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Abstract

This article explores the Chinese–Venezuelan oil agreements established after 2007 to identify both governments' objectives and to pose questions of interest for determining their possibilities and limitations. The first section discusses the global energy background and the evolution of the Venezuelan economy in the last decade, including changes to oil policy after 1999; the second section analyzes the content of the bilateral oil agreements; and the third section evaluates the material and nonmaterial aspects of Chinese and Venezuelan foreign policies included in them. The article concludes that, although both governments share some ideational premises, realpolitik matters in their bilateral oil cooperation. Este artículo examina los acuerdos petroleros entre China y Venezuela establecidos después de 2007 para identificar los objetivos de ambos gobiernos y hacer preguntas de interés para determinar sus posibilidades y limitaciones. La primera sección aborda el panorama histórico de la energía global y la evolución de la economía venezolana en la última década, incluidos los cambios en la política petrolera a partir de 1999. La segunda sección analiza el contenido de los acuerdos petroleros bilaterales, y la tercera evalúa los aspectos materiales y no materiales de la política internacional china y venezolana contenidos en estos. El artículo concluye que, aunque ambos gobiernos comparten algunas premisas ideológicas , la realpolitik es importante en la cooperación bilateral petrolera.
The Chinese–Venezuelan Oil
Agreements: Material and
Nonmaterial Goals
Rita Giacalone and José Briceño Ruiz
This article explores the Chinese–Venezuelan oil agreements established after 2007 to
identify both governments’ objectives and to pose questions of interest for determining
their possibilities and limitations. The first section discusses the global energy background
and the evolution of the Venezuelan economy in the last decade, including changes to oil
policy after 1999; the second section analyzes the content of the bilateral oil agreements;
and the third section evaluates the material and nonmaterial aspects of Chinese and
Venezuelan foreign policies included in them. The article concludes that, although both
governments share some ideational premises, realpolitik matters in their bilateral oil
cooperation.
Este artículo examina los acuerdos petroleros entre China y Venezuela establecidos
después de 2007 para identificar los objetivos de ambos gobiernos y hacer preguntas de
interés para determinar sus posibilidades y limitaciones. La primera sección aborda el
panorama histórico de la energía global y la evolución de la economía venezolana en la
última década, incluidos los cambios en la política petrolera a partir de 1999. La segunda
sección analiza el contenido de los acuerdos petroleros bilaterales, y la tercera evalúa los
aspectos materiales y no materiales de la política internacional china y venezolana
contenidos en estos. El artículo concluye que, aunque ambos gobiernos comparten algunas
premisas ideológicas , la realpolitik es importante en la cooperación bilateral petrolera.
Key words: oil, Venezuela, China, ideas, interests
I
n the last decade, the rise of Chinese trade and investment abroad has affected
developing and emerging markets. In Latin America, its consequences have
been an increase in trade flows toward the Pacific; an emphasis on extraregional
rather than intraregional trade; and a change in the sector composition of trade,
with more primary goods in Southern Cone (Argentina, Brazil, Chile, and
Uruguay) exports (Lélis, Cunha, & Lima, 2012).
In Venezuela, a nation in which oil constitutes the bulk of exports, the People’s
Republic of China (PRC, subsequently China) has recently entered the field of oil
exploration and production in association with the government. Venezuela has
hailed this decision as opening the possibility of obtaining independence from
U.S. companies that had traditionally dominated this field, but the deal has been
Latin American Policy—Volume 4, Number 1—Pages 76–92
© 2013 Policy Studies Organization. Published by Wiley Periodicals, Inc.
criticized because Chinese investments in the exploitation of natural resources
belonging to the state could deepen Venezuelan dependence on oil exports rev-
enues, increase the already large role of the state in the economy, and curtail
future oil sales to guarantee debt repayment of a Chinese loan to a bilateral fund
(Orozco, 2011).
This article explores three aspects of the Chinese–Venezuelan oil agreements:
the global oil background and the evolution of the Venezuelan economy during
the last decade, with emphasis on changes in its oil policy since 1999; the content
of the oil agreements; and the material and nonmaterial elements included in
them. The study is based on secondary material, including a specialized bibliog-
raphy, but also press information, published interviews, and statistical data. Our
aim is to pose questions that may contribute to further research and discussion.
Global Energy Situation, Chinese Objectives, and Recent Venezuelan
Oil Policy (1999–2012)
The global oil landscape at the beginning of the 21st century is characterized
by increased demand for energy and restriction of supply because of dwindling
natural resources. Moreover, 77% of that supply is presently under the control
of governments that restrict access to their country’s natural resources
(Mirsaeedi, 2009, p. 319). Part of the increased demand is due to the pressure of
emergent economies, such as China, the second largest consumer of energy in
the world. In the mid-1990s, its economy entered a phase in which cars became
the main means of transport, displacing other sectors. This change resulted in
a government industrial strategy in which the automotive industry was con-
sidered an engine of economic growth, following the model of industrial devel-
opment in the United States. If the number of Chinese oil-propelled vehicles
grew 5.7% from 1980 to 1999, since then it has grown another 26.5% (Shalizi,
2007, pp. 136–137).
1
This and similar growth in India is not wholly responsible
for the global rise in oil prices, which can be attributed to decreasing supply
and increasing geopolitical uncertainty regarding Iraq, Nigeria, and Venezuela,
plus the Gulf of Mexico hurricanes that have affected refining capacity (Shalizi,
2007, p. 142).
Since the 1980s, international oil prices had been stationary, except during the
Persian Gulf crisis (1990–1991) and the Asian financial crisis (1997–1998). Since
1999–2000, the Organization of Petroleum Exporting Countries (OPEC) has been
able to obtain an increase in prices by decreasing its members’ production quotas.
After 2004, the rapid increase in oil prices went hand in hand with global
economic expansion.
In the 2000s, China developed a new type of agreement—“oil for credits”
(Bingwen et al., 2010, p. 9). The agreements signed in 2007, 2009, and 2011
between the Chinese National Petroleum Corporation (CNPC) and Petroleum of
Venezuela (PDVSA) fall under this type of agreement. China’s objective has been
to obtain a steady supply of energy for at least the next decade (Rodríguez
Holkemeyer, 2011). These agreements—energy for credit lines—began in 2004
and specified that borrowers must buy goods and services from Chinese com-
panies,
2
showing the coordination between Chinese firms and the Chinese gov-
ernment through the China Development Bank (CDB) (Downs, 2011, p. 2).
