannot hold it, you do not own it. That is why I would never willingly buy gold stocks.

Smiddywesson's picture

Agreed, confiscation of your mining stocks is a lot more likely than confiscation of your physical gold.

sunnydays's picture

They don't want their gold to be confiscated by the U.S and England so Venzuela is getting all their gold back from England and the U.S along with their cash reserves.  11 billion worth of gold. 

 

http://sherriequestioningall.blogspot.com/2011/08/venezuela-may-move-bil...

DeadFred's picture

My working hypothesis is that Hugo is acting as pointman for his friends in Beijing in their developing power play with the West. We'll know fairly soon if there is any truth to it. The comex is vulnerable. When Venezula pulls it's monetary reserves will others follow? With the comex in shambles and liquidity freezing up Beijing will be entirely justified in saying they don't like the game anymore, they're taking their ball and going home. I think the system would come apart at the seams. Do they believe they will come out of the rubble better tan others?

Flakmeister's picture

Venezualan oil is at the core of the issue. It has not been divided up yet. So you are very correct that China is lurking behind this.

 The Au reserves represent 2.6 days of Venezulan oil production....just, some perspective

delacroix's picture

very few refiners, can process the heavy crude, from venezuela. the chinese, have been financing  the construction, retrofit projects, closer to the source.  that capacity, will be subtracted, from the U.S. portion       soon?

Flakmeister's picture

That my friends is the question...

DaveyJones's picture

I missed this exchange yesterday. Good stuff

PY-129-20's picture

Yes, but it is also safe to store it at a company or institution you trust. Like the FED in New York. (Oh German Gold where art thou?) :(

That Peak Oil Guy's picture

Almost as interesting in the article as the nationalization bit was the repatriation bit:

"the government's top finance officials were recommending the repatriation of 90 percent of Venezuela's gold reserves held abroad"

Let's see the scramble for the physical begin soon!

TPOG

fajensen's picture

Well, all it took to get Hugo Chavez elected was a bit of that good ole austerity the IMF likes so much, for other people, not themselves of course. Chavez job is to say "Fuck You" to the "international community".

I smell a "humanitarian intervention" coming on ...

"""

....

http://en.wikipedia.org/wiki/Carlos_Andr%C3%A9s_P%C3%A9rez

In February 1989, at the beginning of his second term as president, he accepted an International Monetary Fund proposal known as the Washington consensus. In return for accepting this proposal, the International Monetary Fund offered Venezuela a loan for 4.5 billion US dollars. This cooperation with the IMF came about weeks after his victory in the 1988 presidential election, and a populist, anti-neoliberal campaign during which he described the IMF as "a neutron bomb that killed people, but left buildings standing" and said that World Bank economists were "genocide workers in the pay of economic totalitarianism".[3] Poor economic conditions led to attempts to revolutionize the political and economic structure of Venezuela, but the implementation of the neoliberal reforms (and in particular the liberalisation of petrol prices, which caused an immediate increase in the cost of petrol to consumers and rises in fares on public transport[4]) resulted in massive popular protests in Caracas, the capital. Carlos Andrés Pérez crushed the protest with the national guard, causing a large number of deaths—estimates range from 500 to 3000, and resulted in the declaration of a state of emergency. The protest is now referred to as the Caracazo.

...

"""

Smiddywesson's picture

Is it clear they are going to sell the gold?  He talked about converting it into reserves.  That doesn't necessarily mean they are going to sell it.  His other words indicate they are stacking gold reserves, so it may be he just phrased it indelicately. 

Why repatriate your gold if you intend to sell it?  You would just sell it in place.

He may also be guilty of deception.  He might be hinting to the public that the gold will be sold for their benefit when in fact it is being horded.

Two Towers AU AG's picture

Silver Mines.. I dont know.. but someone should tell Hugo Chavez to deposit the nationallized gold with the Federal Reserve at fort KNOX. it will be in safe custody there... :) :) :) :)

He can then say with confidence.. "IN GOD WE TRUST"

rosiescenario's picture

....yes, they appropriated Hecla's a few years ago...

DosZap's picture

A DIP?

If anything, I see it going UP.

FEAR is a hell of a motivator..........................

A DIP here, makes no sense to me.....................unless folks get scared and SELL, thinking this same crap  will hit here SOON.

And they may be correct, we know it will happen, IF our DIP stays in Orfice.

Sudden Debt's picture

HAHAHA! NOW NO MORE GOLD WILL BE MINED OVER THERE! :)

How is it possible :)

When will Amerika do the same and put it's people in the mines to mine the gold?

 

legal eagle's picture

Wasnt Gaddafi's government the owner of its gold?

Hugo baby, you betta watch your backside

Daddy US doesnt like such actions

DosZap's picture

SD,

IMHO, this is the MAIN reason the Miners have been lagging Gold, smart investors likely were/are fearful this will be coming to a Theater near them soon.

Also, IF the US Gvt did this, the price would be in the toilet asap.(they would drop it to close to, or at retrieval/mining costs.

Would that slam the markets, and get folks into Treasuries and Bonds post haste?.

Uh, YES.

delacroix's picture

the miners, are being shorted, on a massive scale, that can sure cause a lag

Two Towers AU AG's picture

WE WILL GET TO MINING GOLD FOR THE FED RIGHT AFTER WE ARE DONE CUTTING TREES AND MANUFACTURING PAPER TO PRINT THE FRN FOR THE FED...

ELSE..WHAT WILL WE BUY THE MINED GOLD WITH..

DougM's picture

Just who does this indian think he is?!

Ahmeexnal's picture

Your pathetic racist slurs are just about all you'll be able to do.

Then you'll be beggin for food.

Then you'll sell your ivory daugthers to them "indians" and "sand jockeys".

I'm no fan of Buggo Chavez. He's big mouth and little/no action.  Just like Soetoro.

Buggo repeatedly threatens to close the oil spigot to the US - his main customer. He's never done it.

He's getting poisoned by the Castro bros., who are on the Rockefeller payroll.

His sidekick Eggo Morales threatened to do the same with silver mines in Bolivia. In the end it only took a sixpack of Michelob and a cheap Vegas hooker to shut him up.

Let's see if Buggo follows through with his threats.

 

vocational tainee's picture

The legitimate owner of the gold...

rahbii's picture

God bless 'em.  He's got the Oil AND the Gold....

I'm sure Keynesian financial engineering will save us

John McCloy's picture

  There is no chance Ben can launch QE3 and we know he wants to. 

Between the Fed taking center stage in politics now, the failure of 2QE programs and gold going parabolic along with events such as this his hands are tied which is why Pres O has to now resort to some feeble attempt at creating temporary jobs to hike the unemployment number so have even a whisker of re-election. And that is why nobody will address the structural issues in our nation because all they can do is borrow, print and spend without questioning WHY the jobs are not returning. It is a repeating cycle because the core of capitalism has rotted. 

    This can only end in an attempt to pass Tarp 2 and there is no political will for this to occur. The bankers are about to fight back the only way they know how..financial terrorism, contracting the money supply and trying to bring the will of the people to their knees to ensure their livelihood of extraction continues.

Moe Howard's picture

Where is this capitalism you speak of? I have not seen it in my 56 years on Earth.