HomeNewsAnalysisVenezuela Relies on Gold as Other Criminal Economies Dry Up

Venezuela Relies on Gold as Other Criminal Economies Dry Up


In the wake of Venezuela’s hyperinflation and economic woes, the country has come to rely on dwindling oil exports, remittances and the smuggling of fuel, drugs and gold to prop up its increasingly dollarized economy.

But global lockdowns, coupled with increasing international pressure on the Maduro government, have left only one of these economic crutches intact: gold.

The global oil market crash caused the Venezuelan oil price to hit a 20-year low in April – $9.90 per barrel, compared to an average of $56.70 in 2019. Production continues to hover around a quarter of its 2008 level, and export options are severely limited by international sanctions. Due to Venezuela’s limited refinement capacity, processed fuel, once a source of smuggling income, is now so expensive in Venezuela it’s being smuggled in rather than out.

SEE ALSO: Is There a Link Between the Dollarization of Venezuela and Organized Crime?

Remittances sent home by Venezuelan migrants, which reached $3.5 billion in 2019, have also been hit hard by the global economic shutdown. Their contribution to Venezuela’s economy was down 75 percent in March and is projected to drop by nearly half over 2020 as a whole, according to economic consultancy Ecoanalitica.

Meanwhile, heightened US anti-narcotics operations in the Caribbean have made several large seizures allegedly linked to the Maduro government, and are likely making it more difficult for foreign currency to enter Venezuela through drug trafficking.

All this means that gold – long an important economic crutch for the Maduro government – is now more vital than ever.

The precious metal, seen as a safe investment in troubled times, has reached a multi-year trading high since the onset of the coronavirus.

The result has been an accelerated draining of gold reserves from the Venezuelan Central Bank (Banco Central de Venezuela – BCV), including large quantities swapped for oil refinery parts with international allies such as Iran. Nine tons of gold were traded from the BCV in April alone, leaving Venezuela with its lowest hard currency reserves in 30 years, according to Bloomberg.

In this context, the country must look to the Orinoco Mining Belt (Arco Minero de Orinoco – AMO), to replenish its reserves. This wide swathe of southern Venezuela, centered on the state of Bolívar, has long suffered violent battles between criminal groups and state actors to control its thousands of illegal mines.

Now, there are signs that these struggles are intensifying.

1. 'Legalization' of Gold Extraction from Bolívar Rivers

On April 8, the Maduro government declared six rivers in Bolívar apt for gold extraction – despite warnings of environmental devastation. Although the opposition-controlled National Assembly swiftly rejected the initiative, operations have pressed ahead.

In early May, irregular armed groups assassinated at least two, and possibly as many as 13 people, from the Yekuana indigenous group, which had been protesting the installation of new mining rafts on the Caura River. Américo de Grazia, an opposition representative for Bolívar, blamed the killings on Colombia’s National Liberation Army (Ejército de Liberación Nacional – ELN), which had allegedly been tasked with guarding the new installations.

Although the ELN’s role in the killings is yet to be proven, the guerrillas are known to be cooperating with state actors in illegal mining operations in other parts of Bolívar and have been implicated in several massacres related to control of mineral deposits.

2. Attempted Price Manipulation by Gold Buyers

On May 10, 2020, Armando Info reported that the price being paid to miners per gram of gold was at half its usual dollar rate - $15 rather than $30. The article argued that this was due to collusion among gold buyers to keep the price paid to miners in bolivars constant, despite a sharp drop in the value of the bolívar to the dollar, and gold’s increasing value on international markets.

With independent smuggling routes more restricted than usual due to quarantine controls on movement, miners had no choice but to accept. Powerful local buyers – including government and military actors – reaped the bounty.

The dollar price has since risen again and InSight Crime’s sources in Bolívar cautioned that the drop may partly have been caused by unregulated local markets struggling to keep up with the volatility of the bolívar.

However, they also confirmed that the Bolívar gold market is tightly controlled by a select and feared group of buyers. As such, it is plausible that this cabal took advantage of the drop in the exchange rate to hold the buying price artificially low and maximize the gold windfall.

3. More Operations against Uncooperative Mining Gangs

Much of the violence in Bolívar over recent years has been due to the state’s attempt to impose order on the region’s multitude of mining gangs and guarantee access to gold revenues. Through military operations and collusion with ELN forces, most of Bolívar’s gangs have now been at least partially subordinated to the political and military actors that hold power in the region.

SEE ALSO: GameChangers 2019: Illegal Mining, Latin America’s Go-To Criminal Economy

A notable exception is the gang led Jhon Váldez, alias “El Toto,” in the El Perú sector of El Callao, which has brutally resisted government and guerrilla incursions onto its rich mining territories.

Throughout May 2020, security forces launched several major raids against El Toto’s mines, described by some media as an attempted “takeover” of El Perú. On May 13, an employee of mixed mining corporation Mibiturven was arrested for allegedly processing gold for the gang. Such arrests are a relative rarity in Bolívar, despite this modus operandi being widespread.

State attacks on Toto’s gang are nothing new, and the latest operations were ostensibly triggered by the gang’s killing of local musician and miner Carlos Clark in early May. However, the timing of this renewed drive to subdue one of Bolívar’s most notoriously uncooperative mining enclaves may also be suggestive of increased state urgency to maximize illegal resource revenues.

In a region where assassinations are so commonplace they go mostly unnoticed, it seems likely that the killing of a popular local figure was merely used as a pretext to intensify state moves against an old enemy, in newly desperate times.

4. Move to Control Errant Factions

On 20 May 2020, it was reported that six officers of the Bolivarian National Guard (Guardia Nacional Bolivariana – GNB) had been arrested in La Paragua, central Bolívar. They were charged with facilitating illegal mining for the gang led by Reiniero Alberto Murgueytio Bastardo, alias “El Ciego.”

El Ciego was once a favored criminal partner of former Bolívar governor Francisco Rangel Gómez, according to testimony from a security force whistleblower. Although his gang has increasingly fallen out of favor in recent years, he appears to have clung to power in central Bolívar through pacts with local security forces.

In January 2020, eight people were reported killed in El Ciego’s territory of El Manteco, during clashes between the gang and ELN fighters. Local residents told El Pitazo that the ELN had been trying to enter the area for two years, but were unable to because a group within the local military had resisted the takeover.

For several years, such localized criminal-military pacts have formed part of a system that divvies up control of illegal mining in Bolívar between political and military actors, in a bid to keep different factions sweet. However, the recent arrests in La Paragua suggest that the pressure for more centralized control is mounting.

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