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 77
In addition to the CNPC, other Chinese companies are participating in these
agreements to develop the necessary infrastructure for moving supplies out of
the region and obtaining the full benefits of the government lines of credit. In
Venezuela, the China Railway Engineering Corporation has an agreement to
build a railway between Tinaco and Anaco, at a cost of US$75 million, mostly
provided by the CDB through the Joint Chinese–Venezuelan Fund (Heavy Fund)
established in 2007. The project is part of a multimodal link that would go from
the confluence of the Orinoco and Caroni rivers in eastern Venezuela to the
Pacific coastline in Colombia (Rodríguez Holkemeyer, 2011) and includes the
construction of towns along the way for lower-income people. PDVSA (2007,
p. 169) reported the formation of a mixed socialist agro-industrial enterprise
between China’s Helongjiang Xinliang Grains & Oil Group Co. Ltd. and PDVSA-
Agrícola. Its projects include the building of grain storage areas, rice and soy
cultivation, and the production of balanced animal food, as well as pork, mainly
in the Orinoco Belt. In the industrial sector, joint companies would be developed
in telecommunications for the production of cell phones in Venezuela with
Chinese technology. The same would be done with electric appliances (refrigera-
tors, stoves, air conditioners) by means of an agreement between the Chinese
Electric Appliances Corporation and the Venezuelan Corporation of Intermediate
Industry (Carlson, 2007). The fund would also financed five metro lines, a train
from Cúa to Encrucijada, and a highway (Downs, 2011, p. 49).
In addition to more than US$28 billion granted since 2007, including US$8
billion to capitalize the Heavy Fund, the CDB gave Venezuela loans of US$20.6
billion in 2010. The new deal encompassed three agreements: a US$10 billion loan
incorporated under English law, a RMB 70 billion loan governed by Chinese law,
and an oil supply contract between CNCP and PDVSA under Venezuelan law
(Downs, 2011, p. 49). The second loan and US$4 billion of the first one would fund
projects jointly selected and implemented and seemingly conditioned to hiring
Chinese firms (e.g., the contract granted to China’s CITIC Group to build housing
units in Venezuela). The expanded role of CDB in determining how funds should
be spent and of Chinese firms in implementing them signals a departure from
previous agreements. It is probably a risk-mitigating factor, because the lengths
of the repayment periods necessitate guarantees that they would be repaid even
after the present government is out of office (Downs, 2011, p. 53).
In general, the agreements specify that Venezuela would increase its supply of
oil to China and that China would invest in Venezuelan agriculture, infrastruc-
ture, mining, and energy production, increasing annual trade between the two
countries that already had grown from less than a half a billion dollars in 2003 to
US$5 billion in 2008 (Suggett, 2009). The implementation of these measures has
made Venezuela China’s major Latin American trade partner.
3
A decade before,
China’s largest trade partners in Latin America were Mexico, Brazil, Argentina,
Chile, and Cuba, and its main exports were textiles, light industry, and machin-
ery and equipment, in exchange for iron, copper, wheat, wool, sugar, and paper
pulp (Xu, 1996, p. 193).
Since the 1930s, oil has been the axis of the Venezuelan economy because of the
amount of money generated by selling oil and its derivatives in the international
market. The state is at the center of this process, because of its ownership of oil
fields, and it is the main factor in internal redistribution of the oil rent (Baptista
78 Latin American Policy
& Mommer, 1989). A conflict of interests over redistribution developed between
the service and oil sectors that prefer free trade, capital mobility, and a strong
currency, and industrialists and agriculture and cattle producers, oriented toward
the domestic market, who prefer tariff protection (Schliesser & Silva, 2004). Since
the 1960s, economic policies conciliated both interests; while exchange control
and macroeconomic policies favored the outward-oriented sectors, subsidies,
credits, and tariffs helped the inward-oriented ones (Frieden, 1991, pp. 183–185).
This conciliatory economic policy was sustained until the late 1970s, but the
external debt crisis (1982) upset this trend (Bello & Ayala, 2004, p. 41), and
successive governments experimented with different development models. In
1996, with inflation at 103%, salaries losing 40% of their real value, and low
international oil prices, Venezuela resorted to the International Monetary Fund
(IMF) (Schliesser & Silva, 2004). By then, state mechanisms were unable to
manage social and economic conflicts. Institutions were questioned and political
actors mobilized to restructure the economy in their own interests (Machado &
Useche, 2001).
In 1998, a leftist-leaning civic–military coalition headed by Hugo Chávez took
over power. This government emphasized constitutional reform and administra-
tive and political reforms, and since 2001, emphasis moved to the economy in an
effort to restructure it. The axis of the 2001–2007 economic programs was oil
(Guerra, 2004, pp. 36–39), but the increase in oil prices and a strong currency led
to an increase in consumption and imports of luxury products. Cuts in oil
production to sustain high oil prices also meant a fall in GDP, 21% inflation, and
a 15% rise in unemployment, which became evident at the beginning of 2002
(Guerra, 2004, p. 53). The political crisis of April 2002 and the oil strike of
December 2002–January 2003 exacerbated these negative trends (Rodríguez,
2008).
During these years, Venezuelan oil dependence grew because oil-generated
funds went from 5.8% of total state income in 1998 to 15.9% in 2006 (García &
Reyes, 2008, pp. 31–32). Oil exports also grew as a proportion of total exports. In
1998, they were valued at US$12.178 billion and, by 2006, at US$48.150 billion (a
295% rise). As a proportion of total GDP, they grew from 11.66% to 14.16% during
the same years. At the same time, government measures such as the prohibition
of agricultural exports (e.g., coffee, rice) to control domestic food prices dimin-
ished the percentage of nonoil exports in the total amount (“Cae exportación no
petrolera,” 2009; “Exportaciones no tradicionales se contraen,” 2009). GDP
increased 17.9% in 2004, 9.0% in 2005, and 10.3% in 2006 (García & Reyes, 2008,
p. 27). Constant high oil prices did not mean a proportionate growth of the
Venezuelan economy. In fact, it grew by only 2.7% between 1999 and 2006, mostly
due to the fall in foreign and private sector investment (García & Reyes, 2008,
p. 38), which left the state as the largest investor.
During the 1990s, the Venezuelan government had changed the hydrocarbon
legislation to attract foreign investors by means of the “opening process.” Its
objectives were to incorporate new technology and skills from abroad into the oil
business and to increase PDVSA access to new markets. The new laws opened
the domestic gasoline market and promoted the development of the petrochemi-
cal, coal-chemical, and other related sectors in three negotiation rounds from
1992 to 1997. In the first two rounds, the government secured foreign direct
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 79
investment of more than US$2 billion and, during the third, US$2.17 billion more.
Overall, these operational agreements allowed private firms to participate in 32
oil fields, including the Orinoco Belt (Stanley, 2008, p. 7).
The post-1998 Venezuelan government introduced changes in economic and
oil policies. In the oil sector, the government increased the royalties that foreign
investors paid to 30%, later to 33% and later to 50% (Stanley, 2008). The 2001
Hydrocarbons Organic Law established that the state should have the majority
share in all strategic alliances, but this was not effectively implemented until 2005
(Stanley, 2008). That year, the Venezuelan government announced that the oil
operating agreements of PDVSA, signed in the 1990s, would have to convert to
jointly owned enterprises under the hydrocarbons law of 2001 (Pascal &
Azpúrua, 2008).
