Saturday, December 13, 2014
Falling Oil Prices Push Venezuela Deeper Into China's Orbit
Via BusinessWeek: Venezuelan President Nicolás Maduro had a Plan B in the event the Organization of Petroleum Exporting Countries declined to back his country’s proposal to cut output to boost prices. The day after OPEC’s Nov. 27 decision to maintain production at current levels, a move that drove oil prices to new lows, a somber-looking Maduro went on national television to tell the Venezuelan people he was dispatching Finance Minister Rodolfo Marco Torres to Beijing. Torres spent the first week of December in China, during which he tweeted photos of his meetings with Chinese officials and bankers. The late Hugo Chávez cozied up to China as part of his drive to curb U.S. influence in the Americas. Maduro, like his predecessor, has relied on Beijing to underwrite Venezuela’s flagging socialist revolution and finance the country’s gaping fiscal deficits (this year’s shortfall could amount to 15 percent of gross domestic product). Without loans from the Chinese, Maduro’s government might not have been able to weather a deep economic crisis. Under his watch, Venezuelans have had to put up with massive shortages of basic goods, the world’s highest inflation rate, and a steep currency devaluation. Beijing has so far been happy to oblige Maduro. Since 2007, China has advanced Venezuela about $46 billion in loans repayable in oil, of which about $20 billion has been repaid. The latest loan agreement was in July, when Chinese President Xi Jinping visited the country and pledged $5.69 billion in credits. Now Maduro needs more. The price of Venezuela’s market basket of crude and petroleum products is now skirting $60 a barrel. Many analysts estimate that the Maduro government needs a price of $120 a barrel to avoid cutting back or postponing spending commitments.