Hurried by the drop of oil prices and the collapse of oil production, Nicolás Maduro bets on the Orinoco Mining Arc as a formula to increase the resources that are so scarce in the national coffers. Under the "joint venture" system, the Government has ended up agreeing with companies insufficiently known in the extra-activist industry, like Corporación Faoz. Among the beneficiaries is Gold Reserve, the Canadian mining company that Hugo Chávez expelled from Venezuela years ago. The Paradise Papers filtering shows that both have registered companies in that tax haven called Barbados.
The largest mining deposit in Venezuela and the small island of Barbados are connected. Though separated by more than a thousand kilometers (621.37 mi), both geographical points are united in the business that emerged from the delimitation of the "Orinoco Mining Arc" by the government of Nicolás Maduro in February 2016. If smuggling, and small-scale and informal mining governed the south of Venezuela for years, now the foundations of a rushed exploitation with "joint ventures" between the State and private companies with companies in the Caribbean island are being built.
For some reason, not entirely clear, this activity —in an area of ??almost 112 thousand square kilometers (43243.44 square miles) to the north of the state of Bolívar and south of the Orinoco River—according to presidential decree 2.248 issued in Official Gazette 40.855 of February 24, 2016, with which the Venezuelan government aims to make up for the drop in oil prices and the collapse of oil production, is now linked to companies registered in that small tax haven called Barbados. This is the case of Corporación Faoz, an unknown Venezuelan company that in August 2016 signed an agreement with the national Executive for the exploitation of Coltan, a strategic mineral known as "blue gold," and wanted by industries like the telecommunications industry.
"In 2013-2014, they participated in the exploration of phosphate deposits in the state of Táchira, and in 2016, they presented the joint venture project with the Bolivarian Republic of Venezuela for the exploration and exploitation of the tantalum and niobium deposit in the state of Bolívar," the presenter said, as a justification, about Corporación Faoz in a ceremony held on August 5, 2016, at the Central Bank of Venezuela (BCV).
The Paradise Papers leak, containing millions of documents from the Appleby law firm in the Bermuda archipelago and company registers in several tax havens —obtained by the German newspaper Süddeutsche Zeitung and shared by the International Consortium of Investigative Journalists (ICIJ)—, now allows knowing that three years before it was named Corporación Faoz, it had created a homonymous company in Barbados, as if anticipating what was to come. The company is Faoz Corp, registered on May 13, 2013, just two months after the death of Hugo Chávez and one month prior the election of Nicolás Maduro as president of the Republic, after beating Henrique Capriles by a narrow margin. The Orinoco Mining Arc was not yet on the horizon.
On August 5, 2016, Luisa Herminia Alcalá Otero signed on behalf of the company an agreement with the Government, represented by the then Minister for Ecological Mining Development, Roberto Mirabal. That agreement became official almost three months later with presidential decree 2.359, published in Official Gazette 41.026. Company Empresa Mixta Minera Ecosocialista Parguaza (Emmepsa) born there, with a 55% share capital that belongs to the state-owned Corporación Venezolana de Minería (Venezuelan Mining Corporation) and the remaining 45% to Corporación Faoz. Another member of the Alcalá family, Rafael Enrique Solórzano Alcalá appears as the director of the company in Barbados.
Based on the registration papers, the company was created to engage in consulting, investments, and project development in the mining industry. The company did not respond to the request sent by email or to the one made at the offices of Emmepsa in Torre Hener, in El Rosal, a financial area of Caracas. At that point, they redirect those who arrive to Torre Teaca, in the same area of the capital, and where the offices of Corporación Faoz are located, according to their website. "As a joint venture, we must request authorization from the ministry," warned one of the employees.
A resolution of the Ministry for Ecological Mining Development, published on December 6, 2016 in Official Gazette 41.046, determined that the new joint venture would have the right to "explore and exploit mines and deposits of tantalum-niobium (coltan), ilmenite, cassiterite, tin, zircon, quartz, granite, diamonds and gold, including its use" in an 10,201-ha area in Cedeño municipality of the state of Bolívar. According to the minutes of the shareholders' meeting published in that Official Gazette, it was also clear that Corporación Faoz just had to inject 450 thousand bolivars - 45% of the share capital of the joint venture - to enter the business.
Precisely in this and other minutes of the shareholders' meetings, striking aspects of the now partner of the Venezuelan state are evident. Originally Corporación Faoz, created in 1992, it was called Construcciones Faría and adopted the new name on July 29, 2016, just days before closing the agreement with the Venezuelan government to enter the Orinoco Mining Arc. On its website, the company simply explains that "we are a company founded in 1992, engaged in ??construction. We soon diversify our operations into the mining sector, carrying out research, exploration and exploitation of metallic and nonmetallic minerals."
