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What Hugo Chavez, the Venezuelan President, intends to do with his decree on Tuesday nationalizing all the gold mines in the country is by no means clear; in particular, it is not known whether any compensation, let alone how much, will be offered. There has been a Canada-Venezuela Investment Protection Treaty since 1996, which might help.
Before this week’s decree, two Canadian companies, Crystallex International Inc. and Gold Reserve Inc., were already suing the Venezuelan government because they had been deprived of their gold interests, in unwieldy international arbitration proceedings under the treaty. As it happens, Gold Reserve Inc. revised its claim upwards in August, to $2.1-billion.
Rusoro Mining Ltd., a Vancouver-based firm that is now the only non-Venezuelan company to be actually mining gold in the country, is remaining calm. It has some reason to hope that the nationalization is aimed at wildcatters and smugglers in the southeastern state of Bolivar, not at enterprises of any size. But the company may be prudently refraining from provoking Mr. Chavez by expressing concern.
Venezuela has enormous gold deposits, but they are in remote regions (hence the wildcatters, some of whom trade gold into neighbouring Guyana). Possibly, the nationalization will lead to the building of infrastructure that would make Venezuelan gold more accessible. Probably not: Mr. Chavez’s expropriations of various other industries have been followed by less, not more, production.
Mr. Chavez’s habit is to make grand, demagogic gestures. This one may or may not have consequences, especially as its relationship to a previous Venezuelan gold nationalization, back in 1965, is a mystery. Canada should in any case stand poised to defend Canadian investments in Venezuela – as in the world as a whole.