Venezuela’s once-promising gold industry is in utter shambles

Not surprisingly, socialist Venezuela has defaulted on yet another debt. In 2016, it entered into an agreement with Gold Reserve, Inc. to repay 1.03B owed over a canceled mining project, as ordered by the World Bank. Payments were to be made in monthly installments, but Venezuela has ceased making any payments following the fourth quarter of 2017.

Several companies have actively explored for gold in the country. But Venezuela forced out the foreign investors, and its gold mining operations have been taken over by illegal miners, usually under the supervision of Venezuela’s army. The ensuing chaos and corruption have left Venezuela’s once-promising gold industry in utter shambles.

Placed in charge of mining activities, the army has delivered approximately $100 million in gold to the Central Bank of Venezuela in Caracas. The country desperately needed those revenues after its once-plentiful oil reserves plummeted following nationalization of the industry by then President Hugo Chavez. Once the government seized the gold mines, production fell drastically, from 11 tons annually from 2005 to 2009 to a mere 500 kilos a year since 2015.

As Venezuela’s industries crumble, so has its ability to repay its massive debts. Gold Reserve, Inc. is just one company that has not seen repayment. Another, Crystallex, awarded a settlement of $1.4 billion, is also struggling to enforce payment of its debts.

Socialism has destroyed two of Venezuela’s major industries, and it has left Venezuelans hungry and in despair. President Maduro’s government is hanging on by a thread and is depending on a corrupt military to retain a semblance of peace. The military has not hesitated to use guns and force to achieve its objective.

As Venezuela’s bolivar has become nearly worthless after losing 99.9 percent of its value, and with inflation at 2000 percent, its citizens have been unable to afford food or medical care. To alleviate the crisis, Venezuela has requested that pharmaceutical companies accept gold or diamonds in payment for medicine. The desperate government is resorting to an improvised medieval barter system. It is not known whether any company has taken the administration up on its offer, but Venezuela’s history of defaulting on payments would argue against it. It’s unknown exactly how much Venezuela holds in precious gems, but much of the mining for gems has been taken over by groups of illegal miners – as has gold mining. If the government were to nationalize the diamond mines, it might well meet the same fate as the once-abundant oil and gold industries.


According to Tito López, head of Venezuela’s Pharmaceutical Industry Chamber, pharmaceutical companies have not received payments for over a year. Ninety-five percent of needed medication, such as antibiotics and hypertension medicine, are difficult to find. In a jarring understatement, Mr. Lopez says, “What we’re missing is a serious system that actually guarantees payments.”

One pharmaceutical company expressed an interest in accepting gold in exchange for medicine, but the government was unable to guarantee payment. Former president Hugo Chavez urged Venezuelans to shun money in an effort to defeat capitalism. Sadly, Chavez’s plans have come to a bleak fruition. Venezuelans are “shunning” money because the currency is worthless and there are too few commodities on which to spend it.

Venezuela’s private citizens are already resorting to bartering for necessities, offering goods on sites such as Facebook in exchange for other hard-to-come-by commodities. Bread for medicine has become a means of survival. Such are the realities of socialism. The country has been plagued by starvation and food riots, which President Maduro’s army has attempted to suppress through brutal methods.

Forty years ago, Venezuela, then a democracy, was one of South America’s most prosperous countries with a thriving economy, much of which was supported by an abundance of oil. That ended with the nationalization of the oil industry in 1976 and marked the descent of Venezuela into the miseries of socialism. It was slow but steady progress. The two political parties, the Acción Democrática (AD) and the Christian Democratic Comité de Organización Política Electoral Independiente (COPEI) advocated a mixed economy but remained committed to a reasonable semblance of democracy.

During the 1978 election, the AD party advocated greater government involvement, while COPEI represented less government intrusion and more self-reliance in the private sector. It was the perfect opportunity for COPEI candidate Louis Herrra Campins to champion his party’s philosophy. But oil wealth proved too strong and irresistible. The country began to make grander and more unrealistic promises, such as providing 600,000 houses in five years. The abundance created by democracy made these promises possible, but the subsequent embrace of socialist methods made these promises impossible to keep. Corruption became endemic as the oil industry was destroyed by global competition, and all the government’s promises turned into pipe dreams. Venezuela used the fruits of democracy to achieve its own downfall.

When Hugo Chavez overturned and rewrote Venezuela’s constitution, it was the end of any semblance of democracy. Current President Maduro has proclaimed himself president for life, and he has strengthened the army to ensure his plan succeeds. Left with a mountain of debt, no means of repayment, Maduro is relying on the army to keep the citizens in check, by whatever means possible. Opposition is no longer tolerated.

Socialism has succeeded in Venezuela beyond Marx’s wildest dreams. And it has turned the country into a living nightmare for its citizens. Venezuela is a country in crisis with no salvation in sight.