Caracas (Platts)--5May2011/508 pm EDT/2108 GMT

Venezuela's President Hugo Chavez said he plans to create a new law to encourage investment in gold production in the country, which currently has an official output of about 11 tons/year.

Chavez will pass the law by decree under special powers the country's national assembly granted him in January, after major flooding in the country.

Chavez said in remarks carried by state television that in addition to official production, another 11 tons of gold may leave the country every year as contraband.

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According to existing Venezuelan law, industrial gold producers must sell 60% of production to the Central Bank of Venezuela but can export 30% and sell the remaining 10% inside the country.

The small mining sector can export 50% of its production, sell 25% to the internal market and the remaining 25% to the Central Bank.

Official estimates of Venezuela's gold reserves fluctuate between 2,000 and 12,000 tons, most located in the region of Guyana, in the state of Bolivar.

--Mery Mogollon, newsdesk@platts.com