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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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Wed, 08/17/2011 - 15:46 | Link to Comment Greater Fool
Greater Fool's picture

Silly man. He trashes his country's currency with one of the most inflationary fiscal policies on the planet so of course he needs gold (alongside, don't forget, a steady flow of petrodollars) in order to do deals beyond his borders. Nobody else will accept the hideous specie he foists on his citizens.

A true model of what the world will look like if the "gold standard" takes hold again. It may become the numeraire of international trade, but under no circumstances will governments enshrine it in a way that prevents them from printing at will. That's the real lesson of the PIIGS.

Wed, 08/17/2011 - 15:46 | Link to Comment supernova
supernova's picture

Chavez is a f*&king windbag. Gold is not worth anything if its in the ground and just like oil, I'm sure these nationalizations are going to be great for production.

Wed, 08/17/2011 - 15:54 | Link to Comment BlackSea
BlackSea's picture

Won't stop him from trying. Supply disruption -> increase in physical gold price though.

Wed, 08/17/2011 - 16:24 | Link to Comment hunglow
hunglow's picture

Now where did I bury that.

Wed, 08/17/2011 - 15:47 | Link to Comment GregGH
GregGH's picture

Lets see how bureaucrats handle being a miner?  Somehow I think the underestimate the complexity.

Wonder what the breakup price might be for RML .... will sit on my shares for now

Somehopw I think there will be some 'discussion' between Russia & Hugo ... will make a great book ...any writters out there?

Wed, 08/17/2011 - 15:53 | Link to Comment Dr. Engali
Dr. Engali's picture

Exactly why mining stocks are lagging.

Wed, 08/17/2011 - 15:54 | Link to Comment Segestan
Segestan's picture

But Bernanke says Gold is Not money!  WTF!!!

Wed, 08/17/2011 - 15:59 | Link to Comment Threeggg
Threeggg's picture

WOW what a Goose on the Dow today !

I have a question: Is the VIX being manipulated /sarc

CME is in control of the VIX Right >? that's two questions. No need I already know the answers.

Wed, 08/17/2011 - 16:00 | Link to Comment junkacc
junkacc's picture

Oh shit this

Maybe Chavez can create the first modern goldbacked currency with this move.

If the above happens, watch Gold become the money of terrorists and outlaw states/axis of evil in the MSM.

Look out for modern day conquistadors.

Wed, 08/17/2011 - 16:04 | Link to Comment JW n FL
JW n FL's picture

http://www.wealthadviser.co/2010/05/31/48553/morgan-stanley-private-wealth-management-expands-coverage-latin-america

Crystallex International Corp. (TSX: T.KRY) is another company that has spent years trying, without success, to get a gold mine into production. Crystallex’s Las Cristinas project is in Venezuela.

As indicated by the fact that AngloGold has already spent $250 million in Colombia since 2003, the South American country has become a hot area for mineral exploration.

However, while the government has regained control of many parts of the countryside that were once controlled by Marxist guerillas, environmental concerns remain a significant headache for some companies.

Vancouver-based Greystar has been in Colombia for over 10 years, in that time spending $140 million to develop its Angostura gold-silver project in a mountainous area in northeastern Columbia. According to company estimates, Angostura could generate up to 500,000 ounces of gold and 2.3 million ounces of silver annually, starting in 2012.

But that’s only if it ever goes into production.

 

 

Wed, 08/17/2011 - 16:56 | Link to Comment Flakmeister
Flakmeister's picture

Don't remind me about KRY....

Wed, 08/17/2011 - 17:56 | Link to Comment JW n FL
JW n FL's picture

sorry Bro! take the loss write it off and buy gold with the money you didnt give the IRS!

Wed, 08/17/2011 - 18:13 | Link to Comment Flakmeister
Flakmeister's picture

It was 4-5 years ago, only a painful memory that was more than soothed by FRG...