4
The following year, the Law for the Regularization of Private
Participation in Primary Activities terminated all existing operating agreements
and prohibited any new contract granting rights to private parties, except as
minority investors in a jointly owned enterprise (Pascal & Azpúrua, 2008).
In 2007, more economic changes were incorporated in a constitutional reform
process aimed at establishing “real socialism” (Guerra, 2007a, 2007b). The con-
stitutional reform was rejected at the polls in December 2007, but the “enabling
law,” passed by the all progovernment National Assembly in January 2008,
granted government the right to implement these economic measures directly
(Orozco, 2008). In May 2007, the last remaining oil area open to foreign
companies—the Orinoco Belt—had been nationalized, and the government estab-
lished that there should be a 60% minimum share of state property and the
transfer of all operations to PDVSA. These measures affected Chevron, Exxon
Mobil, British Petroleum, and Conoco Phillips, which had huge investments in
the area. Some companies had previously accepted the deals, whereas others had
left Venezuela (Weisbrot, 2007), but Exxon and Conoco Phillips took the matter to
international arbitration. Anti-Western sentiment in government and the need to
generate more funds for official social programs were behind the Venezuelan
decision (Mirsaeedi, 2009, pp. 321–322).
During the oil boom (2003–2008), the existence of a market with high oil
reserves attracted foreign investors to Venezuela, but the government tried to
substitute capital and technology from traditional investors by those coming
from countries whose governments were politically closer to the Venezuelan
administration (CONAPRI, 2007). Investment in the oil sector was necessary
because PDVSA suffered problems due to the rise in production costs, the loss of
technology and human resources after the oil strike (2002–2003), and the need
to finance external cooperation and productive projects in different sectors
(Rodríguez, 2008). Foreign investors were mainly attracted by Venezuelan oil
reserves in the Orinoco Belt—some 79.729 billion barrels (7.3% of the world total)
of heavy and extra-heavy oil that demands additional technological investments
to be processed into light oil (Oficina Económica y Comercial, 2006). Another
objective of Venezuelan oil policy has been the replacement of traditional oil
clients. Although exports to the United States are still dominant, they have been
falling vis-à-vis exports to other nations. A special case is the use of oil in
advance-buying operations of arms, technology, and other things, a trend that
may compromise the possibility of benefitting from future rises in oil prices
because the price of oil is set at the level of the time when the contract is signed.
80 Latin American Policy
Mirsaeedi (2009, p. 323) considers that the Venezuelan government had an
interest in maintaining a minimum share of foreign companies because they
offered know-how, capital, and experience, but the decision of the largest foreign
companies, Exxon and Conoco Phillips, to take the matter to international arbi-
tration upset this possibility. If the government was able to assert its sovereignty
over natural resources, it was also faced with the problem of not having
sufficient capital and know-how to continue production without any joint ven-
tures. . . . If Venezuela does not succeed in attracting enough investment, it risks
having insufficient means to sustain production, arriving at a point where losses
from a lower production volume exceed the additional revenue stemming from
world oil prices. (Mirsaeedi, 2009, p. 324)
This may explain why, since the end of the oil boom in 2008, Venezuela has not
fulfilled its export quota within OPEC (Suárez Núñez, 2009, p. 9). Venezuela’s
need to attract new investors into the Orinoco fields coincided with the Chinese
drive to obtain a larger share of global oil resources, and these became the main
motivations for the Chinese–Venezuelan agreements signed in 2007 (“Heavy
Fund 1”), enlarged in 2009 (“Heavy Fund 2”), and renegotiated in 2011.
The Chinese–Venezuelan Oil Agreements
President Chávez visited China and signed energy-related agreements in 1999,
but the beginning of a new era in Venezuelan–Chinese relations can be dated to
2001, with the establishment of a strategic alliance between the two countries.
The first action in the construction of such an alliance was the creation of a High
Level Joint Commission to coordinate relations between the two countries. Since
then, Chávez visited China several times, the Chinese president visited Caracas
in 2010, and high-level representatives of the Chinese government have been in
Venezuela to discuss mechanisms to activate the strategic alliance. Even before,
the Chinese government had fostered agreements with the Venezuelan oil state
company, PDVSA, and Chinese oil companies had been operating Venezuelan
oilfields in the Maracaibo Lake Basin (“CNPC in Venezuela,” 2012). Bilateral
cooperation in the oil sector increased and deepened after 2006.
There are at least five categories of agreements related to oil and energy issues:
(1) oil supply agreements, by which Venezuela is engaged in the provision of oil
to China; (2) agreements to promote Chinese participation in the exploration and
exploitation of oil in the Orinoco Belt; (3) financial cooperation agreements in
which China provides loans to develop economic and social projects, and Ven-
ezuela pays them by sending fuel and crude oil to China; (4) agreements in which
China supplies capital goods, such as drills or tankers, or services; and (5)
agreements on infrastructure, in particular the construction of refineries in China
to process Venezuelan oil.
Oil supply agreements and exploration and exploitation agreements represent
the majority of treaties signed between China and Venezuela, but financial agree-
ments and capital supply agreements are also important (Figure 1).
The evolution of the agreements signed by the two countries can be seen in
Figure 2, which highlights the interest of each country in promoting cooperation
and how this has evolved. In the early stage (1999–2005), exploration and exploi-
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 81
tation agreements prevailed, a fact that indicated Chinese interest in entering the
Venezuelan oil sector as a first step to ensuring an increasing supply of oil from
that country. Caracas welcomed Chinese interest because, at that time, the gov-
ernment was ending the operating agreements signed in the 1990s and trying to
diversify its partners beyond U.S. and European companies. Since 2006, supply
agreements and financial agreements (related to oil supply) were signed (Tables 1
and 2). When Chinese firms began to participate in the Venezuelan oil market,
new needs emerged, and it was necessary to provide capital goods and services
(Table 3). In the most recent stage, cooperation has evolved from exploration,
exploitation, and supply of oil to infrastructure agreements, such as the construc-
tion of tankers and refineries (Table 4).
Exploration and Exploitation Agreements
Table 1 shows the chronology of exploration and exploitation agreements.
During President Chávez’s visit to China in October 1999, the most important
agreements established a joint commission to explore and foster initiatives of
cooperation in energy and an agreement to supply Orimulsion to China. In 2001,
the Venezuelan minister of foreign affairs, Luis Alfonso Dávila, and the Chinese
minister of planning and development, Zeng Peiyan, signed a memorandum of
understanding for energy cooperation between 2001 and 2011 (Memorandum
de Entendimiento entre el Ministerio de Energía y Minas de la República
Bolivariana de Venezuela y la Comisión Estatal de Planificación y Desarrollo de la
República Popular China sobre la Cooperación Energética Decenal, 2001–2011).
