The new US sanctions on Venezuela’s gold operations will have a strong impact on the Latin American economy, analysts say, predicting a possible reaction from Caracas.
On November 1, US leader Donald Trump enacted new sanctions aimed at blocking Venezuela’s gold operations.
According to the document, the US administration intends to prevent the authorities of the Latin American country from “stealing the riches of Venezuela for its corrupt objectives.”
Washington also banned its citizens from buying Venezuelan gold and stressed that similar measures could be applied against any other sector of the Venezuelan economy, depending on the decision of the United States Department of the Treasury along with the State Department.
Analysts said sanctions against the export of Venezuelan gold could hurt Venezuela’s finances as Nicolás Maduro’s government has used precious metal as an alternative to oil, whose output is falling.
“[By imposing sanctions] Trump is creating conditions to pressure companies and entities that provide technical and financial support to Venezuela. The possible solution to the problem will be to export gold to the parallel market, but it will be difficult to do,” believes analyst of the Russian bank Promsvyazbanc, Roman Antonov.
At present, the country’s only engine of GDP is the oil sector, but it is down because of lack of infrastructure financing, as well as public debt of billions of dollars.
Thus, US restrictions will seriously affect Venezuela’s economy, which is in need of ballots.
“The country is in fact on the verge of defaulting, and the chances of serving the debt after the introduction of US sanctions on gold operations are minimal,” said another banking analyst, Artem Kopylov.
Venezuela has seen the sale of gold as a means of defending itself against sanctions and the economic crisis. Now, the actions of the United States may prevent the stabilization of the situation in the country, added Antonov.
According to data from the World Gold Council (WGC) in the third quarter of 2018, the Central Bank of Venezuela was one of those who bought more gold (after Russia, India and Turkey).
At the same time, commodity markets analyst Oksana Lukicheva is of the view that with the new sanctions, the US is trying to prevent gold payments for goods and services, since dollar payments are already prohibited.
Venezuelan gold reserves constituted 161.2 tonnes in September 2018, the analyst quoted IMF data as indicating that almost all precious metal remains in the country’s territory.