Wed, 08/17/2011 - 16:19 | Link to Comment falak pema
falak pema's picture

The Ultimate Caesar, of course : for the people, by the people, of the people of Bolivarian Amerindia. Chavesian dictat, like that of Bonaparte. "I am son of Enlightenment, progress, new european Order AND... Emperor of France. And Voltaire turned in his grave..."Did we do all this to come to this...? A Tarquin and a Brutus, all rolled up in one...! Oh, Englightenment...How betrayal comes easy to those who are uber-alles...player and referee...France hes never looked back since then...De Gaulle and the fifth republic have written it in concrete...Republican Monarchy!!! 

So Chavez is like a latter day 'Sarkozy squared', with a touch of Castro...just a touch, that gets heavier every day that passes...Robespierre will never die. But justly so, as on the other side of the divide, in US of A...we are going to Oligarchy with leaden feet. 

Has democracy then truly  become a sick joke? On both sides of the ideological divide?

Wed, 08/17/2011 - 16:40 | Link to Comment pazmaker
pazmaker's picture

Falek,

 

The answer is Yes!

Wed, 08/17/2011 - 16:06 | Link to Comment NoTTD
NoTTD's picture

Dip?  If anything, taking yet more productive mines off line should result in the opposite.

Wed, 08/17/2011 - 16:20 | Link to Comment PulauHantu29
PulauHantu29's picture

 

"No one saw this coming," they testified to Congress.

Wed, 08/17/2011 - 16:20 | Link to Comment MFL8240
MFL8240's picture

Why does Chavez want Gold when it is not money?

Wed, 08/17/2011 - 16:22 | Link to Comment NetDamage
NetDamage's picture

South Africa up next. Nationalization, bitchez!

Wed, 08/17/2011 - 16:22 | Link to Comment hunglow
hunglow's picture

Maybe he can create water & electricity for his people now.

Wed, 08/17/2011 - 16:24 | Link to Comment Alz
Alz's picture

When referring to Chavez, it's probably better to use "Chavez (D-Venezuela)". 

Wed, 08/17/2011 - 16:29 | Link to Comment Texas Ginslinger
Texas Ginslinger's picture

Boss Hugo might consider buying gold from Goldline International, as we see advertised here on zh.

If its advertised here, it must be good..........

Wed, 08/17/2011 - 16:35 | Link to Comment mayhem_korner
mayhem_korner's picture

Gonna hafta change the big sign behind Fenway's Green Mawnstah to CITGOLD.

:D

Wed, 08/17/2011 - 16:40 | Link to Comment Negro Primero
Negro Primero's picture

I was surprised when I read, that Venezuela even has gold and cash reserves in the U.S.. As much rhetoric Chavez has spewed over the years against the U.S. and their policies, they have kept cash and gold stored in the U.S.? Venezuela has 11 Billion of Gold stored in the United States and 6 Billion of cash. They are now looking at transferring the cash reserves to other countries to hold. (China, Russia, Brazil) and would get their gold back into Venezuela. I can't imagine the U.S. just letting the gold go, because they most likely have leased or sold it. The gold the U.S. will eventually ship (unless they decide to go to war with Venezuela before hand, just so they can freeze and keep the cash and gold) will most likely be tungsten filled.

I would advise Chavez to have the gold tested when/if they get it back in the country. Why any country would still have their reserves and gold in the United States is beyond me. The U.S. out right stole 700 Billion dollars from Taiwan and I mean out right stole it! 700 Billion was being transferred from the Bank of Taiwan to a trust account in the U.S. The Fed decided they wanted the money and literally took it, just because they could. Lawsuits are still going on over it. Funny enough the Tropos CEO has since been arrested for investment fraud. But it seems all the charges are trumped up and false, it is simply because the Fed and U.S. Treasury do not like the fight for the 700 Billion they stole. Quite a few have written about it, including Harvey Organ - it is towards the bottom his post linked. Another post is here. Needless to say, only alternative media has touched this subject, you won't find it on MSM, but the suits are also online proving it really did happen. Look at Libya, the war started, just so all the billions of Libyan assets in the U.S. and England could be frozen and essentially stolen from the Libyan people. I wonder how much gold they had stored in the U.S. and England? So, now the question comes, what is the U.S. going to think of to freeze Venezuela's assets (11 billion gold and 6 billion cash) in the United States, before they actually have to ship it back to Venezuela? So watch the U.S. rhetoric gaining ground against Venezuela soon, I would assume they will start ramping it up to be able to keep the gold and cash. If the U.S. does actually release the gold, I would think it will take a very long time, while the U.S. thinks of every way to not have to give back Venezuela what is rightfully theirs and the U.S. was trusted to store for them. I wonder if Germany will ever ask for their billions of dollars of gold reserves the U.S. is holding for them? Updated 1:55pm est to add: Wall Street Journal has an article about it, saying they are going to move their gold from London and U.S.. The article can be read through GATA. What is interesting is the Venezuelan official notes part of the reason is due to the pillaging of Libya's assets abroad, as I mentioned above.

