The Venezuelan gold route: how the Nicolás Maduro regime converts worthless notes with the help of Turkey

The most successful financial transactions in Venezuela in recent years have not been in Wall Street offices or tax havens, but in the chaotic gold mines of the south of the country.

Immersed in the worst economic crisis of modern Venezuelan history, an army of 300,000 fortune seekers has moved into the jungle, which keeps in its bowels the the largest reserve of precious metals in the country, make a living by removing the land.

With picks and shovels, they help finance the Nicolás Maduro regime, which since 2016, bought 17 tons of gold, worth 650 million dollars, according to the most recent data from the Central Bank of Venezuela (BCV) to May.

The effort of the artisbad miners, as Chavismo defines it, has been translated into vital currencies by the direction of the dictator of Maduro to finance imports of food products and rare commodities in Venezuela, although they receive their payment in the depressed local currency.

However, the United States is willing to end this gold trade by force of sanctions and intimidation. The White House has even put pressure on the Bank of England so that it does not release some $ 1.2 billion worth of gold bullion that Venezuela keeps in its coffers. US officials recently criticized an Abu Dhabi-based investment firm for buying Venezuelan gold, and asked other foreign operators to refrain from trading more bars with Maduro.

A gold shipment from Venezuela to the United Arab Emirates was canceled a few days ago. Noor Capital, a company in that country, said it did not intend to make any new purchases after buying three tons of ingots in Caracas on January 21st. Although Maduro 's gold purchase policy is well known, its execution was not yet clear..

L & # 39; agency Reuters He followed the path that the gold follows from the dusty mines of the south up to the coffers of the central bank of Caracas, to be then sent to the refineries abroad in exchange for food, according to more than 30 people who know or are involved in the operation. including miners, intermediaries, merchants, researchers, diplomats and civil servants. Almost all sources asked to speak anonymously because they were not allowed to disclose these issues or for fear of reprisals from the Venezuelan or US authorities.

His stories reflect the portrait of a Desperate experience of the socialist regime to get a currency in the short term when the pumped crude oil, the main monetary source of the country, is at a minimum and Maduro has less leeway against the new US sanctions.

With a formal mining sector almost extinct after the nationalization policy, Maduro relies on the thousands of working miners – mostly undocumented – to extract mineral wealth, a task that receives no investment from the state.

In this way, the government takes advantage of the exhausting work of miners like José Aular, a teenager who claims to have contracted malaria five times in a dangerous mine near Venezuela's border with Brazil.

In shorts and without safety equipment, Aular works 12 hours a day with bags of soil who treats in a precarious mill where uses mercury to amalgamate gold particles, regardless of the toxicity of your method.

Accidents are common in areas where they move sand or in machines where they treat them to get gold, according to the miners. Also confrontations with guns and mistreatment.

"The government knows everything that happens in the mines and it suits you, because in the end our gold falls into your handssaid Aular, 18, in a few minutes he was rested.

Maduro also relies on the crucial aid of Turkish President Recep Tayyip Erdogan to carry out his operation, a president who, like him, launches a challenge to the Trump administration.

Venezuela he sells most of the gold to Turkish refineries and then uses part of the product to buy consumer goods, according to people with direct knowledge of these negotiations.

Packages of Turkish pasta and milk powder At present, they are part of the shopping cartons distributed by Maduro as part of its grant program. Trade between the two countries increased eightfold last year.

But the gold sales program is intensifying as the political crisis in Venezuela reaches its boiling point.

In recent days, many Western countries have recognized Venezuela's opposition leader, Juan Guaidó, as the legitimate president of the South American nation.

With the support of these governments, The opposition has asked foreign gold buyers to stop doing business with Maduro, who consider that they have no legitimacy after winning disputed elections. "We will protect our gold," he said. Reuters the opposition MP Carlos Paparoni in an interview.

The road of gold begins in places like La Culebra, a difficult access area less than an hour from the town of El Callao, in the south of the country. Here, hundreds of men work in mines with precarious techniques of the nineteenth century. Crewed, they are lowered on a rope through holes 30 meters deep to fill the sand with bags, then transported with pulleys and towers.

Exploitation in this area and in other areas of the forest affects fragile forest ecosystems and facilitates the spread of mosquitoes that transmit diseases.

The miners also complain about the persecution of military forces and mafias that control the region, where the homicide rate is seven times higher than the national average. Venezuela's Ministries of Defense and Information did not respond to requests for comment.

Despite this, José Rondón, a 47-year-old miner, feels safer in his mining camp. He arrived in 2016 from the city of San Felix, about six hours away, with his two grown children, while the salary as a bus driver was not enough to survive under ravenous inflation.

