Tenth Time's the Charm

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"Que no, chico, no es 'El Dolado" - se dice 'El DoRado', con 'r'...a verdad es que a Uds. no les sale...ji ji..."
“Que no, chico, no es ‘El Dolado” – es ‘El DoRado’, con ‘r’…a verdad es que a Uds. no les sale…ji ji…”

Amid the flurry of tweetnouncements coming out of Nicolás Maduro’s trip to China was this lovely tidbit, announcing that it’s the Chinese who will get commercial gold production going at the enormous Las Cristinas mine, by some accounts, one of the largest untapped gold mines in the world. Let’s see, by my reckoning that makes them the TENTH concession holder for the mine in its rocambolesque 50 year history…

Like I wrote way back when, it’s not that we’ve been screwing this one up since the Leoni administration, we’ve just spent 49 years discovering nine different ways of exploiting Las Cristinas that won’t work.

The only question now is if PDVSA will file an arbitration claim over losing the concession, which would make them the fourth claimant suing over the same, never-yet-exploited mine.

It’s easy to make fun – too easy for me to pass up, at any rate – but early indications are that Maduro’s having some success out there. The additional $5 bn. loan from China Development Bank in particular is going to buy these guys some badly needed breathing room.

Bet they’re glad, too: failure to sign some fat deals out there would likely have seen him end up grovelling to the IMF, which is what passes for a Best Alternative to a Negotiated Agreement for him these days. (Can’t imagine that gave the Chinese any leverage to use in negotiating terms for these deals…can you?)

1 COMMENT

  1. Just so you understand why Maduro is so intent in putting the country into endless debts with the chinese, is that if the chinese’s stake in the country become significant, may a turn of the events down the line translate to real danger for chavismo to lose its stronghold on government, they’ll most likely get help in the logistics required to counter any local insurgency

    • The chinese are very pragmatic , they have learned not to pay all that much attention to ideology except where it serves their own national interests . (Remember Deng Tsiao Ping ) . They probably have made their overtures to the Opposition just in case to ensure some accomodation is possible which allows them to remain int the country if the current govt is replaced . Their goals are geopolitical and practical and will not exclude ‘living with an Opposition Administration ‘ if thats what it takes . Have heard isolated comments that they didnt like Chavez much ( too disorderly and chaotic for their taste) but played the role expected of them to gain his good will. Except for the almost mandatory use of chinese contractors ( which sometimes can be top knotch ) the loan terms are actually not bad . Sending the oil to China may not be in Venezuelas best commercial interests because of the transportation costs , but nothing that a well thought out triangulation scheme with another producing country cannot remedy . After the govt forced migration of existing oil contracts to new ones controlled by Pdvsa they were badly mistreated having all their operational people taken from their jobs to allow pdvsa managers to take over day to day operations with very unfortunate results . Few people know it , but that really hurt them !! Quite sure that now they will insist that Pdvsa take a back seat in the operational handling of joint investments .

      • Exactly, they know that ideology is not enough to get them to do stuff. But fear of a new government not acknowledging the debts with the chinese is enough of a pragmatic reason

    • If the 5 billion US$ loan is in the form of contributions to an Investment Fund then the money is spent on Projects which take some time to execute and where the main contractors and suppliers are almost certain to be Chinese , This of course helps the local economy but not at one go and only in so far as it movilizes local resources ( many projects have a big offshore component) . The notion of a shower of cash falling on the waiting hands of the govt in one fell swoop is not likely to be the case . More likely there will be a program of disbursements slowly paid to the Project contractors and suppliers as they advance the Project. Lets not forget some of the Projects are not even in Venezuela but in China ( the Heavy Crude Refineries in south china , the Crude Carriers to be built in chinese shipyards ) . Part of the loan is likely to be in Chinese denominated currency . It looks good from a PR point of view , but the reality is probably less generous to the govt than may appear !!
      Regarding the US$ 4 billion which payment is due in the next months , pretty sure that the govt will issue new bonds to exchange for the expiring bonds and thereby roll over their payment until a later date , of course this will involve offering some incentive for the bondholders to take the bait , like higher coupons and the like.

