The search for fresh funds: Maduro visits China
Venezuelan President Maduro with his Chinese counterpart Xi Jinping/REUTERS
Venezuelan President Nicolas Maduro is currently on a state visit to China for a few days, to discuss various economic arrangements that exist between the two nations. The trip of the head of the crisis struck OPEC nation is seeking to discuss various loan disbursement arrangements with its key Asian financier.
The leader of the leftist nation announced on a state broadcast his “great expectations” for the trip and his hope to accomplish some “big achievements” without providing any specific details of the same. Yet, the Information Ministry did not respond to any requests for comments regarding the broadcasts.
The Northern Latin American nation has been facing a grave socio-political and economic crisis since 2010, with there being severe compromises to standards of living of the general populace, skyrocketing inflation rates and the worsening of administration due to rampant political corruption. The crisis has witnessed greater contraction of per capita and national GDP than that of the United States in the 1930s during the Great Depression. The crisis has, hence, affected normal citizens of the country in a variety of ways. The country has witnessed the closure of companies and businesses, severe unemployment and low economic productivity, all of which can be somewhat attributed to the over-reliance on the nation’s oil industry. Another aspect that has caused grave concern in Venezuelan society is the rampant crime rate, with statistics estimating the murder rate at around 90 per 100,000 people in 2015.
The overall poor conditions in the country have forced various citizens to seek asylum in neighbouring countries like Ecuador, Colombia, Brazil, and Argentina, where they have sought to re-start their lives by getting work permits or gaining citizenship of the new country. The crisis has hence indirectly raised major concerns over immigration in the region, with many migrants attempting to cross borders with inadequate documentation.
It is in this context that the Venezuelan leader has sought foreign aid schemes from nations like China to help re-stabilize the country’s economy and prevent the economy from going into bankruptcy. The comments from the Chinese government have so far been positive and optimistic, with trust being shown for Venezuela’s administration and their ability to reconstruct the nation’s economy and restore stability in the government. Chinese ministry spokesperson Geng Shuang revealed in statements that faith of China in the people and government of Venezuela to handle their domestic affairs within their legal framework.
Over the last decade, China has forwarded funds worth over $50 billion to Venezuela via oil-for-loan agreements that not only allowed China to establish a source of energy supplies for their domestic use, but also to secure relations with an anti-U.S. ally in Latin America. However, the flow of funds halted three years ago when Venezuela specifically requested a change in the terms of payment as the prices of oil were falling, causing a further hyper-inflationary collapse of the Venezuelan economy.
In July, the finance ministry of Venezuela confirmed that the China Development Bank was granting $250 million to boost oil production in the country, but did not disclose any further details regarding the same. Previously, another loan worth $5 billion was also granted to Venezuela by China, but as per reports, the entire amount has not been forwarded yet.
As per the analysis of local consultants, Venezuela was on track to receive a fresh loan of $5billion for further improving oil-related projects. The sanctioning of the loan, however, was on condition that there would be a devaluation of the currency and more currency control options made available in Venezuela for China.
*Rayan Bhattacharya is a Research Intern at The Kootneeti
