Midas touch? Hugo Chávez plans to use gold to end 'dictatorship' of US dollar

The Venezuelan president announced plans to nationalize his country's gold industry and move Venezuela's reserves out of Western banks and into the banks of more friendly nations.

Venezuelan President Hugo Chávez appears to be becoming more vociferous by the day as he announces plans to nationalize the country’s gold industry and reorganize foreign reserves, just days after returning from a second round of chemotherapy in Cuba.

The socialist leader has finally announced plans to nationalize Venezuela’s gold industry after years of talk on the subject, as well as end the “dictatorship” of the US dollar by transferring foreign reserves to more friendly nations.

Under Mr. Chávez's plans, Venezuela is to transfer more than $6 billion of reserves from banks in the United Kingdom and Switzerland, among others, to countries including China, Russia, and Brazil.

Around 211 tons of the 365 tons of Venezuelan gold reserves held at foreign – banks including the Bank of England, Barclays, and the Bank of Nova Scotia – are to be repatriated. “We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chávez said on state television. “It’s a healthy decision.”

Around half of Venezuela’s gold output comes from illegal mining, a trade in the hands of “mafia and smugglers,” according to Chávez.

This is, however, unlikely to change, due to corruption in the government.

As always with Chávez, there are politics and theater behind the moves, which are a slap at the United States and include a smattering of schadenfreude at its current economic crisis.

“It caught my attention … that all the stock markets in the world fell yesterday, except Venezuela’s,” Chávez said as news of the crisis in the United States broke, failing to acknowledge the staggering difference between Venezuela’s practically non-existent stock market and that in New York.

The reason for the move is ostensibly political and backed by Chávez’s bullish rhetoric. But there may also be fears in the Venezuelan government that the country’s assets could be frozen following numerous expropriations of foreign companies, which require compensation. There are also suggestions that the transfer of reserves has been requested as collateral for the billions of dollars of loans given to Venezuela.

“We think that China, Russia, and Brazil have asked Venezuela to transfer the reserves to guarantee the loans that the government has received in recent years,” opposition lawmaker Julio Montoya told Caracas-based El Universal.

Either way, the plans will do nothing to build relations with the United States or any of the world’s developed economies but may boost nationalistic feeling at home in time for elections next year.