Caracas Chronicles

In 2016, as Venezuela’s oil industry went into freefall, the government of Nicolás Maduro announced the creation of the Orinoco Mining Arc: a territory almost three times the size of Switzerland—rich in gold, iron, diamonds, bauxite, cobalt, and other minerals—open for miners in southern Venezuela. Yet, since then, the Mining Arc—now a violent free-for-all for informal miners, criminal gangs, the military and Colombian guerrillas—has ushered an environmental disaster in the Venezuelan Amazon and fed global trafficking networks, carrying Venezuela’s “blood gold” to places as distant as Uganda, Turkey and the United Arab Emirates. According to a study by Transparency’s local chapter and consulting and research firm Ecoanalítica, quoting internal sources from the Ministry of the Economy, Venezuelan gold production rose 20% in 2022—to between 35,5 and 45 tons—and produced between $2.2 and $2.7 billion.

Last week, as part of its sanction relief, the United States issued a license authorizing dealings with Minerven, the Venezuelan state-owned gold mining company. According to the US Treasury, this measure seeks to reduce the trafficking of Venezuelan gold. Nevertheless, some Venezuelan observers aren’t as enthusiastic. “This sanction lifting is a new incentive for the regime to deepen its Mining Arc policies”, says Cristina Burelli, director of environmentalist watchdog SOS Orinoco, “Through Minerven they will be able to take more gold –now supposedly legal– to the international market.”

According to Transparency’s report, 25% of total income for the Venezuelan gold production went to the Central Bank of Venezuela (BCV), 9% to the national treasury, 36% to “strategic partnerships” between the state-owned holding Venezuelan Corporation of Guayana (of which Minerven is a subsidiary) and local private companies, and 30% to criminal gangs and guerrillas. The study estimated that production will rise between 20% and 30% by the end of 2023 due to the expansion of the strategic partnerships, which could recalibrate the leverage of each group: the partnerships are expected to take 66% of gold revenue this year, compared to 5% for the BCV (which can’t buy much but can authorize exportations), 8% to the treasury and 20% to criminal gangs. 

Yet, the new measures by the U.S. could change this. “The sanction relief could strengthen the role of the BCV and of the treasury,” says Asdrúbal Oliveros, director of Ecoanalítica. “The government will be able to sell gold through more formal mechanisms without having to draw upon opaque ways that also implied a price discount” for gold. Nevertheless, Oliveros believes that Maduro will still distribute an important chunk of the gold that is produced among non-state actors to guarantee its power balance.

According to Transparency’s report, 25% of total income for the Venezuelan gold production went to the Central Bank of Venezuela (BCV), 9% to the national treasury, 36% to “strategic partnerships” between the state-owned holding Venezuelan Corporation of Guayana (of which Minerven is a subsidiary) and local private companies, and 30% to criminal gangs and guerrillas.

Sanctions could have created more incentives to exploit the mines –as the Mining Arc was a response to the collapse of oil production– and the relief on the oil sector could diminish the importance of gold, Oliveros says. Nevertheless, “it doesn’t mean there will necessarily be a reduction of gold production and exploitation” as powerful groups benefit from it and the government needs a major source of resources to finance its 2024 presidential campaign, he says.  

According to Burelli, sanctions relief “is no guarantee of cleaning the gold supply chain.” She says that in the disputed Esequibo area, controlled by Guyana, human rights violations and environmental destruction due to mining are more widespread than in Southern Venezuela, despite Guyana having no international sanctions. “This policy by the United States will allow and boost a criminal bonanza, an even major looting”, she says, “It won’t stop black-market trading and it won’t stop the blood gold market.” For Burelli, Minerven will now channel all the gold “that is being produced unsustainably with mercury.”

Similarly, Burelli and SOS Orinoco believe that the sanctions relief won’t bring foreign companies to the Mining Arc, as “Venezuelan laws make it fiscally impossible for mining activity to be profitable”, and the violent groups in the area also drive these international companies away. “The sanctions lifting won’t attract serious foreign investment” in the mining sector, she says, “and it won’t incentivize sustainable gold production that follows the OCDE regulations.”