[News] Gold from Venezuela: why the Bank of England retains 31 tons of bullion from the South American country

[Warlock-]

https://www.bbc.com/mundo/noticias-america-latina-53078808

 

 

This week the case about the 31 tons of Venezuelan gold bars guarded by the Bank of England reaches the Supreme Court of the United Kingdom, which will have to decide who is the legitimate authority that can administer them. In this June 2020 report we give you all the context about the dispute. 31 tons of gold are at the center of a legal dispute between the Central Bank of Venezuela (BCV) and the Bank of England. The gold bars, valued at US $ 1 billion, are in the vaults of the English institution and belong to Venezuela, which now wants to sell them and use the funds to combat the spread of the coronavirus in the country, according to the government of Nicolás Maduro. However, the Bank of England has rejected the Venezuelan request. The reason? The current BCV directive responds to the Maduro government and the British institution has expressed doubts about the authority of that directive, arguing that the United Kingdom recognizes that of the opposition leader Juan Guaidó as a legitimate government.

 

The dispute began in early 2019, when more than 50 countries recognized Guaidó as the legitimate president. Sarosh Zaiwalla, the lawyer representing the BCV in London, confirmed to BBC Mundo that when at that time the president of the Venezuelan institution, Calixto Ortega, and the then Minister of Finance, Simón Zerpa, traveled to the British capital to request the return of the gold, the Bank of England told them: "No, our government (United Kingdom) recognizes Guaidó (as the legitimate president of Venezuela) and that is why we cannot give you the gold."

 

Now, a court in London will have to decide, as of June 22, who is the legitimate authority to move the gold from the Bank of England, after the Maduro government unsuccessfully requested to sell part of that gold and transfer the resources to the United Nations Development Program (UNDP) to purchase food and medicine and combat the coronavirus in the country. "That gold belongs to the entire Venezuelan people, it belongs to the country, and the BCV has demanded that these resources be used through the UNDP to address the pandemic in Venezuela," said the vice president of the Maduro government, Delcy Rodríguez. "Every minute and hour that passes means people who may lose their lives to the virus, and Venezuela requires its resources, not a clique of white-collar criminal thieves stealing it," he added. But why does Venezuela have those gold reserves in England?

 

Conventional strategy

 

For decades, Venezuela has stored gold that is part of its Central Bank reserves in foreign banks, both in Europe and the United States, a strategy followed by many other nations. "There is nothing strange about a country holding reserves of gold or other securities in other banks," Luis Vicente León, a Venezuelan economist and president of the consulting firm Datanálisis, explains to BBC Mundo. "There is gold in what are called safeguard service providers, which are different banks, including some central ones, that provide the service and charge a commission for safeguarding international reserves." For the economist this is simply a strategy to protect and safeguard gold reserves. "I would say that it is a very conventional strategy for small countries. Large countries have the capacity to be able to protect their own reserves, to keep them in their vaults."

 

"It is a headache for central banks, especially when they do not have the capacity for protection, security measures and technology to prevent a robbery operation from being carried out. When instead you place your gold in a foreign bank in You have a receipt in an accounting, and if something happens to it, you are protected because you pay the custody service, "explains the economist. In 2011, President Hugo Chávez repatriated about 160 tons of gold from US and European Union banks to the Central Bank in Caracas, citing his country's need for physical control of assets. "Venezuela returned gold to the Central Bank from different countries because it was a time when the government feared that international sanctions would be applied that could freeze its reserves abroad," explains León.

 

"He felt that keeping reserves abroad was a dangerous strategy and that part of his resources could be frozen," he added. According to what the economist and opposition deputy José Guerra told BBC Mundo, "about 90% of the gold that Venezuela had abroad was brought in and placed in the vaults of the BCV." According to Guerra, most of the Venezuelan gold reserves are in Caracas. However, the gold that Venezuela had in the Bank of England, and that today is the subject of the dispute, remained in the vaults of the British institution.