      • These deals are just more bad news for the Country: increased shipments of crude oil to the Chinese, above an already high 600m or so bbl/da. level, taken from a finite daily production level, at prices (even disregarding high transport costs) less than, say, could be gotten for higher-priced cash sales to the U. S., and for a few billions, which are not enough to solve the current cash-crunch, and much of which will be ripped off in corruption, and not even spent in Venezuela. Mortgaging the future even more, to get an insufficient amount now, at giveaway prices. As the Chinese know well, in P. T. “Balnum’s” words, there’s a “suckel” born every minute, and most of the Rubes seem to make their way into decision-making positions in this Venezuelan Government. The only possibly good part of the deal are the 2M “Yout(h)ong” buses, presumably for transporting appropriately-attired Venezuelan lasses.

  2. You said it! – “which makes it hard to evaluate”. Thus, if it is hard to evaluate then how do you know it is a loan? As I understand it, this all forms part of the Ven – China Strategic Developemnt Fund which is a revoling credit. You send us oil and we top up the fund.

    Much better to deal with China tan other countries that are bankrupt such as the US as China has around US$3.5 trillion in intrnational reserves and is looking to strengthen this position by buying gold and mining it.

    Al this BS you continually publish about Venezuela grovelling to the IMF is completely without foundation. The only foundation it has had is in media such as El Nuevo Herald or El Universal or dolartoday or La Patilla which have not published anything “oportuno o veraz” about Venezuela in years. And you continue to plaster more egg on your face by quoting them as relaible sources.

    Venezuela paid off itsd last quota to the IMF on December 5th 2001 and will not be going back to it. There are no quotes from Merentes or anyone else in the administration even hinting at this. So………….Quico…..stop playing the amarillismo game and write some true stuff for a cahnnge. If you don’t, then you are just being totally desperate after 11 years getting everything wrong!!

    • Arturo,

      I don’t know if you are familiar with reddit.com, but there is an active and growing community over at reddit.com/r/vzla. The purpose of this Venezuelan subreddit is to promote civil discussion across the political divide, but, currently, it lacks people with pro-government or chavista perspectives. We need fresh blood! If you ever tire of having your comments fall on deaf ears, your participation would actually be appreciated over at reddit.com/r/vzla.

      Hope to see you there.

    • Don’t forget, aporrea also spread the IMF rumor.

      And how is mining gold in Venezuela going to strengthen China’s reserves? If the mine is succesful most of gold legally must be sold to the Venezuelan government, or is China getting this little requirement waived? The Russians can barely make money mining gold in Venezuela, so even if the mine is a smashing success the profits would be a piddling inconsequential laughably small addition to China’s reserves.

      • I actually have it on very good (though not-for-attribution) authority that the IMF discussions did get held. But the bottom line was that a rescue package would only be sought if the government got no useful BoP help from China, and even then only after December 8th.

        My guess is that Maduro got enough breathing room in Beijing to make the IMF deal moot, at least for now.

  3. Arturo,

    I don’t know if you are familiar with reddit.com, but there is an active and growing community over at reddit.com/r/vzla. The purpose of this Venezuelan subreddit is to promote civil discussion across the political divide, but, currently, it lacks people with pro-government or chavista perspectives. We need fresh blood! If you ever tire of having your comments fall on deaf ears, your participation would actually be appreciated over at reddit.com/r/vzla.

    Hope to see you there.

  4. Ive been a follower and been tangentially involved, as an investor, in most of the
    Publicly quoted companies that have attempted to develop Las Cristinas. In the end it all comes down to the abject failure of the Venezuelan government to really be interested in developing its mineral extraction industry. At this stage of the game, I don’t care who develops las Cristina’s, as long as it gets done, at least to see if its able to translate into something positive for the region and the industry in general in venezuela. Just don’t bet on it…

  5. In the Placer Dome case, which can be clicked upon, above, it is stated that the company sold its 70% interest in Las Cristinas for fifty dollars. This suggests that the gold there cannot be extracted commercially in the Chavista environment. If the gold must be sold to the Venezuelan government, where are the divisas to come from? Or do sales occur in Bolivares Fuertes? The devil is in the details.

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