By the Blouin News Business staff

Venezuela goes to China for cash and more

by in Americas, Asia-Pacific.

Venezuela's President Nicolas Maduro (R) and Chinese President Xi Jinping salute children REUTERS

Venezuela’s President Nicolas Maduro (R) and Chinese President Xi Jinping salute children REUTERS

Venezuela’s President Nicolas Maduro is building upon the strong relationship with China that his predecessor Hugo Chávez initiated more than a decade ago. Maduro has just concluded his first official state visit to Beijing as president — though he is well known to his hosts from his time as Chávez’s foreign minister.

During this latest trip, he and his Chinese counterpart Xi Jinping signed more than a dozen cooperation and investment agreements valued collectively at $20 billion. Maduro called the relationship between their two countries “an example of how a relationship can be developed on the principles of mutual benefit and shared profit.” His critics cast the visit, undertaken barely five months since succeeding to the presidency, as Maduro going cap in hand to Beijing to get the patches he needs for an economy in deep trouble (inflation topped 45% in August).

Maduro made a calculated political move before he set off (one that raised some eyebrows in the U.S.). Days before the trip Venezuela’s petroleum ministry announced that state-owned China National Petroleum Corp. would develop the Junin 10 block in the Orinoco oil belt, one of the world’s largest reserves, in a joint venture with Venezuela’s own state oil company, Pdvsa. Production is expected eventually to reach 200,000 barrels of crude per day, approaching 10% of Venezuela’s current output.

That oil will likely find its way to China in short order. The two countries relationship of mutual benefit and shared profit mostly comes down to Venezuela borrowing money from China which is repaid in oil and fuel shipments. China is aiming to raise the 640,000 barrels of oil a day it currently gets from Venezuela to 1 million barrels a day by 2015. A new $5 billion loan from the China Development Bank was signed during Maduro’s trip. China’s Export-Import Bank also signed a deal to develop a port for Pequiven, Venezuela’s state petrochemical company.

From 2005 to 2012, China has loaned Venezuela $47 billion, accounting for 55% of the total credit China’s lenders have advanced to South American nations. Venezuela, though, is only China’s fourth-largest trading partner in the region, behind Brazil, Mexico and Chile. This pecking order was evident when Xi, on his second foreign trip as president, skipped Venezuela in a swing through Tobago, Costa Rica and Mexico. Meanwhile, China is Venezuela’s second largest trading partner.

Ahead of a proposed China-CELAC (Community of Latin American and Caribbean States) Cooperation Forum, Venezuela is trying to position itself strategically as the region’s bridge to China. But the reality for Maduro is that the ideological affinities between the two countries’ leaderships have weakened since Chávez first came to power, and the regional realpolitik is that China matters more to Venezuela than Venezuela, for all its oil, matters to China.