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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TruthInSunshine's picture

The Bernank has busted out GASOLINE & IS TORCHING THE GLOBAL JOINT, bitchez.

Audioslave Gasoline

 

Fisher says "I am going to whack Bernank" -

Fisher doesn't want to be hanged along with The Bernank (see Jim Grant or Rick Perry's comments about The Bernank referring to this):

08-17 15:02: Fed's Fisher says 'enormous costs' to a QE3 with little benefit

cowdiddly's picture

Now if he will just talk to his homies over in Peru, Bolivia and Mexico it will be ON LIKE DONKEY KONG. The world it waking up to how Wall Streets paper games are screwing them out of their countries natural resources.

Sokhmate's picture

In my version of the game, rock beats paper. Always played it this way and people just never like me.

johngaltfla's picture

Wow, "deflationary" and "Traditonal" all in one shot.

Motorhead's picture

I think that chemo is finally getting to Chavez.

machineh's picture

Bullish!

With a socialist government running the mines, employment will grow to hundreds of thousands (many absent or deceased), as output drops to zero.

Supply vs. demand, bitchez!

Ricky Bobby's picture

My thoughts exactly, He will appoint his ignorant corrupt cronies to manage the mines. 

gwar5's picture

 

I read that at GATA earlier --  sounds like China Russia Brazil are advising and using Chavez as a proxy. Also means that Chavez will very soon be up to mischief. He is getting his gold and $$ out of the USA, ahead of putting intermediate Iranian missiles in Venezuela, to prevent his those monetary assets from getting frozen.

Still, effectively monetizes gold that much more.

 

JW n FL's picture

we will end up with his gold and oil!

and he will get a brand new country.. infrastructure PLUS! Brand New!!

Blow it up! Build it up!

gwar5's picture

 

Take that back a little, I read at GATA today that Chavez wanted his $25 billion in vaulted USA gold and $$ repatriated back to Venezuela. 

Nationalization of gold mines is different story. But honestly, I thought Hugo had already done this years ago along with nationalizing the Marriott Hotel and the golf courses. 

No mas chemo por mi loco amigo. 

JW n FL's picture

I think this is the 3rd time.. he has taken back the industry from the suckers who invested down there with him.

he is high risk and everyone knew that walking in.. if they didnt?

I had an offer to invest.. I passed.. I like down south the people are nice.. but not him.

faustian bargain's picture

Keep at it Hugo. Utopia is just around the corner.

/sarc, just to be sure

speconomist's picture

Why will gold dip? Because of this?

My rationale is that after nationalization mines will have less output because they will not be run properly, gold will not go to the market, etc. therefore boosting price, so... why would gold dip?

SovietCong's picture

I also don't see it as necessarily bearish for gold. If the reason, at least the official one, behind nationalization is that Venezuelan gold miners wanted export more and Chavez prefers to hoard it in his vaults, it would be somewhat bullish (somewhat because Venezuela is not really a market mover in terms of gold production).

Perhaps some could identify as bearish the fear that the gold expropriation Chavez-style would spread and other socialists, such as Obamao, would warm up to the idea. Even if this event in facts works as a reminder of the confiscation risk, I personally view it as bullish for gold and even more bullish for the Swiss vaults.

DosZap's picture

  "even more bullish for the Swiss vaults."

 

Not for Amercans...................................hell they are having no luck keeping Checking Accts there, even ExPats.

Americans/ExPat Americans (Need not Apply).

Not just in SwitZErland,but globally in any nation that the IRS has any say in.

 

Threeggg's picture

Some people didn't read the "whole" article ?

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.

Whalley World's picture

As I read it, Hugo will use production to increase international reserves.  Is gold not considered an international reserve.

He is too smart to turn his gold into paper in my opinion.  Unless it's Yuan or Rouble.  Just my take on this breaking story.

Threeggg's picture

Please remember who wrote these pieces, WSJ and Bloomberg.

Oh Please !

KowPie's picture

I agree on his possibly converting into yuan or rouble, at least a portion. He has the trifecta between a cemented alliance, nationalization of the mines and oil holdings. The only fly in the ointment is his possibly getting fuked on the repatriation of metal. uncle sambo ain't gonna like that one.

oldmanagain's picture

I agree this is bullish.  Most countries wll keep the gold, increase reserves, then use it to lever paper issuance.

 

buzzsaw99's picture

Hey Hugo, There is a lot more money to be made in the illicit drug trade.

PaperBear's picture

Good luck finding competent people to do the work of the executives and management of your gold mines, Mr President.

Pladizow's picture

All the American/Canadian dollar whores will stay on board for even the slightest pay raise - if not replacements will easily be found.

Now that Chavez will own all the gold, along with the oil, what will he care about a fiat pay raise?!?!

KowPie's picture

"Good luck finding competent people to do the work of the executives and management of your gold mines, Mr President."

Who needs competent management when you have an inexhaustible supply of expendable drones to dig with?

Sudden Debt's picture

65% of all silver in the world comes from Zaire.

The Chinese have got their hands on it so their industrial needs are covered like FOREVER!

BUT!!!

Zaire does have a Tyran to :)

A greedy one for that :)

So if Silver goes up even more, Zaire... no the President could claim all the silvermines for himself and become the richest man on earth.

And if the President doesn't do it... the rebels will.

 

DosZap's picture

SD@ 15:37,

Never happen, wanna see WAR # 7 start?.

We are "An Equal Opportunity Bombing Entity."

Sudden Debt's picture

ehe... another Jungle war... where will you guys get the soldiers from? enlist all the 12 year olds to?