Figure 1. Oil Cooperation Agreements between China and Venezuela
Source. MPPRE, Embassy of China in Venezuela.
82 Latin American Policy
Figure 2. Oil agreements.
Source. Tables 1, 2, 3, 4.
Table 1. Supply Contract Agreements
Agreement Date
Supply contract about Orimulsion 4/17/2001
Supply contract of PDVSA to Petrochina 8/24/2006
Supply contract of fuel oil between PDVSA and CNPC 3/03/2007
Supply contract of crude oil between PDVSA and CNPC 3/27/2007
Supply contract of fuel oil up to 500,000 barrels between PDVSA
and CNPC
7/24/2008
Supply contract of fuel oil between PDVSA and China Zen Hua
Oil Co. LTD.
9/24/2008
Framework supply contract of fuel oil between PDVSA and
China Zen Hua Oil Co. LTD
12/22/2009
Framework supply contract of fuel oil and crude oil between
PDVSA and UNIPEC Asia Company LTD
12/23/2009
Framework supply contract of fuel oil between PDVSA and
Petrochina International Limited Company
12/23/2009
Source: MPPRE, Embassy of Venezuela in China.
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 83
According to this agreement, the Venezuelan government would foster the
participation of Chinese oil firms in the development of studies leading to their
participation in investments for oil exploration in Venezuela and as shareholders
or operators in the exploitation of hydrocarbons. Both governments would foster
cooperation between their oil firms; carry on conversations to sign an agreement
to drill the Zumano oilfield; promote cooperation in the development of
Orimulsion; and explore mechanisms to increase their firms’ cooperation in coal,
electricity, and new sources of energy, and the Chinese government would
encourage its firms to participate in the provision of technical services and oil
engineering in Venezuela and exports of oil materials.
In 2001, PDVSA and the CNPC founded a joint venture in which the Chinese
firms had a 70% stake and signed a 30-year contract for the drilling of an oilfield
and an emulsification plant (“CNPC in Venezuela,” 2012). Chinese oil corpora-
tions, such as CNPC, Petrochina Company Limited, and the SINOPEC Interna-
tional Petroleum Exploration and Production Corporation, participated in these
agreements with PDVSA (Table 1).
Table 2. Financial Agreements Related to Oil
Agreement Date
CDB and the Ministry of Finance of Venezuela 9/13/2005
Agreement for the management of the Venezuelan Chinese
Program of Financial Cooperation
11/14/2005
Four-party agreement (BANDES, PDVSA, CDB, and CNPC) 6/11/2007
Six-Party agreement for the establishment of a China–Venezuela
joint investment fund
6/11/2007
Financing agreement between BANDES and CDB 6/11/2007
Intergovernmental convention about the financing of the
China–Venezuela Joint Fund
6/11/2007
Amendment Protocol between Venezuela and China to the
intergovernmental convention about the financing of the
China–Venezuela Joint Fund
2/18/2009
Supplementary agreement between BANDES, PDVSA, CNUOC,
and CDB, modifying and refunding the four-party agreement
of November 6, 2007
2/18/2009
Supplementary agreement between China Oil, CDB, BANDES,
PDVSA, FONDEN, and the Ministry of Economy and Finance,
amending and reestablishing the framework agreement signed
on November 6, 2007.
2/18/2009
Supplementary agreement between BANDES and CDB signed in
November, 2007, amended and reformulated as a loan
agreement
2 /18/2009
Agreement between Venezuela and China for cooperation in
long-term financing
10/09/2010
Four-party agreement for financing the Heavy Fund 2/27/2012
Financing contract between BANDES and CBD 2/27/2012
Source: MPPRE, Embassy of Venezuela in China.
84 Latin American Policy
CNPC was involved in the development of the Caracoles and Intercampo
oilfields. These oilfields are considered marginal fields and have been drilled for
longer than 50 years. According to CNPC, “peak production of the fields has
increased from 700 tons per day to 5,500 tons per day since CNPC takeover. In
2006, 1.07 million tons of crude oil was produced” (“CNPC in Venezuela,” 2012).
Similarly, the Chinese firm had signed with PDVSA a cooperation agreement on
the Zumano oilfield in 2004 and a joint venture in 2006, with CNPC holding a
40% stake. Zumano is an oilfield located in the East Venezuelan Basin composed
Table 3. Capital Goods Supply and Services Related to Oil Agreements
Agreement Date
Memorandum of understanding between PDVSA and China
Petroleum Technology and Development Corporation
(CTPDC) regarding drilling rigs
3/26/2006
Memorandum of understanding between PDV Marina and China
National United Oil Corporation on marine traffic
4/28/2006
Purchase contract of drilling rigs between PDVSA and the
CTPDC
8/24/2006
Memorandum of understanding for the creation of a joint
venture for the assembly and engineering of drilling rigs
between PDVSA and CTPDC
8/24/2006
Memorandum of understanding for the creation of a joint
venture for the transportation of crude oil between PDVSA
and the China United Oil Corporation (CNUOC)
8/24/2006
Memorandum of the meeting between PDVSA and the Chinese
firm Freet—Shengli Oil Field Petroleum (subsidiary of
SINOPEC) on the development of a project for the supply and
possible creation of a Venezuelan–Chinese joint venture for the
production of machinery, equipment and engineering for the
exploitation of heavy oil in Venezuela
11/15/2006
Agreement for the creation of a joint venture for the assembly of
drilling rigs between PDV exploration and the CTPDC
3/27/2007
Memorandum of understanding between PDV Marina and
Jiangsu Rongsheng Heavy industries for the procurement of
ships
9/24/2007
Memorandum of understanding for construction of four tankers
by the joint venture CV Shipping
9/24/2007
Memorandum of understanding to provide services of
deep-water and ultra-deep-water offshore drilling between
PDVSA CNOOC
12/22/2009
Contract for the construction of a 320,000 DWT crude oil tanker
(Hull BH518–4) between CV Shipping PTE. Ltd. and China
Shipbuilding & Offshore International Co. and LTD. and Bohai
Shipbuilding Heavy Industry Co. Ltd.
12/22/2009
Agreement between PDVSA and SINOPEC to create an oil
refining joint venture
12/27/2012
Fuente: MPPRE, Embassy of Venezuela in China.
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 85
of 15 oilfields and covering a total area of 532 square kilometers. According to
CNPC, Zumano has production of original oil in place of 6.14 billion barrels. The
remaining recoverable reserve is 510 million barrels, and the oilfield currently
produces 19,025 barrels of crude oil per day (“CNPC in Venezuela,” 2012).
Another agreement was established in October 2007 between CNPC and the
Venezuelan Ministry of Energy and Mines to jointly develop and produce 20
million metric tons of heavy oil (or 30 million metric tons after blending with
light oil) annually. In November, CNPC and PDVSA signed a memorandum to
extend integrated upstream and downstream cooperation in the Orinoco heavy
oil belt (“CNPC in Venezuela,” 2012). The Junín 4 Block, located in that area, is
another significant CNPC investment in Venezuela. The block boasts a reserve of
8.7 billion barrels of oil, and it is estimated that the project will produce approxi-
mately 400,000 barrels per day and 2.9 billion barrels of extra-heavy crude oil over
the 25-year contract term (“PetroChina signed Junin 4 Oil Project,” 2010).
