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Venezuela's Moscow Maneuvers

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All enlightened governments, including Canada's, which just signed an investment agreement, should deem Venezuela a "no-go" zone. This is because the country, under Hugo Chavez, has descended into a kleptocracy. Industries like coffee and rice have just been nationalized and confiscations without compensation are underway.

Two Canadian mining companies are victims, as are Venezuelan business interests, and there are gross human rights abuses, says Canadian lawyer and activist Robert Amsterdam. In his white paper entitled "The Erosion of Judicial Autonomy under Hugo Chavez," Amsterdam and his Venezuelan legal colleagues recite a case involving Eligio Cedeno who has been jailed without charges for two years because he opposes the Chavez regime. Here is their executive summary:

"The rule of law and liberal democracy in Venezuela are crumbling under the leadership of President Hugo Chavez. Chavez has subverted the fundamental institutions of government converting theminto tools for maintaining and consolidating personal power," they wrote.
"He and his supporters harass those who do not align themselves politically and ideologically with the Bolivarian Revolution. They use various means to persecute their opponents, including assaults in the media, violence, censorship and false criminal charges. Chavez has gained complete control of the criminal justice system. A growing class of political prisoners has emerged, including businessman Eligio Cedeno."

"Intervention by the international community is both necessary and appropriate in order to preserve the rights of Venezuelan citizens."

Official theft
So where is the Canadian and other governments when it comes to preserving the rights of foreign firms and individuals. Take the case of the two embattled Canadian mining companies -- Crystallex International Corporation and Gold Reserve Inc. They have spent years exploring and millions obtaining rights to develop two world-class ore bodies in Venezuela only to have them confiscated, de facto, through illegal means. Both trade for pennies as a result.
Crystallex's statement in its 2009 Second Quarter was:

"The Company's principal asset is its interest in the Las Cristinas gold project located in Bolivar State, Venezuela. The Company's interests in the Las Cristinas concessions are derived from a Mine Operating Contract (the "MOC") with the Corporacion Venezolana de Guayana (the "CVG") which grants Crystallex exclusive rights to develop and mine the gold deposits on the Las Cristinas property."

"The Company has not received a response from the Minister of Environment and Natural Resources ("MinAmb") to its June 16, 2008 appeal of the Director General of the Administrative Office of Permits at MinAmb denying its request for the Permit for the Las Cristinas project."
"On March 2, 2009, the CVG confirmed that the Company was in compliance with the MOC. This corroborates the Company's position that is not in default of the MOC and there is no change in control under the terms of the MOC. The Company plans to remain compliant with the MOC in order to protect the option of proceeding to international arbitration."

That's theft through government obstruction and stone-walling.

The other case involves a combination of Venezuelan tactics to obstruct and reduce the value of Gold Reserve Inc. combined with a hostile takeover bid this winter by Rusoro Mining Inc., a Moscow favorite. The bid failed because it was declared illegal by the Ontario Superior Court because a financial intermediary was collecting fees from both parties without disclosing this to Gold Reserve.

Canada bye bye unless you bear arms
Lest anyone discount this as just the usual maneuverings in the world of mining, the secret intentions to steal from the Canadians were published last fall in a blog out of China.

"Venezuela said it will offer a joint venture to Russian-owned miner Rusoro to operate the Las Cristinas and Brisas gold projects, currently under contract to two Canadian companies, Mining minister Rodolfo Sanz on Thursday. He told a Russian delegation that a memorandum of understanding would soon be signed with Rusoro. It appeared that Sanz intends to replace the Canadian companies who operate the projects that contain some of Latin America's largest gold deposits, with Rusoro, but he did not mention their names."

Why would this be happening, given the fact that the Canadian companies had signed a deal and invested millions in good faith already?

"What's happening in Venezuela is not understood by Canadians," said Amsterdam in a recent interview. "Chavez has political prisoners, he is killing opposition without due process.I have a client who is victim to phony charges, no trial and has been in jail for two years. there are two million people on Chavez's black list who are denied decent jobs. In the meantime, he is causing problems with neighboring countries and has bought US$10 billion worth of arms from Russia. We just don't get the danger."

Lloyds of London does. In June, it withdrew maritime "war risk" policy cover for Venezuela, "the first such exclusion of a Latin American country for 20 years. the move is the latest sign of Venezuela's deteriorating business environment," wrote Oil and Gas Insight in June.