Maduro Says Venezuela Gets $20 Billion New China Investment
Venezuelan President Nicolas Maduro said he obtained $20 billion of new Chinese investment to shore up a recession-hit economy battered by falling oil prices. He didn’t provide details.
“With the China Development Bank and Bank of China we are strengthening a series of financing deals that have been approved on this visit,” Maduro said in recorded comments from Beijing broadcast on Venezuela’s state television yesterday. These include “projects of the economic, energy and social kind.”
The biggest collapse in energy prices since 2008 has stoked concern of a default in Venezuela as foreign currency reserves decline and the economy contracts. The impact of the announcement will depend on how much of the $20 billion will be a cash transfer instead of long-term contracts for Chinese goods and labor, Eurasia Group analyst Risa Grais-Targow said in an e-mailed report.
“The funds do not necessarily represent freely available cash that the government can use for imports or to make debt payments,” Grais-Targow said.
Former President Hugo Chavez and his successor Maduro have turned to China for financing amid tense relations with U.S.- funded multilateral organizations such as the World Bank. China has lent more than $45 billion to Venezuela in the past decade, mostly in return for oil supplies, including a $4 billion loan in July.
Oil’s Plunge
The price for Venezuela’s oil, which accounts for more than 95 percent of the country’s exports, has plunged by more than half from last year’s peak in June to $47 a barrel this month.
Maduro is visiting China to attend the opening ceremony of the first ministerial meeting of the Forum of China and the Community of Latin American and Caribbean States, or CELAC, which opens today. The forum, proposed by Chinese President Xi Jinping during his trip to Latin America last July, is the first governmental exchange mechanism between China and the bloc, comprising 33 countries in the region.
In his speech at today’s ceremony at the Great Hall of the People in downtown Beijing, Xi said the two-way trade would reach $500 billion within the next 10 years and pledged $250 billion in investment in the region over the next decade.
China and Latin America have between them one third of the global population, a fifth of the total landmass in the world and an eighth of global economic output, which makes this forum “a great invention” for boosting bilateral ties, Xi said.
Five-Year Plan
“The forum sends the world a positive message about deepening relations between China and Latin America,” Xi said. “We should jointly build this new cooperative platform from a strategic perspective and a long-range vision.”
The two-day meeting will generate a bilateral cooperation plan for the next five years, the Beijing Declaration and the Regulations on China-CELAC Forum, according to the Chinese President. The cooperation plan will define key areas and specific measures for overall cooperation from 2015 to 2019, covering a wide range of areas from energy and resources to politics and security, Xi said.
Besides Maduro, the meeting includes Costa Rican President Luis Guillermo Solis, Ecuador President Rafael Correa Delgado and Bahamas Prime Minister Perry Christie.
During Maduro’s talks with his Chinese counterpart yesterday, Xi called on the two countries to “push forward cooperation” in the areas of oil exploration, infrastructure and technological innovation, according to China’s official Xinhua News Agency.
Relations Upgraded
Xi, calling Maduro “an old and good friend of the Chinese people,” said China supports Venezuela’s efforts to restructure its economy and boost manufacturing. Xi also said he hopes Venezuela will use the bilateral financing mechanisms to channel more funds to energy, mining, agriculture and industry.
Bilateral relations between the countries were upgraded to a “comprehensive strategic partnership” during Xi’s visit to Venezuela in July 2014, which Xi said began “a new chapter” in the relationship.
“It can be said that the development of China-Venezuela relations and win-win positive cooperation have been raised to a new level,” Xi said at yesterday’s meeting.
Venezuela’s benchmark bonds due in 2027 rose 1.58 cents to 41.63 cents on the dollar at 3:14 p.m. inNew York, the biggest daily increase on a closing basis since Dec. 19. The yield fell 86 basis points to 24.2 percent. The country’s dollar-denominated bonds had lost an average 31 percent in 2014, more than any other nation tracked by Bloomberg indexes.
Venezuela isn’t the only Latin American country turning to the Chinese. Ecuador’s Finance Ministrysigned loan deals with China for $7.5 billion, according to an e-mailed statement. The accord included a $5.3 billion credit line from Eximbank.
To contact the reporter on this story: Anatoly Kurmanaev in Caracas atakurmanaev1@bloomberg.net
To contact the editors responsible for this story: Andre Soliani at asoliani@bloomberg.net Andrew Davis, Greg Ahlstrand
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