SINOPEC has also participated in the Chinese strategy of exploring and exploit-
ing oil in Venezuela. Another Chinese firm, SINOPEC, has also signed an agree-
ment in 2010 to develop the Junin 1 and 8 oil blocks of the Orinoco Oil Belt, with
the goal of producing 200,000 barrels per day in each block (“China’s Sinopec to
have a stake in Orinoco Oil Belt,” 2010).
Similarly, the China National Offshore Oil Corporation (CNOOC) signed a
memorandum of understanding in 2009 to participate in the offshore production
of gas in Venezuela. A year later, the company signed an agreement with PDVSA
to participate in the Mariscal Sucre offshore gas project, which originally had
expected to start gas production in 2012 (“China’s Sinopec to have a stake in
Orinoco Oil Belt,” 2010). This project has the goal of producing 1.2 million cubic
meters of natural gas and 37,000 barrels a day of natural condensation gas. Finally,
Petrochina Company Limited, a subsidiary of CNPC, signed a framework agree-
Table 4. Infrastructure Agreements between China and Venezuela
Agreements Date
Framework agreement for the construction of a refinery between
PDVSA and Petrochina in Huhai, Province of Guandong
2/20/2008
Framework agreement of the project to construct a refinery by
PDV–Eurasia and Petrochina
5/09/2008
Agreement for a joint PDVSA–SINOPEC study for the construction of
a refinery at the Junin 8 Block in Venezuela
9/24/2008
Memorandum of understanding between PDVSA and Petrochina to
develop an oil storage and distribution terminal in the Orinoco Belt
12/22/2009
Memorandum of understanding between PDVSA and Sinohydro to
cooperate in the development of projects of infrastructure in the
Orinoco Heavy Oil Belt
12/22/2009
Agreement for the construction of offshore oil platforms by CITIC 2/27/2012
Agreement between PDVSA and Sinohydro to build an industrial
condominium at Carabobo area, Orinoco Heavy Oil Belt
2/27/2012
Source: MPPRE; Embassy of Venezuela to PRC, 2011.
86 Latin American Policy
ment with PDVSA in 2008 to establish a joint venture in the Junín 4 Block. In
April 2010, both oil corporations signed a preliminary agreement according to
which the Junín 4 Block would produce 400,000 barrels of crude oil per day
(“China Oil Giants Explore Petroleum in South America,” 2010)
Oil Supply Agreements
More than a decade after Chávez first visited China (1999), a PDVSA document
highlights that “China and Venezuela have achieved significant progress in the
past years regarding oil matters. Before, hydrocarbons supply between both
nations was non-existent. Venezuela never sold oil to China because this nation
was located too far away” (PDVSA, 2012). According to the same document,
“Venezuela currently sends China 350 thousand barrels per day of crude and
derivatives. Moreover, there is a commitment to raise that number to
500 thousand barrels per day next year and to reach 1 million barrels per day
by 2020–2021.” Table 1 shows the diverse supply contract agreements signed
between PDVSA and different Chinese oil firms in recent years.
The Financial Agreements
The first framework agreement between the CDB and the Venezuelan Ministry
of Finance was signed in September 2005. In November of the same year, they
also signed an Agreement for the Management of the Venezuelan-Chinese
Program of Financial Cooperation (Convenio para la Administración del Programa de
Cooperación Financiera Chino-Venezolana, 2005).
In 2007, there was a change in bilateral cooperation because of the emergence
of a new type of agreement—“financial agreements related to oil”—in which the
Chinese government grants Venezuela loans or financial assistance to develop
projects, and Venezuela commits to paying them by selling fuel oil or crude oil to
China under special conditions.
Some crucial agreements were signed in November 2007, when high-level
Chinese representatives visited Caracas: the four-party agreement between
BANDES, PDVSA, CDB, and CNPC; the six-party agreement for the establish-
ment of the China–Venezuela “Heavy Fund” (see first section), and the agree-
ment between BANDES and CDB (Table 2). These agreements were amended,
supplemented, or modified in 2010 and 2012.
According to the agreement, CDB granted a US$4 billion loan to BANDES,
called the Joint Fund Phase I Facility. PDVSA was to pay this loan by selling up to
100,000 barrels of fuel oil or crude oil per day in three consecutive years, from
November 2007 to November 2010. The agreement created a mechanism for the
rollover of the fund for further terms of three years, each based on the same terms
established in Phase I. A joint technical office of the CDB and FONDEN is
responsible for the implementation of the strategic development projects in infra-
structure, energy, and industry financed by the fund. The High Level Joint Com-
mission (created in 2001) coordinates and supervises the implementation of the
agreement, and BANDES and the CDB present an annual report to the commis-
sion on its activities in relation to the fund (Convenio, 2008, arts. V, VIII).
In February 2009, the Chinese vice president, Xi Jinping, visited Venezuela and
signed an agreement that increased the resources of the Heavy Fund I, which
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 87
were augmented from US$6 billion to US$12 billion. This increase was provided
by an additional US$4 billion loan granted by the CDB to BANDES, whereas
FONDEN would supply US$2 billion (Protocolo de Enmienda, 2009, art. 1).
Venezuela would pay the loan by selling 130,00 barrels per day of fuel oil and
crude oil to China for three consecutive years. The schedule and mechanisms to
supply oil to China were established in the supply agreements shown in Table 1.
In September 2010, the Chinese and Venezuelan governments established a
new agreement for cooperation in long-term financing. The Venezuelan National
Assembly ratified the agreement that same month (long-term financing agree-
ment, 2010). In the agreement, the CDB granted BANDES a loan of up to
US$10,000,000,000 and a loan of up to RMB 70,000,000,000. These loans would be
due 10 years from the date the respective agreements were signed (Long-term
financing agreement, 2010, art. 3). The loan would amortized in the following way:
PDVSA will sell oil to the China National United Oil Corporation (CNUOC or
China Oil), and CNUOC will deposit the funds of the sale in the accounts that
BANDES opens and maintains in the CDB. A portion of those funds, related to the
royalties on oil resources PDVSA pays to the government of Venezuela, will be
used to pay the CDB for amortizations of principal and interests and other related
obligations. (Long-term financing agreement, 2010, art. 4)
Capital Goods Supply Agreements and Services Related to
Trade Agreements
Since 2006, Chinese–Venezuelan bilateral energy cooperation has been diver-
sified with the signing of agreements related to Chinese supply of capital goods
to Venezuela. As shown in Table 4, they include agreements aimed at assembling
drilling rigs in China to be used by PDVSA in oil exploitation. The president of
PDVSA, Rafael Ramírez, explained the reasons. PDVSA in the past had con-
tracted 18 oil-drilling rigs from transnational firms. “Now those firms are
demanding huge amounts for the right to use this equipment. Vis-à-vis this
situation, we have decided to nationalize these machineries and put them under
the control of the State” (Ramírez, quoted in PDVSA, 2007). Because those 18
drilling rigs were not enough for the expansion plans of PDVSA, the Venezuelan
government bought more from China, beginning in 2007, when Caracas pur-
chased the first 13 Chinese drills (PDVSA, 2007). In September 2011, Ramírez
announced that Venezuela would import 138 Chinese rigs and that both coun-
tries had established a joint venture (the Chinese–Venezuelan Drilling Industry)
(“Industria China Venezolana de Taladros, ICVT,” 2011) in the Orinoco Belt to
assemble drilling rigs in Venezuela.