 

Ahmeexnal's picture

65% of all silver in the world comes from Zaire

 

Really? I do not remember the complete list of silver producers. But I do remember the top three: MEXICO, PERU, CHINA.

So...if Zaire produces 65%, and in the hypothetical case Zaire is the worlds fourth silver producer (I'd have to look up the data), then...MEXICO, PERU and CHINA must produce at least...66% of "all the silver in the world" each.

Damn, just those four countries produce 263% of all the silver in the world.  I guess that's why silver is so cheap! You can have OVER UNITY production!!!!!  Better than FREE ENERGY!!!

You'd better lay off the mayo on them vlaamse frittes.  Or the Gouden Carolus Tripel.

A Nanny Moose's picture

Somebody has to fly the drones. They are the only ones with the skills. Perhaps if we put them on the job we migh stop bombing weddings

Mysteron's picture

"65% of all silver in the world comes from Zaire."

 

Interesting, but SD, what is your source for that statistic? I have never seen that mentioned before.  E.g. Zaire not even in this  list of the top 20 countries by production http://www.silverinstitute.org/production.php. Thanks

Hamsterfist's picture

83% of the time that is wrong all the time.

FranSix's picture

Venezuela touted as having world's largest oil reserve:

Financial Post

New American Revolution's picture

A few milliseconds might not be possible, this market looks like it is straining at the bit and I'd say it's about to take off,... in my humble opinion of which I've been told I have none.

Threeggg's picture

I agree, based on the fact metals options expire this Friday I think they are trying to hold the line ! Can't have those terrorist "in the money" who knows they might buy guns and IED's with them !

It's a WAR !

Smiddywesson's picture

I agree, the gold market looks like the polar opposite of the stock market.  Gold is straining to rise, and stocks are straining to fall.  The one important difference is the central banks can keep stocks from falling, but they can't stop gold from rising.  Why????

Because they are the demand.  They are buying.

Chavez is not gong to dump his gold.  Maybe two years ago, but the gold game is much too obvious now.  

As I have said before, repatriation of gold reserves is a canary in the coal mine that the new system is nearing.

JW n FL's picture

 
Russia challenges US dominance with Venezuela naval wargames ...

www.timesonline.co.uk/tol/news/world/us_and.../article5225275.eceSimilar

Nov 24, 2008 – A Russian navy task force will sail into Venezuela tomorrow as President Medvedev undertakes a tour of Latin America to challenge the ...


  • Russia, Venezuela to hold naval war games


    www.globalresearch.ca/index.php?context=va&aid=10148 - CachedSimilar

    Sep 11, 2008 – Russia and Venezuela will hold joint naval war games in what could be a Russian response to a NATO naval build-up in the Black Sea. ...


  • Russian navy conducts war games in Caribbean - Telegraph


    www.telegraph.co.uk/.../venezuela/.../Russian-navy-conducts-war-games-in...Similar - Add to iGoogle

    Nov 25, 2008 – Russian warships have arrived in the Caribbean for war games with Venezuela in their first military exercise in the region since the end of ...


  • Russian Navy Coming to Caribbean for War Games With Venezuela ...


    www.thetrumpet.com/?q=5499.3815.0.0 - Cached 

    Sep 10, 2008 – Russian warships are set to join Venezuela for war game exercises at the end of the year. (Reuters/Stringer). Russian Navy Coming to ...

  • Miss Expectations's picture

    Then there's this from 2009:

    "The United States is massively building up its potential for nuclear and non-nuclear strikes in Latin America and the Caribbean by acquiring unprecedented freedom of action in seven new military, naval and air bases in Colombia."

    http://www.independent.co.uk/news/world/americas/us-builds-up-its-bases-...

    JW n FL's picture

    Columbia from the 1980's until now is night and day.. our Money built that Country up.. what is nice as much as the new is there the old towns are still there right next to the new build stuff. Great Country, for Americans.

    JW n FL's picture

    http://www.youtube.com/watch?v=eYQQJtDftK8

    "Old Town Cartagena" Jeffsadventures's photos around Cartagena, Colombia (cartagena old town)

    verses this... http://www.youtube.com/watch?v=58CzTOBLLNE&feature=related

     

    JW n FL's picture

    think San Juan PR but the building are finished in a timely fashion.. LOL!

    Bananamerican's picture

    "Great country, for americans"

    The country has received military aid worth $4.6bn (£2.8bn) from the US since 2000, despite its poor human rights record. Colombian forces regularly kill the country's indigenous people and other civilians, and last year raided the territory of its southern neighbour, Ecuador, causing at least 17 deaths.

    ...The Colombian forces, for many years notorious for atrocities inflicted on civilians, have cheekily suggested that with US help they could get into the lucrative business of "instructing" other armies about human rights. Civil strife in Colombia meant some 380,000 Colombians were forced from their homes last year, bringing the number of displaced since 1985 to 4.6 million, one in ten of the population. This little-known statistic indicates a much worse situation than the much-publicised one in Islamist-ruled Sudan where 2.7 million have fled from their homes.


    Amnesty International said: "The Colombian government must urgently bring human rights violators to justice, to break the links between the armed forces and illegal paramilitary groups, and dismantle paramilitary organisations in line with repeated UN recommendations."

    Palanquero, which adjoins the town of Puerto Salgar on the broad Magdalena river north-west of the capital, Bogota, is one of the seven bases that the government of President Alvaro Uribe gave to Washington last month despite howls from many Colombians. Its hangars can take 100 aircraft and there is accommodation for 2,000 personnel.

    greased up deaf guy's picture

    so which publicly traded miners will be affected by this? or did they all know better to invest in properties there? thanks in advance...

    nah's picture

    communist bitchez