Chavez and China

President Hugo Chavez visited Beijing in December 2004 to consolidate his strategic alliance with communist China. On Christmas Eve – 24 December – Chavez pledged in Beijing that Venezuela’s oil reserves would be available to fuel China’s economic development.

Venezuela would break the bonds of US imperialism, he added.

Merry Christmas, China. The interventionist, imperialist, exploitative gringos were out, and communist China ever since has been Bolivarian Venezuela’s new best friend, together with Cuba and Iran, of course.

China’s government took Chavez at his word.

China and Venezuela have signed over 300 bilateral agreements since 2005. Energy agreements predominate. Beijing is determined to secure a large, and growing, share of Venezuela’s crude oil and gas resources.

But it doesn’t stop there. China also is keen to acquire stakes in Venezuela’s non-oil resources (ferrous and non-ferrous) and agriculture.

China has already committed substantially to its strategic alliance with the Chavez regime, which is not saying that Venezuela – the country – is committed to Chavez’s relationship with Beijing.

China has loaned $28 billion to the Chavez regime in cash-for-oil deals in which China appears to be profiting overmuch at Venezuela’s expense.

CNPC has committed in writing, at least, to invest $16 billion to develop an extra-heavy crude production joint venture with Pdvsa in the Orinoco oil belt’s Junin 4 block.

The bilateral agreements signed since 2005 also are worth over $100 billion on paper anyway, and include 3-4 proposed joint refineries in China and 3-4 proposed crude oil production joint ventures in Venezuela.

Chinese loan money currently is funding five thermal power generation plants built by Chinese contractors with Chinese components, all near Pdvsa assets (El Palito/Planta Centro) or in areas of interest to Chinese oil companies.

Chavez’s strategic alliance with China was developed by Chavez. It’s an important point, since there is a substantial body of legal opinion in Venezuela that argues that Chavez’s agreements with China including the $28 billion of cash-for-oil loan deals are illegal and unconstitutional even under the Bolivarian constitution.

It’s something for Beijing to think about, particularly now that Chavez’s PSUV/PCV doesn’t control almost 100% of the National Assembly as of 5 January, 2011. Perhaps foreign policy mandarins in Beijing also are weighing the future significance – if any – of the fact that Chavez lost the popular vote by 52-48% in the past Sunday’s legislation elections.

But what has Venezuela gained from Chavez’s strategic alliance with Beijing?

Here is a recent Al-Jazeera report about China in Africa. Perhaps it offers some insight about what Venezuela might expect as Chavez continues to leverage (indebt) his alliance with Beijing.

China wants Venezuela’s exportable raw commodities, starting with crude oil but also including ferrous and non-ferrous metals. China also may be interested in farming Venezuelan land with Chinese farmers to feed its people in China. Over 1 million Chinese currently work farms in Africa, growing food that is exported to China.

Chavez says his regime’s alliance with China is vital for the sustenance of the emerging Bolivarian Socialist model.

But the model apparently consists of China taking Venezuela’s raw commodities to China with minimal-to-zero downstream transformation in Venezuela.

Chinese companies developing resource-extraction projects in Venezuela using Chinese-issued loans paid for in crude oil by Venezuela to finance the development of these Chinese projects in Venezuela by Chinese contractors using Chinese-made components wherever possible. I’m confused.

Doesn’t this sound suspiciously like the bad old days of US-centric corporate exploitation of Latin America denounced decades ago by perfect idiots like Eduardo Galeano?

Venezuela is a prime hub for the expansion of China’s regional interests, which focus mostly on energy in South America, ending all support for Taiwan in Central America, and challenging the US wherever possible. CNPC reportedly has been in talks with Cupet and Pdvsa about refinery joint ventures in Cuba. Chinese oil companies also are developing refinery and pipeline projects in Costa Rica and Honduras, and operate in Ecuador, Peru, Colombia and other countries.

Some in China’s military – the PLA – are thought to be eyeing Bolivarian Venezuela as a strategic outpost of China’s expanding global reach. Some Chinese military leaders even may think that the alliance between Chavez and Cuba – Cubazuela – could benefit China’s strategic interests. Not good for Venezuela, since increasingly among young PLA officers and even some generals there appears to be some longing for an armed confrontation with the US.

China’s business culture certainly would prosper in Venezuela’s hugely corrupt Bolivarian culture, like dirt under a fingernail. But I don’t see any real Chinese FDI flooding into Venezuela yet. Cash loans for crude oil, yes; but no gross fixed investment that creates good, sustainable jobs here. In fact, I don’t see much FDI at all in Venezuela any more.

Chavez announced a few days before last Sunday’s elections that he would visit Beijing for the second time this year, immediately after the elections, to sign yet another batch of new agreements with China. It’s unclear at this time if he’s still planning to travel to Beijing soon.

But now that Hugo lost the popular vote nationally, and lost all of Gran Caracas except the Libertador district – aka Chavezland – where the PSUV/PCV reportedly won by only a few hundred votes, might some Chinese Latin Americanists be having second thoughts about El Comandante’s future?

The success of China’s efforts to capture a huge share of Venezuela’s natural resources for itself ultimately depends on the longevity of the Chavez regime.

If Chavez doesn’t win re-election again in December 2012, it could be curtains for China in Venezuela as of 2013. The bilateral agreements that Chavez signed with Beijing easily could be repudiated by his successor in Miraflores.

What would Beijing do if that happens? Deploy gunboats to La Guaira like the Brits did over 100 years ago?

About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
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2 Responses to Chavez and China

  1. Gringo says:

    The Chinese are not altruists, but act in self-interest. Thugo has not read the fine print of th agreements, to the detriment of Venezuela.


  2. Mike E. says:

    Great analysis. I am having a ball observing how the Chinese play Chavez!

    Somewhat OT:
    So the Senegalese are angry and making xenophobic comments, about the Chinese come (I presume LEGALLY) to their country, making a living by working hard. But they do not understand why many Europeans are angry about Africans immigrating ILLEGALLY to Europe and in large numbers take advantage of many counties’ social services for free.
    We’ll have to provide them with some sensitivity and diversity training.


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