China has also become a supplier of oil tankers to Venezuela. As a result of the
transportation agreement signed in 2006 (Table 3), Venezuela is committed to
buying 18 oil tankers. The agreement also stated that China would help establish
shipyards in Venezuela and train Venezuelan workers (“Venezuela, China Sign
$1.3 Billion Tanker Deal,” 2006).
Infrastructure Agreements
Infrastructure agreements have been signed since 2008, with the main objective
of establishing refineries in China to process Venezuelan crude oil. They include
88 Latin American Policy
the agreement signed in 2008 (Table 4) aimed at building a refinery complex in
Guandong province, southeast China. The construction of the refinery started in
April 2012, with an investment of US$9.3 billion, with CNPC holding a 60% stake
and PDVSA the remaining 40%. The complex is expected to have an annual
processing capacity of 20 million metric tons, or 400,000 barrels a day, and
become China’s largest integrated refining complex ever built at once. The refin-
ery will process crude oil from the Orinoco Basin and will produce gasoline,
diesel, and jet fuel (“CNPC-Venezuela joint refinery set for 2014 opening,” 2012).
In 2008, SINOPEC and PDVSA signed an agreement to establish a refinery at
the Junín 8 Block, and, in February 2012, both firms established a joint oil-refining
venture at the Cabruta refinery in the Orinoco Oil Belt to be built by SINOPEC.
The Chinese firms Sinohydro and CITEC will also participate in the construction
of two US$8,000 industrial condominiums in the Carabobo campus of Orinoco
Belt (El Mundo, 2012).
Conclusion
The promotion of national interest in a more-complex and diversified interna-
tional system has led China and Venezuela to further energy cooperation. Ide-
ational reasons have also played a role in this process, but it is difficult to deny that
a realpolitik logic is behind the recent cooperation between Beijing and Caracas.
In Venezuela, this cooperation must be understood in the context of the new
foreign policy fostered by its government. One of its goals is the promotion of a
multipolar world, in response to U.S. hegemony after the end of the Cold War. As
Corrales (2010, p. 115) has pointed out, Chávez “has elevated relations with China
to almost national priority. He considers deepening ties with China as vital for
constructing a more ‘multi-polar world,’ lessening Venezuela’s dependence on
U.S. markets for oil.” In an official document of the Venezuela embassy in the
United Kingdom, this objective is clearly established:
Deepening diplomatic relations with China and other alliances with countries in
Asia, Africa, Latin America and Europe is part of promoting a “multi-polar” world
order which counteracts US hegemony. Multi-polar cooperation is an alternative to
conventional financing by the IMF and World Bank which often comes with the
burden of high interest rates and the imposition of damaging economic policies.
(Embassy of the Bolivarian Republic of Venezuela to the UK-Ireland, 201, p. 1)
China shares this interest in the promotion of a multipolar world, even if the
strategy that its government pursues is different from that of Caracas. For Beijing,
a multipolar world is linked to the democratization of international relations, or
as President Jintao asserted in 2010, a multipolar world should be based on “a
new type of relationship with each other: one in which countries of the world are
politically respectful and trusting to each other and, economically, beneficial and
reciprocal to each other.” Jintao also pointed out, “We uphold that all countries
co-exist in peace, adhere to a new view of security that is based on mutual trust,
mutual benefit, equality and collaboration, solve conflicts by peaceful means,
and safeguard world peace and stability” (“Chinese president calls for multi-
polar world, democratization of international relations,” 2010). This view of a
multipolar world has been recognized in the agreement that created the JIF/
Heavy Fund I, because it states that it is based on equality, reciprocal consultation,
and respect for sovereignty and mutual benefits (Convenio, 2008, art. 1).
The Chinese–Venezuelan Oil Agreements: Material and Nonmaterial Goals 89
Notwithstanding these ideational premises, realpolitik also matters in bilateral
oil cooperation. China needs to secure energy resources to maintain its process of
economic growth, and considering the increasing political volatility of the Middle
East and the Persian Gulf, Venezuela seems to be a more secure oil provider. The
Chinese–Venezuelan agreements are part of China’s overall foreign economic
policy and follow the lines of Chinese energy for credits agreements in Africa,
Asia, and South America, where China has signed similar deals with Brazil and
Ecuador. At the same time, the loans associated with the agreements have helped
Chinese firms to secure contracts in infrastructure, housing, agricultural develop-
ment, and military equipment (e.g., aircraft, arms, radars) in Venezuela, a trait also
shared with agreements in the rest of the world. In South America, this may be an
important consideration because Chinese business does not have a strong foothold
in the region. Projects undertaken in Venezuela, if successful, may be expected to
have a substantial effect in high-value added sectors (cars, computers, cell phones,
aircraft) for the rest of the region (Ellis, 2010, p. 3).
For Venezuela, oil cooperation with China fulfills several objectives. The agree-
ments benefit the Venezuelan government by providing short-term funds,
helping to extract oil, diversifying export markets, generating “symbolic projects
for domestic consumption,” serving as a supplier of “second-tier” military and
other goods (Ellis, 2010), and obtaining external resources to finance social and
economic plans without the conditions imposed by the Inter-American Devel-
opment Bank and the World Bank.
This preliminary analysis of the Chinese–Venezuelan agreements shows the
dynamism of relations between the two countries in a changing global environ-
ment. Moreover, it leads to the formulation of several questions regarding the
possibilities and limits of the relationship. What will the effect of Chinese tech-
nological transfer be on the Venezuelan oil sector, with some authors questioning
whether this is a second-tier technology? Is Venezuela a secure oil supplier for
China, given the structural problems currently affecting PDVSA? There have also
been questions regarding the lack of transparency about the use of the nonoil
financial segments of the agreements. All these questions may be the starting
point for developing a research agenda on Chinese–Venezuelan relations.
