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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anynonmous's picture

RML tanks on the news

from 15 cents to 14

The Deleuzian's picture

Gold Standard (the Stock) amex??  Lost rights to the big big resource in Chavez-land circa 5 years ago. Las Christinas mine??  Would not touch Venezuela with your DICK, Collapse already happened--just the details pending.............

IQ 145's picture

The beatings will continue until morale improves.

Instant Wealth's picture

Best thing for Venezuela would be him to denationalize himself.

IQ 145's picture

Suicide would be excellent. then they could have a statue to him. Statues hardly ever cause any serious problems.

Strider52's picture

Through early morning fog I see
visions of the things to be
the pains that are withheld for me
I realize and I can see...

That suicide is painless
It brings on many changes
and I can take or leave it if I please.

I try to find a way to make
all our little joys relate
without that ever-present hate
but now I know that it's too late, and... 

The game of life is hard to play
I'm gonna lose it anyway
The losing card I'll someday lay
so this is all I have to say.

The only way to win is cheat
And lay it down before I'm beat
and to another give my seat
for that's the only painless feat. 

The sword of time will pierce our skins
It doesn't hurt when it begins
But as it works its way on in
The pain grows stronger...watch it grin, but... 

A brave man once requested me
to answer questions that are key
'is it to be or not to be'
and I replied 'oh why ask me?'

'Cause suicide is painless
it brings on many changes
and I can take or leave it if I please.
...and you can do the same thing if you choose.

Black Forest's picture

Our only advice is that he should wait before he sells

True.

 

Jasper M's picture

This is actually a pretty bad sign for gold, as governments tend to decide to acquire gold at the worst possible times. They are the ultimate herd, and once they are in, there are few others that can follow to sustain the trend.  

And note that this capitualtion barely moved gold. It looks exhuasted.

Throw in all the highly leveraged hedge funds holding gold (More than most central banks), the fact that their gold holdings will be one of the few liquid contracts the can sell vs. the losses they will take in equities, and I believe you have a recipe for a substantial decline. 

 

Threeggg's picture

Problem is the words "holding Gold" as they are all holding paper !

At some point there will be a Physical scramble (history will repeat itself)

kito's picture

venezuela is not acquiring gold. you cant "acquire" something that already belongs to you. 

RockyRacoon's picture

You'd be right IF their gold is physically out there to be repatriated.  That remains to be seen...

oldmanagain's picture

I doubt he sells the gold but just issues more paper, which makes the paper better than most.

Smiddywesson's picture

Right, all the central banks and governments in the world are buying gold, the very people who control everything and know what is coming, is a bearish sign for gold.

Gold, which just shook off two margin increases and is now back knocking on the $1800 level looks exhausted?  LOL

Then short it.  I dare you.

Equities are going exactly nowhere, but they are doing it real fast.  That is because the Fed is supporting the stock market and buying gold.  Go ahead and short it.  All the people in the know will probably stop buying, all at the same time.  Sure.

Cognitive Dissonance's picture

I expect more and more countries will nationalize their PM mines......even if "nationalization" only takes the form of demanding that all PM production remain within the country. China for example.

End Game baby.

DaveyJones's picture

Obama's gonna ease us in. He'll start with earrings, then nationalize cuff links. Then all of a sudden, whoosh.  

Cognitive Dissonance's picture

Then all of a sudden, whoosh.

Handcuffs.

National security end game baby.

gwar5's picture

Exactly CD.

That's why I don't invest in miners.  They're wide open to confiscation by other means. They have the risk of being nationalized outright for "Strategic reasons," or environmental reasons (without compensation), or being taken over in a soft nationalization through windfall profits taxes, without warning.

In, Australia, the last PM got tossed out a month after he said he wanted to impose a tax of 40% on the miners. The miners said they didn't need a partner who didn't share their risk, so they got him sacked. The new PM has backed off.

 

 

ItsEvolutionBaby's picture

Yeah backed off right down to only 30%, ontop of state royalties, money paid to the natives and all the other usual taxes.

Now the same Australian government are imposing a 'carbon tax'. llolol 

PaperBugsBurn's picture

Ecuador is next. What's worse is tgat their economy was dollarized. Oh hell, no way to plan a long term mine.