The business of Corporación Faoz does not end there. It is also related to the Joint Mining Company of Nueva Esparta (Ecomine), which in the event held on August 5, 2016, at the BCV, sealed another agreement with the national government. This time, another Alcalá, Félix Angel Oliveros Alcalá, who also appears as president of Corporación Faoz in some minutes of the shareholders' meetings of Emmepsa, signed on behalf of Ecomine. A report by efectococuyo.com, published in last year’s September, showed that link between Corporación Faoz and Ecomine, and that both had the same office in Torre Exa, another office complex in El Rosal area of Caracas.
On September 9, the news agency of Venezuela Agencia Venezolana de Noticias (AVN) reported that joint venture Emmepsa was able to produce the "first ton of coltan," which was also reported by Corporación Faoz on its website. According to the report, the thousand kilograms of the mineral were extracted "while calibrating the machinery and the mechanical system used in the mine operations in Los Pijiguaos area, in the state of Bolívar."
As to the marketing of the mineral, the president of the company, César Sanguinetti, told the state agency that "we are waiting for the legal aspect to proceed with the first sale that is a historical event of the Venezuelan people, since we are venturing for the first time into this field of the coltan mineral." Years ago, in 2009, Hugo Chávez admitted that they discovered mafias involved in smuggling the mineral. "Now, a strategic mineral called coltan has appeared, and we have militarized the area because they were smuggling it to Colombia, exploiting it illegally. We still do not know how much reserve we have, but based on the information, it is a large reserve," Chávez said eight years ago.
A report signed by journalists Joseph Poliszuk and Emilia Díaz-Struck, published on March 4, 2012 on Armando.info, proved that the mineral was being illegally marketed on internet platforms. "In Paguaza, in the state of Bolívar, at the foothills of the Guyanese massif, you can see the first signs of coltan fever," he says. According to court records, from 2009 to 2011, the National Guard seized almost two tons of coltan to seven people.
The issue does not seem to be fully resolved yet, despite the government's rush to obtain through mining exploitation the resources that could not be obtained through oil to contribute the diminished Venezuelan coffers. "Palestine is investing in coltan," Nicolás Maduro said in early December while announcing a "zoning plan for the Orinoco Mining Arc". "Come! Diamond, gold. Palestine, come to work gold, diamond, oil, gas, coltan, come. Palestinian entrepreneurs and from around the world, come to Venezuela, this is your homeland, this is the Jerusalem of America, Venezuela," insisted the head of state.
The rush showed by the President of the Republic of Venezuela since that last year to exploit one of the most important natural areas of Venezuela has been fervently questioned by environmental movements and officials of the Chavez government, like former ministers Ana Elisa Osorio and Héctor Navarro, or former commander of the Strategic Integral Defense Region (REDI) of Guyana, Clíver Alcalá Cordones, who has unsuccessfully tried legal actions before the Supreme Court of Justice against presidential decrees associated with the Orinoco Mining Arc. "On August 5 (2016) the country saw the most opprobrious act of the last 200 years," said Alcalá Cordones in a television interview about the agreements between the government and companies like the unknown Corporación Faoz.
Curiously, Corporación Faoz is not the only company favored by the national government that has registered companies in Barbados. Canadian gold miner Gold Reserve also went to that jurisdiction. In 2009, Hugo Chávez suspended a concession to this miner to exploit the Las Brisas and Las Cristinas mines in the state of Bolívar, to form the Empresa Mixta Ecosocialista Siembra Minera. That company was part of the agreement reached by the administration of Nicolás Maduro after the mining company obtained in 2014 at the International Center for Settlement of Investment Disputes (ICSID) an arbitration award for just over 700 million dollars as compensation for that decision of Chávez.
"From a conflict and a lawsuit we had, we are now partners for the development of a project of over 5 billion dollars," Maduro argued in February last year when he approved the decree of the Orinoco Mining Arc. The pact, in fact, forces Venezuela to settle the award, which amounted to almost 800 million dollars for the interest accrued until 2016, with monthly payments until mid-2019. In addition, Venezuela must pay another 240 million dollars for the technical information of the mines that Gold Reserve gathered for years, which will be useful for the operation of Empresa Mixta Ecosocialista Siembra Minera.
Formally, the company was incorporated on September 30, 2016, according to presidential decree 2.465 published in Official Gazette 41.000, whereby it was established that the alliance was between the Venezuelan Mining Corporation and company GR Mining Inc of Barbados.
