China to Lend Venezuela $5 Billion as Maduro Visits Beijing
(Bloomberg) -- China agreed to extend a $5 billion credit line to cash-strapped Venezuela, said the Venezuelan finance minister, as President Nicolas Maduro headed to Beijing.
Minister Simon Zerpa told Bloomberg News that Venezuela would pay back the loan with either cash or oil. The countries were expected to sign what Zerpa described as a strategic alliance on gold mining.
“Venezuela has a great alliance with China,” Zerpa said on Thursday.
The finance minister was speaking in Beijing ahead of a state visit by Maduro, who’s seeking greater Chinese support to weather a financial crisis that has led to unrest, assassination attempts and the collapse of the country’s currency. Maduro has halted most payments on Venezuela’s foreign debt and owes more than $6 billion to bondholders, cutting off most sources of new financing.
China and Venezuela are finalizing agreements and would release details in a timely manner, Chinese foreign ministry spokesman Geng Shuang told reporters in Beijing on Thursday. Any financing cooperation would be in line with international norms, he said.
“The domestic situation is getting better and Venezuela’s government is actively promoting economic and financial reform,” Geng told reporters.
Zerpa said he met with Chinese Vice President Wang Qishan, as well as various ministers, while in Beijing. Venezuela “continues to look for a mutually agreed upon solution” with foreign bondholders, Zerpa said.
Bonds of state-run oil company Petroleos de Venezuela maturing in 2020 rose 0.3 cent to 81 cents on the dollar, with yields standing at 22.4 percent. The government’s benchmark 2027 bonds, currently in default, were little changed at 23 cents.
China has been a key lender to Venezuela since 2008, when it first provided funds for infrastructure and oil projects in the country. Although there’s little public data, China has lent an estimated $70 billion in several installments, most to be paid back in oil, according to Asdrubal Oliveros, director of Ecoanalitica, a consulting firm in Caracas.
“This will give the government some breathing room,” Oliveros said.
Venezuela has been in the throes of a economic meltdown since oil prices collapsed nearly four years ago. Despite the rout, the Maduro administration has largely refused to liberalize a heavily-managed economy even as inflation skyrockets and hunger runs rampant.
A complicated web of price caps and currency controls are widely blamed for the country’s crippling shortages of basic staples and hyperinflation, while the leftist government insists its woes are the result “economic war” waged by the Trump administration and the political opposition.
Last week, a team of Chinese advisers arrived in Caracas as the government unveiled plans to overhaul Venezuela’s 15-year-old currency controls. Zerpa promised the new system would be “free and clear,” but economists remain skeptical that the Maduro administration will be able satisfy dollar demands as creditors circle and the oil industry continues to crumble.
To contact Bloomberg News staff for this story: Ben Bartenstein in Beijing at email@example.com;Fabiola Zerpa in Caracas Office at firstname.lastname@example.org
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