The three men receive only about 10 grams of gold a month, despite the dozens of bags they extract from the mine. But they still earn nearly 20 times more than before. "Here you have many more," said Rondón, resting in a hammock hanging in a small camp without walls.

Minors They go to the city of El Callao to sell their seeds, mainly to unlicensed merchants, who operate in tiny shops protected by alarms and steel doors.

"The state, everyone buys gold, because that's what's going on"said Jhony Diaz, a wholesaler of the industrial city of Puerto Ordaz, about 171 kilometers from El Callao, and has an authorization from the Central Bank, which pays in advance delivery of kilos of gold made every three days from the coins bought between the agents coming from the south.

Merchants who sell to Díaz usually have money to operate in El Callao and other cities off the coast. gold feverso they pay the miners, who need tickets to buy food and supplies in those areas and send what's left to their families.

The Maduro Diet manages to acquire gold through middlemen because offers a higher price than the market, the only way to compete with smugglers that they take from the country a good deal of precious metals.

And since Venezuelan currency is worth less every day, the authorities, when they pay in bolivars, agree to use as a reference the most advantageous exchange rate, which has been for years the black market, ignoring the severe control of the changes that they impose the economy.

The parts bought by the government are melted in the ovens of Minerven, the state mining company, according to a senior employee. The bars are then transported to the coffers of the Central Bank of Venezuela, in the capital Caracas, 843 km from the state factory of El Callao.

Even though the Central Bank's gold reserves have fallen to their lowest level in 75 years, the authorities They chose to sell all the gold mines to pay their bills and also some of its bullion of maximum purity, according to two senior government officials.

The main buyer of gold nowadays, according to both sources, is the Erdogan Diet.

Maduro's gold sales plan is accelerated with the improvement of the Erdogan bond in Turkey. Both leaders have been criticized internationally for suppressing political dissent and undermining democratic norms in order to concentrate power.

"On the gold, we have a model (…) that is fine, we will triple the production in the first half"Maduro told reporters this week." We have a lot of buyers of gold, "he added, without mentioning any.

A November 1 decree signed by US President Donald Trump prevents people and entities from that country from buying gold from Venezuela. But this does not apply to foreigners, and Ankara badured the Treasury Department that all trade between Turkey and Venezuela was governed by international law.

Venezuela announced in December 2016 a direct flight from Caracas to Istanbul with Turkish Airlines. The road surprised because of the low demand for travelers between the two distant countries and dozens of other airline flights..

Customs data show that these planes carry more than just pbadengers. On the New Year's Day, in 2018, from Caracas, the Central Bank sent 36 million dollars in gold in Istanbul by air. It was a few weeks after the state visit of Maduro in Turkey.

The last year's shipments totaled $ 900 million, or about 23 tons, according to Turkish government data and customs reports.

The central bank has sold its gold mines directly to Turkish companies and refiners, according to two senior Venezuelan officials. The funds will go to the National Development Bank of Venezuela, Bands, to buy consumer goods in Turkey, the sources said.

Among the buyers of metal is the Gold refinery in Istanbul (IGR, acronym in English) and the signature Sardis Kiymetli Mandele, a gold trader in this country, according to a person working in the gold industry in Turkey, a diplomat in Caracas and the two most senior Venezuelan officials.

The director general of the RIG, Aysan Esen, denied in an interview with Reuters that the company has been involved in any gold business with Venezuela. In another written response, he confirmed that he had met with Venezuelan and Turkish officials in Istanbul in April to provide his perspective on how to comply with international standards. Esen told the Turkish government that working with Venezuela "would not be fair to the main institutions or to the state".

As for Sardes Kiymetli Mandele, no one in his Istanbul office answered questions from Reuters.

Months after the entry of gold in Turkey, it takes 60 days for products to arrive from this country they started to be sold in supermarkets and food boxes distributed by the Maduro government.

Early December, 54 containers of Turkish milk powder were unloaded in the port of La Guaira, very close to Caracas, according to the port archives seen by Reuters.

The Istanbul-based company that has marketed it, Mulberry Proje Yatirim, shares an address with Marilyns Proje Yatirin, a company that formed last year a mixed company with the State Minor of Venezuela, according to documents filed in the Turkish Trade Register in September. Companies did not respond to a request for comment.

Even critics of Maduro admit that the plan for selling gold has turned out to be a good trick for alchemy: they paid unpaid miners in local currency depreciated and obtained in return for precious metals that they sold 10,000 kilometers away..

"The government has chosen to sink into obscure operations and unusual mechanisms of commercial exchange," said economist and Venezuelan opposition MP Ángel Alvarado. "They do it out of desperation to stay in power at all costs"

(With information from Reuters / Corina Pons and Maria Ramirez)