The Paradise Papers show that that company was created on the Caribbean island on April 15, 2016, and its directors are Alexander D. Belanger and Robert A. Mcguinness, both managers of Gold Reserve. On that same day, the Canadian mining company also registered GR Engineering Inc. in that jurisdiction. "GR Engineering Inc provides engineering, procurement and construction services to Siembra Minera with a 5% tariff on all construction and development costs, and a 5% commission on operating costs during operations," explains the Gold Reserve website.
As of June 30, 2017, Gold Reserve had spent approximately 7 million dollars in the process of forming Empresa Mixta Siembra Minera. A resolution of the Ministry for Ecological Mining Development, of November 2, 2016, confirmed that the company would have the right to mining in an area of 18,951 hectares in the Sifontes municipality of the state of Bolívar. Finally, in March of this year, another presidential decree ended up confirming the right of the company to extract from gold mines in the defined area.
While the Government and the companies are committed to attract resources. Organizations like the Venezuelan Society of Mining and Metallurgical Engineers (SVIMM) recently warned that the Orinoco Mining Arc is "wandering," and that it is necessary to prepare a "legitimate and indisputable long-term national mining plan.”
As if they were pieces of a broken mirror scattered in many islands around the world, several offshore companies form an oil-trading business network that reveals the trajectory of Alessandro Bazzoni and Francisco D'Agostino. Both of them, together with the Venezuelan telecommunications magnate Oswaldo Cisneros, landed in 2016 in the Orinoco Belt to fill the vacancy of the original partner, Harvest Natural Resources.
Aside from ethical questions, the logic of a private entity opening an offshore company seems elementary —to declare its profits in a territory where it can pay less tax than it should in its place of origin. But when it comes to a state-owned company like Petróleos de Venezuela, which is not obliged to pay taxes - and therefore does not need to evade them - it is difficult to understand why within its business scheme there is contracting with companies established in tax havens and there is even the creation of their own subsidiaries in these places. What does the Venezuelan public treasury gain from this?
When Vice President Delcy Rodríguez turned to a group of Mexican friends and partners to lessen the new electricity emergency in Venezuela, she laid the foundation stone of a shortcut through which Chavismo and its commercial allies have dodged the sanctions imposed by Washington on PDVSA’s exports of crude oil. Since then, with Alex Saab, Joaquín Leal and Alessandro Bazzoni as key figures, the circuit has spread to some thirty countries to trade other Venezuelan commodities. This is part of the revelations of this joint investigative series between the newspaper El País and Armando.info, developed from a leak of thousands of documents.
Leaked documents on Libre Abordo and the rest of the shady network that Joaquín Leal managed from Mexico, with tentacles reaching 30 countries, ―aimed to trade PDVSA crude oil and other raw materials that the Caracas regime needed to place in international markets in spite of the sanctions― show that the businessman claimed to have the approval of the Mexican government and supplies from Segalmex, an official entity. Beyond this smoking gun, there is evidence that Leal had privileged access to the vice foreign minister for Latin America and the Caribbean, Maximiliano Reyes.
The business structure that Alex Saab had registered in Turkey—revealed in 2018 in an article by Armando.info—was merely a false start for his plans to export Venezuelan coal. Almost simultaneously, the Colombian merchant made contact with his Mexican counterpart, Joaquín Leal, to plot a network that would not only market crude oil from Venezuelan state oil company PDVSA, as part of a maneuver to bypass the sanctions imposed by Washington, but would also take charge of a scheme to export coal from the mines of Zulia, in western Venezuela. The dirty play allowed that thousands of tons, valued in millions of dollars, ended up in ports in Mexico and Central America.
As part of their business network based in Mexico, with one foot in Dubai, the two traders devised a way to replace the operation of the large international credit card franchises if they were to abandon the Venezuelan market because of Washington’s sanctions. The developed electronic payment system, “Paquete Alcance,” aimed to get hundreds of millions of dollars in remittances sent by expatriates and use them to finance purchases at CLAP stores.
Scions of different lineages of tycoons in Venezuela, Francisco D’Agostino and Eduardo Cisneros are non-blood relatives. They were also partners for a short time in Elemento Oil & Gas Ltd, a Malta-based company, over which the young Cisneros eventually took full ownership. Elemento was a protagonist in the secret network of Venezuelan crude oil marketing that Joaquín Leal activated from Mexico. However, when it came to imposing sanctions, Washington penalized D’Agostino only… Why?
Through a company registered in Mexico – Consorcio Panamericano de Exportación – with no known trajectory or experience, Joaquín Leal made a daring proposal to the Venezuelan Guyana Corporation to “reactivate” the aluminum industry, paralyzed after March 2019 blackout. The business proposed to pay the power supply of state-owned companies in exchange for payment-in-kind with the metal.