Caracas Gold Rush
Chavez Repatriates Gold, Offers Obama a Loan

Hugo Chavez has impressed supporters and outraged opponents by bringing back Venzuela's gold bars.

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Amiel Ungar,

Hugo Chavez
Hugo Chavez


Aside from the issue of his personal health (Hugo Chavez claims that he has made a complete recovery from cancer, but the opposition and some independents argue unfeelingly that he is fighting a losing battle and may not make it to the elections), Hugo Chavez will also have to parry accusations that the Venezuelan economy is in a shambles.

Chavez resorted to a dramatic stratagem to radiate economic health. He recalled Venezuela's 365 tons of gold bullion valued at  around $20 billion. The gold bars were then paraded on trucks guarded by soldiers and tanks. Chavez supporters cheered the spectacle.

The government has attempted to tame inflation with price controls. Unfortunately, when prices are artificially low, hoarding ensues, because factories will not keep churning out the goods at a loss. They withhold the goods from the market until a price increase is approved. Currently, for example,  it is impossible to find coffee in the shops.

In any case, Chavez hailed his repatriation of the national gold as a victory in his campaign to end the dictatorship of the dollar and he compared his country's economic condition favorably with that of the United States. "The Yankees are broke… They have no money to pay their debts… Shall we give Obama a loan?"

The Venezuelan opposition has attributed nefarious motives to Chavez that go beyond mere political grandstanding. The gold is intended to secure Venezuela's debt to China. This debt will only increase as China pumps money into Venezuela in order to create a feel-good atmosphere prior to next October's selections.

Another theory is that Chavez intends to sell off some of the gold to finance public spending prior to the election. The downside of this policy is that it does not inspire investor confidence, accelerates inflation and makes bond issuance prohibitive.