Venezuela has secured a loan from the Chinese government of $5bn. Venezuelan President Nicolas Maduro stated only that it would be used to “finance development,” without giving any specific details. The loan will, according to Venezuela Analysis, be repaid using oil exports to China. Venezuela currently sells 640,000 barrels of oil to China daily, with this expected to rise to one million.
China is now Venezuela’s primary financial backer
The loan comes at an important time for Venezuela. The steep decline in world oil prices has hit the country particularly hard, as oil accounts for 95 percent of Venezuela’s exports. The country is also in the midst of a recession and reeling from high inflation, resulting from a mixture of economic mismanagement and sanctions imposed by the United States.
China is now Venezuela’s primary financial backer. Since 2007 the Latin American nation has received over $50bn in loans, reported the LA Times earlier this year. In January of 2015, after a trip to China, President Maduro secured $20bn from China to fund infrastructure development.
According to The Diplomat, the loan from China stems from a wish to “avert a major crisis in a country that has given it a geopolitical foothold in Latin America for decades.” The loans are perhaps less about development than attempting to put Venezuela’s ailing economy on life support.
China has had close relations,based on ideological affinity, with Cuba since Maduro’s predecessor, the late Hugo Chavez, was elected to office. As Venezuela moves closer to China, Cuba has warmed relations with its traditional adversary, the United States, as economic sanctions and travel restrictions have eased.