About the Authors
Rita Giacalone has a PhD in history from Indiana University. She is professor
at the Faculty of Economic and Social Sciences of the University of the Andes,
Mérida, Venezuela. E-mail: ritagiacalone@hotmail.com
José Briceño-Ruiz has a PhD in Political Science at the Institute d’Etudes
Politiques d’Aix-en-Provence, France. He is professor at the Faculty of Economic
and Social Sciences of the University of the Andes, Mérida.
Notes
1
Between 2001 and 2005, China was responsible for 37% of oil global consumption (Shalizi, 2007,
pp. 142–143).
2
See Mattlin and Nojonen (2011) on conditionality in Chinese loans and cooperation funds.
3
Trade between China and Venezuela reached US$10 billion in 2008, and China became Venezu-
ela’s second largest trading partner, after the United States (Crowe, 2009). By 2011, China had also
become the largest creditor of Venezuela, in the amount of US$32 billion (“Venezuela: ¿Por qué
PDVSA necesita préstamos de China?” 2011).
90 Latin American Policy
4
At that time, with oil selling for almost US$50 a barrel and access to the world’s reserves at a
premium, the companies could probably have lived with the consequences (“Chávez Squeezes the Oil
Firms,” 2005), so private investors stayed but delayed new investments in Venezuela (Pascal &
Azpúrua, 2008).
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El presente capítulo busca comprender las características principales de las relaciones entre China y Venezuela durante los gobiernos chavistas, así como entender los impactos de dicho relacionamiento en la actual crisis económico-política venezolana. Para alcanzar ese objetivo, se divide en cuatro partes. En primer lugar, se señalan algunos de los hitos principales en el desarrollo de las relaciones bilaterales. Segundo, se interpretan los intereses chinos en el contexto de su presencia en América Latina y el Caribe. Como tercer punto, se analizan los intereses venezolanos en el contexto de la política exterior chavista. Finalmente, se confrontan diversas explicaciones sobre los impactos económicos y políticos que han tenido los préstamos chinos en la crisis venezolana, agudizada durante el gobierno de Maduro y con el fin del boom de las materias primas, y se proyectan posibles escenarios para las relaciones bilaterales
... The Chinese Development Bank (CDB) and Venezuela's National Development Fund (FONDEN) have, in large part, financially supported these funds. In some cases, these loans supported the purchase of goods and services from Chinese firms for the programs mentioned above in Venezuela (Giacalone & Ruiz, 2013;Sun, 2012 andWeston, Campbell &Koleski, 2011). The repayment of the Chinese contributions to the fund comes in the form of crude oil dispatches from Venezuela ("oil for loans") (Wang & Li, 2016). ...
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Purpose The aim of this article is to describe Huawei's internationalization process in Venezuela and show how socio-political and economic conditions helped to expedite the company's development in this Latin American nation between 2006 and 2019. Through this internationalization process, Huawei participated in a large technological transition in Venezuelan telecommunications. Design/methodology/approach This research uses an integrative approach, developing a quasi-case study from a review of the academic literature, contemporary news stories and institutional and practitioner documents. Findings The review indicates that Huawei was engaged in business with the Venezuelan phone company before its renationalization. Secondly, Huawei's internationalization was a beneficiary of the increased relations between the Venezuelan and Chinese governments, mainly through “oil for loans/goods” agreements. Lastly, this internationalization process includes wholly owned subsidiaries, direct export, greenfield and government joint ventures. Practical implications This research provides an understanding to other firms and strategists about the benefits of strong bilateral economic relationships between home and host countries. Originality/value This paper is among the first academic articles that describe the internationalization process of Huawei in Venezuela. Considering the host country's changing political and economic conditions during the last 20 years, such research may provide a perspective for considering other Chinese business expansions in Venezuela and Latin America.
... 162). The dominant thesis on the assertive foreign policy of the Bolivarian revolution is confirmed, since alternative geopolitical ties are established for soft balancing against the United States (Boersner & Haluani, 2013;Giacalone & Briceño-Ruiz, 2013;Romero, 2006;Serb ın & Serb ın Pont, 2014). It is the first and foremost great game in Venezuelan grand strategy, strengthening ties with China and Russia and soft balancing against the United States, the same relationship that Beijing and Moscow have with Washington (Larson & Shevchenko, 2010). ...
... Sin duda uno de los mejores ejemplos sea Venezuela, sujeto a una tensa observación desde Unión Europea, preocupada por la reversión de la consolidación de la democracia en la región. Al contrario, la relación chino-venezolana se ha centrado en acuerdos petroleros que convenían a ambas partes constructoras de una relación pragmática que les ayuda a nutrir su visión de un mundo multipolar (Giacalone y Briceño, 2013). De hecho, los acuerdos energéticos chino-latinoamericanos han llevado a modificar los equilibrios energéticos mundiales (Hongbo, 2013). ...
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La presencia China genera dos interrogantes sobre las relaciones de América Latina y el Caribe (ALC) con la Unión Europea. 1) ¿Qué consecuencias tienen las estrategias de China para ALC sobre los equilibrios internacionales de la región, especialmente la UE? 2) ¿Qué impactos internos generan dichos reequilibrios internacionales? Este trabajo establece una reflexión en cuatro grandes momentos. En el inicial se ofrece una visión teórica y metodológica destinada a enmarcar el análisis. En el segundo momento se describe la primera paradoja de la progresión latinoamericana y caribeña actual: las inversiones y comercio chino en ALC han favorecido una estabilización de la región que no había sido lograda a través de las relaciones con los otros socios internacionales. En un tercer momento se presenta la segunda paradoja que vertebra la reflexión: la relación China-ALC lleva la región latinoamericana y caribeña a una estabilidad fragilizada ante la cual la UE puede recobrar protagonismo ofreciendo a ALC lo que China no puede ni quiere. Por último, se proponen algunas conclusiones centrales, así como cuatro recomendaciones.
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Ante la complejidad creciente del sistema internacional este trabajo apunta a explorar las oportunidades y desafíos que surgen en términos de la reconfiguración del regionalismo en América del Sur. Desde una perspectiva conceptual de desarrollo humano sostenible, se busca explicitar posibles juegos entre las diferentes dimensiones del desarrollo conjugadas en torno a la propuesta de la Agenda 2030 y los Objetivos de Desarrollo Sostenible (ODS) de 2015 y asumiendo a las personas como destinatarias y protagonistas en un proceso que amplía las posibilidades de elección del tipo de vida que dichas personas consideran valioso. En un marco de condiciones inestables en la región sudamericana, este trabajo aborda la potencialidad de la articulación de las políticas energéticas focalizando la situación de las energías renovables en el contexto del MERCOSUR. Considerando sus posibles aportes en términos de mitigación del cambio climático, se analiza por un lado la evolución de las matrices energéticas de Uruguay, Argentina y Brasil, visualizando en particular la situación uruguaya en relación a la potencial reducción de los Gases de Efecto Invernadero (GEI). Por otro lado, se analiza el patrón de intercambios comerciales entre Uruguay y sus socios del MERCOSUR, destacando las posibilidades que surgen a raíz del proceso de inversiones en el sector de las energías renovables que experimentó dicho país en los últimos años, lo que impulsó la exportación de energía a cargo de actores públicos y privados. Finalmente, se proyectan algunas perspectivas de los procesos regionales y nacionales en términos de modelos que apuntan hacia sociedades y economías ‘descarbonizadas’ que viabilicen nuevos formatos de una gobernanza climática regional.
