Venezuela and China are restoring their ties after years apart, which is evident in the face of the resumption of contacts between both governments and the introduction of joint projects in what represents a challenge for Washington.
Last month, high-ranking officials from the China, Venezuela’s largest creditor, and close associates of President Nicolás Maduro to discuss the restructuring of Venezuela’s long-standing credit line, according to people with knowledge of the matter. Both sides also discussed potential areas for renewed collaboration, such as the telecommunications and oil said the people, who asked not to be named because it is an internal strategy.
A loosening of relations with China would offer Maduro a powerful ally, as well as the possibility of a new conduit for oil sales, while potentially giving him more leverage with the United States amid Washington’s attempts to bring more crude. to market at lower prices for American voters. Venezuela has the largest known reserves in the world, but is subject to international sanctions that have crippled its ability to sell oil.
“Today, relations between China and Venezuela have reached their best level of mutual trust, cooperation and work,” Maduro said on March 27 in a live broadcast as he said goodbye to the Chinese ambassador to Venezuela, Li Baorong. “We must deepen our strategic relations with China more and more.”
The commitment is achieved in a context of worsening in the US-China rivalry, and amid tentative signs that Latin America is once again becoming a destination for Chinese loans, increasing Beijing’s influence across the region. Brazilian President Luiz Inácio Lula da Silva’s meeting with President Xi Jinping last month highlighted the mutual interest between China and Latin America’s largest economy.
The new approach also coincides with the normalization of the Venezuelan economy after years of recession when ties with China were suspendeda pause that was aggravated by the covid-19 pandemic.
China became a key creditor to Venezuela in 2007, when it first provided funds for oil and infrastructure projects under the late president. Hugo Chavez. Public data supports estimates that Beijing lent more than $60 billion in oil-backed loans through state-owned banks through 2015, reaching an unprecedented level of diplomatic and financial investment in Latin America and, perhaps, the world.
China’s support filled an investment and security vacuum caused by Washington’s decades-long distancing from Caracas, and became crucial to continuing Chávez’s legacy of socialism during the transition to Maduro. The collaboration included roads, bridges, power plants and food processing factories, but many of these were never completed or are no longer in use.
“Relations between China and Venezuela have seriously deteriorated over the past decade due to the failure and endemic corruption surrounding Chinese projects in the country”said Parsifal D’Sola, director of the Chinese Latin American Research Center in Bogotá. “Today, the Chinese government perceives that the Venezuelan crisis has bottomed out and sees a more stable Maduro in power and less isolated in the region.”
Although there is little public data, D’Sola, who is founder and executive director of the Andrés Bello Foundation, estimates that the outstanding debt is between USD 11,000 million and USD 12,000 million, which means that Venezuela has paid almost 80% of the total it owes to China, which receives oil as debt payment. In recent years, Venezuela has been unable to ship enough crude to meet its obligations as its output fell sharply and crude prices plummeted, triggering one of the sharpest economic contractions in modern history. A series of US sanctions further hampered the country’s ability to export oil, its biggest source of income.
the state Petroleos de Venezuela SA it is currently conducting an extensive contract review after discovering billions of dollars in oil revenue is missing. Between 5% and 10% of those exports would go toward paying off debt, the people said.
“The Venezuelan government has come a long way in paying off the debt with crude oil,” said Rodolfo Sanz, a lawmaker in the Maduro government and former minister of Basic Industries and Mining, who is vice president of the Venezuela-China Parliamentary Friendship Group. It is time for Venezuela to raise “the status of economic and political relations with China,” he said.
Production from the Sinovensa joint venture of China National Petroleum Corp., a key producer in the Orinoco belt of Venezuela, nearly doubled to 90,000 barrels per day in early April, according to PDVSA data to which Bloomberg had access. Production is still about 40% below 2015 record levels of 160,000 barrels per day.
In another sign of closer ties, the senior Chinese diplomat and former adviser to the Chinese Embassy in Venezuela Lan Hu has just returned to Caracas as ambassador after four years at the Beijing Foreign Ministry and a period as ambassador in neighboring Colombia.
“China and Venezuela are comprehensive strategic partners and both countries have always followed the principle of equality and mutual benefit,” said the Chinese Ministry of Foreign Affairs in response to questions about the new relations with Caracas. “Practical cooperation based on the principle of mutually beneficial cooperation and marketing generates tangible advantages for the two peopleshe said, declining to comment on specific aspects of the relationship.
The US State Department did not respond in time for publication after several requests for comment.
The renewed relationship with China has not gone unnoticed on Venezuelan state television, with frequent segments highlighting bilateral projects over the past month, such as a recent invitation from Beijing to help build a lunar base in about five years. Venezuela has no history of space exploration.
The Chinese company Huawei Technologies Co., which has been present in Venezuela for two decades, has hired more than 100 employees in Caracas in the last yearaccording to two of the people.
In 2019, Maduro asked Huawei to help build 4G technology across the country, just days after former President Donald Trump signed an executive order restricting Chinese telecommunications companies from selling their equipment in the US. Press representatives for Huawei in Venezuela did not respond to a series of requests for comment.
“It was never going to be the case that China just walked out” of Venezuela, said Margaret Myers, director of the Inter-American Dialogue and a fellow at the Wilson Center. “It was always going to be that he would bide his time.”
For Sanz, the legislator of the Venezuelan ruling party, China is “a strategic ally of the first order.”
“Despite the fact that the volumes of commercial exchange are lower than in the past, China continues to see Venezuela as an important country,” he said. “And we will continue to be an important country for China because we have things to offer.”
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