EL CALLAO: Venezuela’s most successful financial operations in recent years have not taken place on Wall Street, but in primitive gold-mining camps in the nation’s southern reaches.
With the country’s economy in meltdown, an estimated 300,000 fortune hunters have descended on this mineral-rich jungle area to earn a living pulling gold-flecked earth from makeshift mines.
Their picks and shovels are helping to prop up the leftist government of President Nicolas Maduro. Since 2016, his administration has purchased 17 tonnes of the metal worth around $650 million from so-called artisan miners, according to the most recent data from the nation’s central bank.
Paid with the country’s near-worthless bank notes, these amateurs in turn supply the government with hard currency to purchase badly needed imports of food and hygiene products. This gold trade is a blip on international markets. Still, the United States is using sanctions and intimidation in an effort to stop Maduro from using his nation’s gold to stay afloat.
The Trump administration is pressuring the United Kingdom not to release $1.2 billion in gold reserves Venezuela has stored in the Bank of England. U.S. officials recently castigated an Abu Dhabi-based investment firm for its Venezuela gold purchases, and have warned other potential foreign buyers to back off.
The existence of Maduro’s gold program is well-known. How it functions is not.
To get a glimpse inside, Reuters tracked Venezuela’s gold from steamy jungle mines, through the central bank in the capital of Caracas to gold refineries and food exporters abroad, speaking with more than 30 people with knowledge of the trade. They included miners, intermediaries, merchants, academic researchers, diplomats and government officials. Almost all requested anonymity because they were not authorized to speak publicly, or because they feared retribution from Venezuelan or U.S. authorities.
What emerges is the portrait of a desperate experiment in laissez-faire industrial policy by Venezuela’s socialist leaders. U.S. sanctions have hammered the nation’s oil industry and crippled its ability to borrow. The formal mining sector has been decimated by nationalization. So Maduro has unleashed freelance prospectors to extract the nation’s mineral wealth with virtually no regulation or state investment.
The Bolivarian Revolution now leans heavily on ragtag laborers such as Jose Aular, a teenager who says he has contracted malaria five times at a wildcat mine near Venezuela’s border with Brazil. Aular works 12 hours daily lugging sacks of earth to a small mill that uses toxic mercury to extract flecks of precious metal. Mining accidents are common in these ramshackle operations, workers said. So are shootings and robberies.
“The government knows what happens in these mines and it benefits from it,” said Aular, 18. “Our gold goes into their hands.”
Maduro has also received a crucial assist from Turkish President Recep Erdogan, a fellow strongman who has likewise sparred with the Trump administration.