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Segundo Volume da Edição Especial trilígue de Tempo Do Mundo, publicada pelo IPEA, com artigos de atores brasileiros, latino-americanos sobre aspectos econômicos, energéticos, comerciais e ambientais.
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The analysis focuses on China’s relations with, and impact on, South American since the beginning of the twenty-first century. While emphasizing bilateral economic relations, the analysis looks into a more comprehensive set of interconnected issues, where China’s impact has been felt, namely also on geopolitics, alliance patterns in international politics, and how domestic politics in South American countries relate to relations with China. The analysis compares three types of South American countries. The typologies differ in terms of economic policy and foreign policy and in terms of their economic models of development. It is argued that China’s impact in the region has been significant but has varied as a function of South American governments’ own policies and to some degree as a function of political and developmental characteristics of its South American partners.
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El presente trabajo pretende resumir los aspectos positivos de la relación comercial y de inversión de China en América Latina y evaluar si la región podría contar con ésta, de una manera relativamente estable. Con ese fin se hará una evaluación de la evolución reciente de la economía china y, hasta donde sea posible, un pronóstico del comportamiento de dicha economía para el futuro cercano.
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Even critics of Hugo Chavez tend to concede that he has made helping the poor his top priority. But in fact, Chavez's government has not done any more to fight poverty than past Venezuelan governments, and his much-heralded social programs have had little effect. A dose look at the evidence reveals just how much Chavez's "revolution" has hurt Venezuela's economy-and that the poor are hurting most of all.
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The relationships between governments and investors -especially transnational corporations -are changing rapidly, and this is especially true in Latin America today. Last month, Bolivia, Venezuela, and Nicaragua surprised many international observers by announcing that they would withdraw from the World Bank's international arbitration body, the International Center for the Settlement of Investment Disputes (ICSID). The ICSID is a place where -under prior arrangement -foreign investors who have a dispute with a host government can submit their case to binding arbitration. Bolivia's position is that ICSID is not an impartial arbitrator, and cannot be expected to act as one, so long as it is part of the World Bank. As was highlighted by the recent controversy that led to the resignation of World Bank head Paul Wolfowitz, the Bank may have 185 member countries, but it is really dominated by Washington. The saga continues as the Bush Administration once again has chosen a close neo-conservative associate of President Bush -former U.S. Trade Representative Robert Zoellick -to run the institution. The World Bank has long used its power -not only from its own lending of $23 billion annually, but also as part of a "creditor's cartel" led by the International Monetary Fund -to pressure governments to adopt policies favored by transnational corporations. These include privatizations and removing restrictions on foreign ownership, trade, and investment flows. The Bolivian government also argues that there are other conflicts of interest involved in having the World Bank's arbitration panel rule on disputes between governments and foreign investors. Pablo Solón, Bolivia's Special Ambassador for Trade and Integration, cited the case of Aguas de Illimani, a subsidiary of the French international water giant Suez. It turned out that the International Finance Corporation, a part of the World Bank Group, was a shareholder in Aguas de Illimani. It is clear that the same institution should not be both arbitrator and a party to the dispute. The ICSID process, like other such international arbitration panels, does not have the transparency, checks and balances, or openness of a real judicial system -like ours in the U.S., for example. It is shrouded in secrecy. And the World Bank's influence in selecting arbitrators makes it anything but neutral. Bolivia maintains that their government, which was elected with a majority that was tired of seeing the country's natural resources drained to make foreign companies rich while their country remained the poorest in South America, needs to change the rules so that they are at less of a disadvantage relative to giant corporations. They have a good case. Since the government raised its royalty rates on hydrocarbons -with the government's share of the biggest gas fields going from 18 to 82 percent -it has increased its revenue by nearly 7 percent of GDP. This is a huge increase in revenue. The IMF wrote in their country papers on Bolivia that the country would be hurting itself by raising the royalty rates. They were wrong, as were most of the experts in Washington and the US business press. In these circles it is taken as given that anything which pleases foreign investors is good for the host country, as it will attract foreign investment. Likewise, anything that foreign investors don't like is generally portrayed as a potential disaster.
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China’s long insistence on non-interference and sovereignty and frequent criticism of Western interventionism has contributed to a widely held impression that China lends and invests abroad without attaching policy conditions. This discussion paper surveys the general policy debate on conditionality in lending, as well as China’s own debate on conditionality. We then examine bilateral loans provided by Chinese state-owned policy banks, notably China Exim Bank, arguing that the assumption of China’s shunning conditionality is valid only if the term is taken narrowly to imply the specific set of policy conditions (e.g. privatisation and financial liberalisation) routinely called for by World Bank Group lenders. Based on a literature review and analysis of loan features along with tentative evidence from empirical cases of Chinese bilateral lending, we identify four hypothetical types of conditionality: political conditionality, embedded conditionality, cross-conditionality and emergent conditionality. In all likelihood the last three types of conditionality are not imposed by a unitary state actor, but emerge as an indirect consequence of the voluminous business activities of Chinese state-linked lenders and enterprises in developing countries.
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El artículo realiza un análisis sobre la política económica del gobierno de Hugo Chávez Frías. Particulariza en sus estrategias de política monetaria, fiscal y de intervención estatal. Parte de la hipótesis que la estrategia de política económica del gobierno del presidente Chávez maneja criterios de economía ortodoxa, pero acompañada de una fuerte participación del gasto público en la economía, cuyo objetivo principal es combatir los niveles de pobreza. El trabajo llega a las siguientes conclusiones: La economía venezolana, después de 9 años de gobierno del presidente Hugo Chávez, presenta adecuados indicadores macroeconómicos, moderados niveles de crecimiento y disminución de los niveles de pobreza. Esto último es resultado del fuerte gasto público, el cual tiene su origen en los elevados ingresos del petróleo.
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El objetivo del presente trabajo estuvo centrado en determinar el efecto de la distribución de la Renta Petrolera en la Productividad del Sector Privado durante el período 1983-1999, utilizando como base teórica el Enfoque Regulacionista Francés, enfatizando en los conceptos de crisis estructural y formas institucionales. Los resultados del estudio evidencian que la crisis estructu-ral en la economía venezolana en los años ochenta, afectó significativamente los mecanismos de transmisión de la renta petrolera, en especial el de sobrevaluación del tipo de cambio, lo que dificultó la renovación tecnológica del sector privado y repercutió en el descenso de la producti-vidad de dicho sector, la cual decrece un 38,97% en 1999, en comparación a 1983.