Chavez creates a new direction for Venezuela
Venezuelan President Hugo Chavez ordered his government to repatriate $11 billion in gold held in banks abroad to safeguard the country from the economic crisis and said he’ll nationalize the local gold industry.
According to the Venezuelan government, Venezuela has 211 tons of its 365 tons of gold reserves held overseas in financial institutions including Standard Chartered, Barclays, JP Morgan Chase & Co, and Bank of Nova Scotia. President Chavez has insisted on bringing these reserves back home. According to Chavez, he feels its a good decision for Venezuela.
President Chavez has shown his discontent for the US Dollar “dictatorship” or its effective “gold standard.” The Venezuelan central bank will be looking to diversify the nation’s holdings into BRIC nations. It is estimated close to $6.3 billion be shifted to the BRIC region in a short span of time, said the Central Bank of Venezuela President Nelson Merentes at a news conference.
Brutal Place
Chavez wants to put a lid on the illegal mining that goes on in the country. The government is preparing a decree to stop illegal miners exploiting deposits of gold and coltan, an ore containing tantalum, used in mobile phones and video-game consoles, he said.
Venezuela faces international arbitration over nationalized gold assets from three companies including Crystallex International Corp. (KRY), a Canadian gold producer whose Las Cristinas mine was taken over by the government in February. Chavez has increased state control over the economy since 2006 by nationalizing companies in the oil, petrochemicals, cement, metal, mining and telecommunications industries.
“Venezuela has established its position as a brutal place to do business,” Tom Winmill, who manages the Midas Fund in New York, said today in a telephone interview. “Whether it’s a small cap like Crystallex or a large cap like Barrick or Anglo Gold, it doesn’t really make any difference because no one is going to put another nickel into that country,” he said.
The South American country, in an effort to boost stalled production and take advantage of rising prices, last year relaxed restrictions on gold exports to allow some companies and joint ventures with the government to send as much as 50 percent of their output abroad. Venezuela state gold producer Minerven has been shut for 15 days amid a strike, newspaper El Mundo reported today, citing company President Luis Herrera.
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