With much fanfare, Venezuela's first batch of repatriated gold comes home(Read article summary)
President Hugo Chávez oversaw the return of the first batch of Venezuela's gold from foreign banks. Was it a publicity stunt?
Many experts laughed off the plan, claiming it unfeasible and nothing more than a publicity stunt that would never materialize. Yet, just three months after announcing his intent to bring home Venezuela's international gold reserves and end the “dictatorship” of the US dollar, President Hugo Chávez has pulled off at least the initial portion of the feat, with trademark theater.
The first shipment of the precious metal landed at Caracas’ Maiquetia International Airport late on Friday night to great fanfare. Pallets carrying the ingots traveled along the runway with an armed soldier on top of each. They were loaded onto armored vehicles and carried to Caracas as supporters celebrated in the streets.
Many analysts claimed the movement of such large quantities of gold – from some of the world’s most secure vaults – was financially unviable thanks to the huge insurance premiums involved.
“The market in physical gold is tiny and largely comprised of nutcases,” wrote Reuters blogger Felix Salmon, wondering how the Herculean feat could ever be pulled off. But Mr. Chávez frequently opts for the unconventional route and comes away unscathed.
Venezuelan authorities claim the shipment cost just $7 million, much less than analysts estimated. The authorities declined to give further information on where exactly the gold came from.
The maverick leader said that he wants to pull in most of Venezuela’s gold and foreign currency reserves held around the world. Some 211 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 before the end of the year, according to authorities.
The move appears to be one of Chávez’s more elaborate PR stunts, but there is likely to be more to it. Following numerous expropriations from foreign companies, Venezuela risks having its assets seized in order to compensate those corporations. Moving foreign reserves of cash and gold either back to Caracas or to more friendly nations should allay that risk.
“We are bringing the gold back because capital markets and the world economy are in turmoil,” Central Bank Chief Nelson Marentes told the ebullient crowds, toeing the official line.
Last week, a Chinese delegation visited Caracas and promised another $4 billion worth of loans, taking the total from Beijing up to $32 billion – all to be repaid in oil shipments. This cash comes on top of recent Russian loans as well as huge bond sales, totaling more than $15 billion this year – more than the rest of Latin America combined.
Chávez will plough this money into social programs, in the hope that the poor will entrust him with a fourth term in power in next October’s presidential elections.