On January 7, 2015, Venezuelan President Nicolas Maduro reportedly announced that he had attracted an additional $20 billion in investment from Bank of China and China Development Bank. The announcement came the day before the opening of the first ever ministerial Forum of China and the Community of Latin American and Caribbean States (CELAC), being held in Beijing, which Maduro is attending. Although little detail is yet available about what this $20 billion is being provided for, Maduro announced that the proceeds would go to “projects of the economic, energy and social kind.” It is not expected, however, that these funds will be available for imports or debt repayment. They will likely be linked to future deliveries of oil or specific project financing. Since 1998, Venezuela has reportedly received some $42 billion in long-term loans from China and has repaid a little over half of that (mostly in the form of oil deliveries).
Venezuela is currently suffering from the highest inflation rate in the Americas, at approximately 60%, and is experiencing acute financial strain due to plunging oil prices. Oil comprises some 95% of the country’s total exports, making Venezuela largely dependent on faltering energy industry. This would not be the first time that financing of this magnitude would be provided by Beijing to Caracas amidst times of economic and financial turmoil, with similar sums provided in the past — couched as advance payments for future deliveries of oil — but that also serve the purpose of assisting during particularly vulnerable periods for Venezuelan leadership.
Beijing is likely nervous about the stability of a friendly regime, as social upheaval in Venezuela intensifies with basic imports dwindling and services deteriorating. Chinese President Xi Jinping described Maduro as “an old and good friend of the Chinese people” in a speech at the Great Hall of the People the next day, and said that he expected two-way trade to reach $500 billion within the next 10 years and pledged $250 billion in investment to the region over the next decade. With regard to Venezuela, specifically, Xi said that China supports Venezuela‘s efforts to restructure its economy and boost manufacturing and expressed his hopes that Maduro would use the bilateral financing to fund energy, mining, agriculture and industry. It is likely that Chinese companies will play prominently in these industries in the period ahead.