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

 

Wed, 08/17/2011 - 16:45 | Link to Comment pazmaker
pazmaker's picture

Negro,

 

It may be venezuela preparing to let Iran use them as a base for operations.   Many Iranians are in Venezuela so rhetoric or not Venezuela is getting ready and choosing sides.

 

http://faustasblog.com/?tag=ghazi-nassereddine-atef-salame

 

Wed, 08/17/2011 - 23:19 | Link to Comment Anonymouse
Anonymouse's picture

Never heard of the Tropos thing before.  Did a few quick searches on it.

Sorry.  That does not pass the smell test.

1) Who is Tropos Capital and how is it they are big enough to be entrusted with $700B?

2) Why is the letter from Tropos to the BIS from Tropos and not from an attorney?  This would be a fairly significant event and would justify paying a few legal fees

3) Why is the email for a financial titan (big enough to be entrusted with $700B at least), Hryniak@attglobal.net (http://www.scribd.com/doc/43680919/TroposRe)?  That's only a step above a ymail address.

4) Why hasn't the Bank of Taiwan entered a lawsuit? Or been the defendant in one?

5) Why haven't the mysterious Bank of Taiwan depositors filed a lawsuit?

6) Why is all the work being left to poor Mr. Hryniak who apparently can't afford a proper corporate email address?

 

Just doesn't quite fit together.  As Joe Pesci said, "I think we got scammed by a kiddygartner"

Wed, 08/17/2011 - 17:46 | Link to Comment bill1102inf
bill1102inf's picture

AND, it should be done AGAIN in America,  along with all oil reserves, other PM's, the railroads, coal, nat gas, anything else in the ground, and any intellectual property that gets stolen (so the fed can defend it).  At the same time nationalize the entire health care sector, but split it up and sell it off BUT with PUBLISHED pricing that is FIXED by the gov.  NO MORE 3000 MRI's, $99.00 (billed to uncle same) (JUST LIKE JAPAN), if Toshiba and the other companies dont like it, toooooo bad, JUST LIKE JAPAN.    There will be NO NEED FOR TAXES for people making under 50K per year and every american would receive a check every month for MASSIVE profits this will generate.  We will have free colleges for Americans, jobs galore for Americans, we will reverse and inverse the debt problem we have, and have medical coverage for EVERY AMERICAN.  From there we can build LFTR's which will power america for 300 years AND provide 100% of our liquid fuels, and we can sell that TECH to everyone else.  Electricity will be 10% of its current cost, will be unlimited, 100% green, 100% safe, 10,000,000 jobs would be created.  $2.00 gasoline and diesel, the NE can use electricity for heat at 10% the cost they do now.

Wed, 08/17/2011 - 19:58 | Link to Comment Smiley
Smiley's picture

Wow, this starting to play out like a bad dream.

Wed, 08/17/2011 - 21:35 | Link to Comment Anonymouse
Anonymouse's picture

"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."

This strategy is similar to what happens in Russia.  They tie the company up with regulation, licensing restrictions, and corruption.  Then when the company underperforms, they nationalize it (or more likely force its sale to one of Putin's oligarch cronies) claiming that management is poor, is wasting national resources, and is not creating needed jobs.

Wed, 08/17/2011 - 23:45 | Link to Comment plata pura
plata pura's picture

As the unraveling increases it's veracity and enters crisis; nations will nationalize almost all resources, hence perpetual waring on steroids. The saeculum can be delayed by frequency from time to time; however make no mistake the fourth turning be coming.

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