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R E S O U R C E N AT I O N A L I S M Hugo Chavez, Socialism for the 21st Century and Venezuela's Narcissistic Resource Nationalism By Joseph Kirschke, News Editor-Mining On a Thursday night in November 2011, a plane carrying an undisclosed consignment of gold bullion previously secreted in overseas bank vaults touched down under cover of darkness at Venezuela's Maiquetia International Airport. After the first delivery of several shipments totaling more than 200 tons—in 15,000 stock 400-oz gold bars—was loaded, an armored convoy guarded by 500 soldiers, helicopters and members of the central bank's elite security team embarked on a 13-mile journey on a decrepit, potholed highway toward a vault in Caracas, one of the world's most lawless cities. To many, it was mere stagecraft by Venezuela's fiery President Hugo Chavez less than a year after the diagnosis of cancer to which he succumbed in March. But to die-hard loyalists it signified more: Central Bank President Nelson Merentes termed it "historic," reported the staterun AVN news agency. "We're returning assets that belong to the people." To particular victims of Chavez's "socialism for the 21st century," on the other hand, it would prove a depressing, if apt, metaphor for the pending death knell of Venezuela's long-decayed mining sector in one of the world's most resource predatory regimes. Despite abundant mineral wealth with some of the world's greatest reserves of iron ore, aluminum, nickel and gold—and Latin America's secondlargest coal deposits—Venezuela has long stagnated behind regional mining powerhouses like Mexico, Colombia and even Bolivia, since Chavez took power in 1999. The damage his erratic, quintessentially one-man rule inflicted on Venezuelan mining, moreover, is all but impossible to know—and equally hard to overstate. A Grim Post-mortem Few can doubt the cult-like "Chavista" legacy will endure for decades, if not generations. Less assured is Venezuela's economic prosperity—and its moribund mining industry, according to observers like James Lockhart-Smith, a 60 E&MJ; • JULY 2013 senior Latin America analyst at Maplecroft, a U.K.-based risk analysis firm. In all, nearly 1,000 foreign and domestic private businesses were appropriated over 14 years. Ecoanalitica, a Venezuelan research firm, has reported the losses to the country's private sector at $23.3 billion. The trend, according to the Venezuelan Confederation of Industries, soared 924% since 2007. Bitterly contested April elections— wherein Chavez's hand-picked successor Nicholas Maduro won by 1.5%—herald little change. The former bus driver claimed Chavez's cancer was poisoning by "historical enemies," for example. "The outlook is pretty bleak all in all," said Lockhart-Smith. "The government is highly likely to become more entrenched in its positions," he added, while striving to "maintain the same strategic goal of control over the whole supply chain for the construction industry—including the required hard commodities." These include what's left of Venezuela's bauxite and iron ore deposits languishing alongside the world's 16th largest gold reserves at 4,600 tons. In total, Venezuelan mining, according to the U.S. Geological Survey's 2011 report, stood at just 1% of GDP; government data similarly reports formal mining at just 4.3 million tons annually. Regardless of Chavez's legacy—amid continued international praise—few can deny Venezuela's squandered economic potential. The World Bank's 2013 Doing Business report is typical, ranking Venezuela at 180 out of 185. The survey, co-authored by its International Finance Corporation wing, reflects a one-point decrease for the country from 2012. There are many others. "Venezuela is an example of nationalization being a populist as opposed to an economically strategic program," notes a 2012 report by the South African Institute of Mining and Metallurgy, which concluded that "an economy under nationalization driven purely by a socialist ideological program is not sustainable." Influences Near and Far Chavez was never ideologically shy. From the start, he made unusually fast friends with Cuba's Fidel Castro, champion of his own nationalizations. For access to the world's greatest oil reserves, the strongman's 86-year-old mentor gave his protégé an army of doctors, military advisers and intelligence agents; a special terminal at Maiquetia Airport exclusively processes Cuban nationals. But a failed, U.S.-supported 2002 coup radicalized Chavez's militancy: Championing a leftist "pink revolution" across Latin America, his nationalization binge accelerated as he forged ties with similarly anti-Western— and resource rich leaders worldwide— some with shared appetites for mine appropriation. These included Zimbabwe's diamond-wealthy Robert Mugabe along with Argentina's Christina Kirchner, Ecuador President Rafael Correa and— to a lesser degree—Brazil's populist Lulu Ignacio da Silva across the Americas. But it was Bolivia's Evo Morales—in one of the hemisphere's most mineral-rich jurisdictions—who most closely emulated Chavez, to the detriment of its mining industry. Neglect, Avarice and Middle Class Flight Like other resource nationalists, Chavez's charisma resounded among poor Venezuelans long exempted from the country's oil benefits, noted Jorge Neher, a lead Latin America partner for Norton Rose, an international law firm that advises companies on resource nationalism issues. "After years of being neglected by the state, there's a sentimental relationship," said Neher, a counsel to Venezuela's Congressional Mines Commission in 1994. Indeed, the subsidized literacy campaigns, free public housing and health initiatives that brought accolades from statesmen to intellectuals to celebrities worldwide, would have been impossible had oil prices not surged beyond $100 a barrel through the last decade. Meanwww.e-mj.com