Chavez's Gold Bind

A miner illegally pans for gold at Las Cristinas mine near Ciudad Dorada, Venezuela.

David Rochkind / Polaris

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That new populist bravado, which Chávez has backed up with a multibillion- dollar social-spending program at home, has spread to South American countries like Bolivia, where two Presidents have resigned in less than two years after raucous protests calling for the nationalization of vast, newly discovered natural-gas reserves. Says Amy Myers Jaffe, an analyst at the Baker Institute for Public Policy in Houston: "Chávez has seemingly become a leader who can galvanize antiglobalization agendas anywhere."

Next to Venezuela's gargantuan oil industry, gold once seemed an unlikely target of resource nationalism. But Venezuela possesses about 2.5% of the world's 1 billion oz. of unmined gold reserves, and experts say about half its gold is mined by some 30,000 illegal miners. So as bullion approaches $500 per oz.--and as miners call attention to their squalid lives--gold has become a hot political as well as economic commodity.

Few Venezuelan mines create more heated debate than Las Cristinas. Rights to the mine were a Dickensian legal muddle for most of the 20th century until Chávez granted Crystallex the concession in 2002 for a bargain $15 million. But company executives cannot open Las Cristinas because, among other reasons, the Chávez government has not granted the necessary environmental permits, which, so far, have been mired in bureaucratic review. One problem may be the chronic concern, as government officials have said privately, that foreign companies like Crystallex rarely create as many jobs as promised. For now, Crystallex complains it must sit idly by while its lodes are being picked at by illegal miners the government seems unable or unwilling to stop--workers Crystallex says it would be happy to hire if it could just run the mine. "The way to resolve the misery and desperation [the miners] live in," pleads Guillermo Adrián, Crystallex's Las Cristinas general manager, "is to give them the jobs."

The sooner the better, considering the misery. The miners' slums have become cauldrons of drugs and prostitution in recent years. Sewage trickles through the unpaved streets. Houses are often built of nothing sturdier than flattened gasoline drums, and the surrounding terrain looks moonscaped from the slash-and-burn deforestation. Chávez has begun to organize the miners into some 3,000 government-backed cooperatives, which would be given legal access to any gold-mine reserves the government might take away from idle concessionaires, foreign or Venezuelan. But many miners remain skeptical, especially since the cooperative funds are moving as slowly through Caracas as Crystallex's environmental permits. "We're always living with conflict and manipulation," says Humberto José Alonso, 37, an illegal miner for 18 years. "We hear promises from everyone, but we don't see results."

Industry analysts say even Chávez, for all his provocative socialist rhetoric, realizes that the best way to achieve those results is to tap into the capital and technology of the multinationals. Says Luis Rojas, vice president of Venezuela's mining chamber: "He knows foreign investment is the only way Venezuela can boost its production and increase its reserves." While Chávez's September speech may have scared the mother lode out of mining execs, many believe it was meant more to appease the restless miners than to presage the ouster of the foreigners.