COMMENTARY — Optimistic note for Venezuela

For investors in Venezuela, 1994 was a year most would prefer to forget. However, there are good reasons for looking forward to the remainder of 1995 with some optimism.

It seems as though the political realism that swept so confidently through most of South America was tripped up in Venezuela when exchange controls were re-imposed in July, 1994. However, the controls are a temporary measure to allow the accumulation of foreign reserves following a flight of capital. There is reason to believe that the country’s resulting large positive trade balance will allow the relaxation of these restrictions in 1995. Given the reliance of its economy on trade, there appears to be little alternative to Venezuela’s integration into the “global market” and to its undergoing the free-market restructuring that this demands.

The development of a healthy private sector will require considerable foreign investment and the policies required to attract it. The announcement that the Venezuelan oil industry is to allow strategic associations with foreign companies, together with news of forthcoming privatization of the aluminum and steel industries, suggest that the implementation of such a framework remains a priority.

The impact of this framework on exploration and gold mining is first likely to manifest itself in the creation of conditions favorable to the development of Placer Dome’s Las Cristinas deposit. A feasibility study is expected to be completed on the US$400-million gold project by the second half of 1995. John Willson, chairman and chief executive officer of Placer, says he was encouraged by the positive tone of ongoing discussions with the Venezuelan government regarding the conditions necessary to allow a major investment in a mine.

A go-ahead decision for the project would be a clear indication of the government’s desire to support foreign investment in mining, and would give a boost to the sector in general.

While much of the drilling conducted during 1994 consisted of limited, first-phase programs on the most obvious targets, relatively little was understood about the geological settings, and many of the programs could have been better designed. The experience gained during the course of the past year will prove invaluable in the targeting of future drill programs. — From “Venezuela Revisited,” published by Yorkton Natural Resources.