World Now

News from around the world

« Previous Post | World Now Home | Next Post »

China's Venezuela presence grows with loan-for-oil deal

December 16, 2011 |  2:01 pm

Hugo Chavez
REPORTING FROM CARACAS AND BOGOTA - China increased its claim on Venezuela's oil production this week with an additional $4 billion in loans, bringing to $30 billion the total owed by South America’s top oil-producing country, which is secured by future Venezuelan oil production.

To repay the debt, Venezuela now sends about 410,000 barrels of crude a day to China, or half the average 806,000 barrels per day that Venezuela sent to U.S. refineries in September, the last month for which Department of Energy figures are available. The country's average production is 2.3 million to 2.4 million barrels per day.

Venezuelan President Hugo Chavez has said on numerous occasions that he wants to diminish and even eliminate oil sales to the U.S. altogether, and replace that market with China.

Planning and Finance Minister Jorge Giordani said this week that China does not get a discount on the oil it receives. If true, that means Venezuela is receiving the loans without paying any financing costs or interest rates.

Opposition candidates vying to face Chavez in elections next October criticize the lack of transparency in the use of the $30 billion in Chinese loans. In a debate last month, many also said the deal mortgages Venezuela’s future.

Miranda state Gov. Henrique Capriles, the opposition front-runner, said in a televised debate last month that the deal is ”an inevitable result of the exaggerated discretion the chief executive has in managing public funds, and of the abandonment of the controller’s oversight role imposed by the constitution.”

“Venezuelans have no access to timely reliable information, and as a consequence we have no idea how much money is left, how much we owe, or the terms under which we have to pay it off,” Capriles said. Said another candidate, Zulia Gov. Pablo Perez: “We have no idea where the money is.”

Of the loan funds, $20 billion has been designated for housing and infrastructure projects, including ports, electric power and railroad projects. But there is no public accounting of when and how the money is to be spent.

Apart from the loans, China has signed deals totaling $40 billion to invest in energy projects through 2016, including an oil production and refining project called Junin in the oil-rich Orinoco Belt in eastern Venezuela. The project is near projects that ExxonMobil and ConocoPhillips abandoned in 2007 rather than cede majority control as demanded by Chavez. The two companies are still waiting for full remuneration for their investments.


Venezuela's Chavez to seize bank

Healthcare suffers in Venezuela

The little tramp's classic labor lesson

--Special correspondents Mery Mogollon and Chris Kraul. 

PHOTO: Venezuela's President Hugo Chavez holds up copies of the phrasebook of former Communist Party Chairman Mao Tse-tung during a meeting in Caracas on Nov. 24 with Zhang Xiaoqiang, right, vice minister of China's National Development and Reform Commission. Credit: Reuters/Miraflores Palace handout.