Gold, bitchez?

kito's picture

@paper --tis not true. ecuador will not nationalize their mines. they havent nationalized any major industry since correa took over. he is not a socialist like chavez. correa understands how markets works. stop listening to mainstream media. 

DosZap's picture

kito,

You are far too kind, Chavez is not a Socialist, he is a friggin Fascist.

Cross him, and see.

kito's picture

tis true doszap, tis true

pazmaker's picture

nah Correa just likes throwing journalist in Jail...for writing an op ed piece critical of him...he's not a socialist!  

 

Maybe you should stop listening to lefty news!

 

kito's picture

@paz--since you know so much about the slander case involving el universo and president correa, and since you are obviously well versed in the laws involving slander and the relentless onslaught against correa by large ecuadorian corporate interests who refuse to allow a free market sytem to prevail in ecuador, and instead suck the system dry of any progress, maybe you can shed some light? 

 

 

 

 

 

 

 

 

 

pazmaker's picture

I've lived there(ecuador),  I have family that lives there still as well as part of our family living in Caracas, Venezuela so if you truly are open minded and want to  know the truth form someone who has experienced it first hand let me know.

 

Otherwise I won't waste my time casting pearls to swine.

 

by the way, groups like amnesty international (that may be considered liberal by some)has even criticized Correa for puttng the journalist in jail.

 

If you posted a pic or link I can't see it due to firwall

granolageek's picture

Dear Tyler,

ROFL. Gonzalo Lira, disappeara. Attacked any good Falklands lately?

pan's picture

Gold bitchez!

JohnFrodo's picture

Ok Bitches for those of you who missed it Canada renamed its armed forces yesterday. Now they are proud again at being called Royal. So our gun canoes will be kicking some Venny butt any day now.

Catullus's picture

Now if he could only get the utilities industry to actually support a mining operation... Haha

Chappaquiddick's picture

GOOD-BYE SHARES ::: HELLO PHYSICAL!!!!

Gringo Viejo's picture

And if I thought I was havin' a bad day........

at least I wasn't invested in Crystallex Mining.

JohnFrodo's picture

If he sells Citgo you know the shits going to hit the fan.

Dangertime's picture

So now are they going to raise their "official reserves" and put it into the "Deep Storage Gold" account?

anynonmous's picture

On Bloomberg just now via Pimm Fox - possibility

Fed to buy treasuries using excess bank reserves

Everybodys All American's picture

Have they not already been doing this?

High Plains Drifter's picture

attention blackwater security, now known as Xe services.  please proceed to venezuela according to plans discussed. it is a green light. this tape will self destruct in 10 seconds. if you are caught or captured this nation will disavow any knowledge of your actions. good luck

BlackSea's picture

"The good news: gold may finally dip modestly" ????

I would think that physical gold price would increase on supply shortages, whereas miners would be sold based on risk of nationalization.

Threeggg's picture

This comes out today and then I hear Ghadaffi is sick ?

on the same day ?

a connection ?

Cathartes Aura's picture

Sabotage by an insider at a major utility facility, including a chemical or oil refinery, could provide al Qaeda with its best opportunity for the kind of massive Sept. 11 anniversary attack Osama bin Laden was planning, according to U.S. officials.

http://abcnews.go.com/Blotter/terror-alert-warns-insider-threat-infrastr...

9.11.11.

carbonmutant's picture

Hugo can now treat his mines as banks, and he gets to brag about his awesome gold reserves.

baby_BLYTHE's picture

All faith is being lost in paper currencies

The Deleuzian's picture

The less physical Au coming to market will only make the suppy/demand curve favor higher prices! No need to venture into extremities for result

We all in ZH-ville know this .... Why think anything different.. Contrarian explainations!! Pfffffffffffff

JB's picture

will Chavez find out that Frisco D'Anconia has spiked the mines???

sbenard's picture

It never ceases to amaze me how a people can be so foolish as to elect a dictator, just as Venezuela has done and the Germans did when they elected Hitler.

But then, Americans did the same thing when they elected America's Dictator nearly 3 years ago! All hail Emperor Obama!

Flakmeister's picture

Not much of a dictator when noone does what he tells them to do..... try again...

Note, this not a defense of BO, call it more like an adjustment of rifle sights....