Canadian Company Challenges Chávez’s Expropriation
September 29
Gold Reserve Inc., a Canada-based mining company, has filed a $1.928 billion arbitration claim with the World Bank against the Government of Venezuela.
The company had been operating the “Brisas Project” in southeastern Venezuela since 1992. The region, located in the State of Bolivar, is one of the largest undeveloped gold and copper deposits in the world, with an estimated 10.2 million ounces of gold. For 16 years, Gold Reserve invested nearly $300 million into the region and established an internationally renowned mining project. This lasted until April 2008, when the government seized the company’s Venezuelan operations, postponing the mining projects inevitably. Gold Reserve is now seeking full compensation from the Venezuelan government for its losses.
In a press release, Doug Belanger, Gold Reserve President said that “The Brisas Project and the promising Choco 5 exploration property were significant assets to the shareholders of the Company. We worked extremely hard to maximize the value of these projects for the shareholders, stakeholders, and local beneficiaries in Venezuela. Venezuela has obviously decided to take another path regarding the Brisas Project. As a result of the unfortunate actions taken by Venezuela in violation of the BIT, we are prepared to vigorously pursue a decision in this case for our shareholders and stakeholders.”
Gold Reserve is one of the many companies owned by foreign investors that the Venezuelan government has expropriated. Others include American companies such as Hilton, ConocoPhillips, Cargill, Pepsi, McDonald’s, Wendy’s, and Helmerich and Payne. According to a study from Ecoanalítica, a Caracas-based economic consulting firm, Venezuela has failed to pay $14.65 billion of the $23.3 billion it owes to expropriated companies.
President Hugo Chávez has been notoriously antagonistic towards the private mining sector in particular. In April 2010, he threatened to expropriate the entire gold mining industry, labeling them as “crazy people” and “transnational mafias.” The Fraser Institute, an independent Canadian think tank focusing on government’s role on domestic economies, put out its annual mining survey in April which ranked Venezuela dead last out of 72 countries regarding its handling of the mining industry and appeal to foreign investors.