Venezuela

Denial. Obfuscation. Silence. Indifference.  

These are some of the adjectives to describe Venezuela’s approach to the Kimberley Process since a PAC report uncovered widespread evidence of mismanagement in its diamond sector in 2006.

Faced with the facts of our report, Venezuela chose to disengage from the KP rather than fix its shortcomings. It “self-suspended” itself and subsequently ignored further inconvenient questions from the KP.

Seven years later, at the November 2013 Plenary in Johannesburg, the KP belatedly took action and formally placed Venezuela on a list of countries that cannot trade diamonds.

Background

Venezuela’s diamond production is exclusively alluvial, with rich deposits located south of the Orinoco River in the southeast of the country. As with other countries in the region, small teams of miners use portable motorized dredges and resumidors which suck up the slurry and separate out the rough stones. Scoping done by larger companies interested in exploiting Venezuela’s deposits have either determined that the sites were not economically viable, or ran afoul of the country’s regulatory system. Relations between the government and artisanal miners have been difficult.

Even prior to its self-suspension, little of Venezuela’s diamond production made it into legitimate export channels. Production statistics have been nonexistent since 2005, despite ongoing mining activity. What has happened to those diamonds remains a mystery, since Venezuela has not issued any Kimberley certificates since 2006. In 2005, Venezuela officially produced 55,153.71 carats of rough stones, valued at nearly $3.2 million US according to KP statistics. For the same period, PAC estimates that unofficial production was some three times higher than this figure, with some 150,000 carats produced.[1]

A PAC investigation in 2006 found direct evidence that much of this excess production was being smuggled into Guyana. Not only had official production in that country soared as Venezuelan production officially decreased, there was strong anecdotal evidence of smuggling activity. Miners acknowledged the smuggling, and diamond dealers admitted funneling “tens and even hundreds of thousands of carats a year” to Georgetown via Boa Vista in Brazil. In more recent years, others have uncovered direct evidence of this smuggling activity. In a 2012 article, Time magazine identified a number of diamond buyers in Guyana who openly admitted to purchasing stones from Venezuela despite not being able to verify their origins. These stones are then issued Kimberley certificates and can enter the global market.[2]

Nearly two years after the KP first threatened Venezuela with expulsion if it didn’t invite a Review Mission, a KP delegation finally traveled to Caracas in October 2008. Ultimately, the visit proved to be one of the most ineffectual in KP history. The KP allowed Venezuela to dictate the composition of the team, resulting in the government refusing civil society participation, and threatening to place other members under police guard in their hotel. If that were not bad enough the team spent more time visiting hydro-electric projects than assessing the country’s diamond sector. No mines were visited, no miners interviewed, and somehow completely overlooked the MIBAM headquarters in the state capital, where the KP is supposedly administered. A failure to take tough action in 2008 resulted in Venezuela dictating terms to the KP, while 100% of its production is smuggled into the legitimate market.

Venezuela’s KP authorities are not meeting minimum KPCS requirements. No legal exports have taken place since 2005, yet artisanal diamond miners remain actively digging in the diamond areas. The confirmed presence of significant smuggling activity and the lack of official production statistics represent a significant barrier to the country achieving KP compliance. In an effort to appease critics, Venezuela provided documents with official production and export statistics in 2012, however as the figures were all listed as zero, they were entirely useless. While Venezuelan diamonds cannot be characterized as “blood diamonds”, its unilateralist and isolationist approach sets a dangerous precedent and may give other poorly-compliant countries reason to ignore their own compliance issues.[3]

 

Because of these factors, PAC gives Venezuela a High risk rating.

 

Recommendations

  • There is documentary evidence that Venezuela’s ongoing diamond production is being smuggled out of the country, with a large portion going to neighbouring Guyana. Increased vigilance on the part of Venezuela’s neighbours is needed to prevent the entry of illicit stones into their supply chains. This is particularly the case for Brazil, Guyana and Panama, all of which are known exit points for Venezuelan diamonds.
  • At the KP Plenary in Johannesburg, 2013, the final Communique asserted that Venezuela should invite a technical assistance visit in preparation for a mandatory review mission before being re-admitted to the KP. PAC has long advocated for such an approach and continues to stress the need for both as prerequisites to Venezuela’s reintegration into the KP.
  • At the same Plenary it was agreed to add Venezuela to a list of countries that KP members cannot trade with. Participants and industry members should practice greater vigilance with an intention to protect the legitimate diamond supply chain and to thwart the illicit trade.

 

What people are saying

"If Venezuela can flout the rules, why should anyone else bother?"

  • Ian Smillie speaking to Reuters, Dec 6th, 2012

http://www.reuters.com/article/2012/12/06/venezuela-mining-idUSL1E8N126M20121206

 

“You’d have to be blind to believe [that the KP is doing its job in Venezuela]. It’s a little bit more difficult now [since the KP was established] to smuggle and certify the diamonds. But we do.”

  • Unnamed Santa Elena diamond trader, August 2012

http://world.time.com/2012/08/20/not-just-out-of-africa-south-americas-blood-diamonds-network/

 

View the PDF

 


[1] PAC (2006) The Lost World: Diamond mining and smuggling in Venezuela http://www.pacweb.org/images/PUBLICATIONS/Conflict_Diamonds_and_KP/16_TheLostWorld_Nov2006.pdf

[2] Time (2012) Not Just out of Africa: South America’s “Blood Diamonds” Network. http://world.time.com/2012/08/20/not-just-out-of-africa-south-americas-blood-diamonds-network/

[3] Reuters (2012) Diamond smuggling in lawless Amazon mocks international pact. http://www.reuters.com/article/2012/12/06/venezuela-mining-idUSL1E8N126M20121206