The Venezuelan mining sector is making a bold play to reposition itself on the global investment map.
For as long as the country has bet its economy on oil, policymakers in Caracas promoted the Venezuelan mining sector as the jewel in the nation’s economic crown. High-grade deposits of gold, diamonds, coltan, bauxite, and rare earth elements sat underground — tantalizingly within reach — but insufficient investment turned a sector with promise into one defined by extraction to meet domestic needs and finance for artisanal miners.
Venezuela’s mining sector is back on Washington’s radar.
Deepening economic crisis and collapsing oil exports are now forcing Venezuela’s leaders to confront that reality. Mounting pressure from U.S. sanctions — especially the loss of a key Chinese market for crude oil — has also reignited Venezuela’s pursuit of gold mining, specifically as a source of much-needed foreign currency. Add in geopolitical upheaval, gold’s relative safe-haven status, and a slew of key amendments to the country’s mining law that aim to incentivize foreign investment in Venezuela, and investors are starting to pay attention.
Gold: Drive of Venezuela’s Mining Comeback
Until recently, the Venezuelan mining sector remained in the shadow of its resource-nationalized cousin: petroleum. Yet gold is fast emerging as a key driver of renewed interest from investors.
A revised mining law is slated to open the sector to private investment.
Unlike other parts of Venezuela’s economy, where commodity price changes have caused seismic shifts, mining was able to operate with relative autonomy. One analyst describes mining as Venezuela’s “engine that didn’t stop.” The market has started to take notice, too: Last year, Venezuelan gold production grew by nearly one-third and in January reached its highest level in over a decade.
The legal landscape is evolving as policymakers look to restart the sector.
Although domestic production has ticked upwards, broader reform in the Venezuelan mining sector is needed to catalyze private investment. Venezuelan lawmakers this week reintroduced a revamped mining law aimed at doing just that. The latest proposal would:
- extend concessions up to 30 years
- formalize artisanal mining (largely unregulated in Venezuela until now)
- require ministry promotion of foreign investment, provide for domestic arbitration
- prioritize mediation in legal disputes.
Gone from the new draft is controversial language that would have allowed the President to issue mining concessions at will.
Growing geopolitical tensions, with far-reaching implications for global mining markets, are providing an additional tailwind.
One of the more interesting developments in the steady stream of recent news about the Venezuelan mining sector concerns Washington. Reuters reported last month that despite heavy sanctions against Venezuela, the United States has granted several licenses that allow U.S. companies to conduct transactions related to mining in the country. In December, U.S. government officials met with executives from Minerven, Venezuela’s state-run gold mining company.
Why Now? U.S.-China Competition and Venezuela
Discussions between Minerven and the U.S. government are just one example of how geopolitical competition with China is playing into Venezuela’s efforts to court foreign mining investors.
China buys roughly two-thirds of the world’s mined rare earth metals, and while Venezuela is hardly a competitor in that space, Chinese control of the rare earth value chain is raising alarms in Washington. As one former U.S. diplomat with knowledge of the conversations recently told Axios, Venezuela “is well aware of the strategic importance of rare earth minerals and the pivotal role they will play in future industries and technologies, especially electric vehicles.”
Increased U.S.-Venezuela dialogue fits within a broader pattern
Elsewhere in Latin America, the United States is making major investments to wean critical mineral supply chains from reliance on China. Secretary of Energy Jennifer Granholm toured Peru’s largest lithium deposit in November. Earlier this month, President Trump approved $4 billion for mining production in the United States, including processing facilities for rare earth elements. with Venezuela.
Venezuela’s Mines Offer Investors Potential and Risk
Slowly but surely, the pieces are lining up to attract foreign investment to Venezuela. But just because the possibility exists doesn’t mean investors should take the plunge.
For starters, significant risk remains. The ease of doing business in Venezuela is among the lowest in the world. Venezuela’s legal system is opaque at best, and expropriation remains a serious risk for commercial actors. U.S. companies looking to operate in mining (and anywhere else in Venezuela) should heed the lessons of Venezuela’s oil industry, where billions of dollars in sunk costs failed to stave off competitive disregard for private property and contracts.
However, risks notwithstanding, there are legitimate reasons to consider Venezuela.
Similar dynamics are at play in Iraq, Libya, and Syria, countries that also boast significant mineral reserves and are fertile ground for U.S. companies looking to diversify their supply chains. But Venezuela has advantages these countries don’t: a history of production and, increasingly, Washington’s attention. As the Trump administration continues to explore tools for reducing risk in Venezuela, Congress should weigh whether targeted allowances for the Venezuelan mining sector could help alleviate suffering without undermining prospects for a democratic transition.