From the Editors of VenEconomy
In pursuit of its sinister goal of changing Venezuela’s democratic path, the Hugo Chávez administration has sought out “alternative” partners to satisfy its insatiable thirst for funds, the most important of these being the Government of the Republic of China. So it was that, in 2007, the Venezuelan Government signed an agreement with China to set up a bi-national fund for $6 billion, renewable in three years.
The Law Approving the Agreement between Venezuela and China on the Financing Fund, published in Gaceta Oficial of September 18, 2008, established that the Republic of China would contribute $4 billion to the Fund, through the China Development Bank (payable with future oil production) and that Venezuela would put in $2 billion via the National Development Fund (Fonden), with money injected into Fonden by the state-owned PDVSA. Since then, this bi-national Chinese-Venezuelan Fund has been renewed twice (in 2009 and 2010) on the same terms as the first agreement. To date, a total of $18 billion has been fed into the Fund, $12 billion of which were contributed by China.
The government got to like committing future oil production in exchange for Chinese loans, so much so that, in 2010, it set up the Great Volume Fund for $20 billion, all of it contributed by China (50% in yuan and 50% in dollars) against payment in oil over ten years. This Fund was increased to $30 billion in 2011.
So this means that, since 2007, the Hugo Chávez administration has run up a debt with China on behalf of the Republic of Venezuela for an incredible $42 billion, which is being repaid with oil. According to unofficial sources, of that amount, Venezuela apparently still has to make payments in oil amounting to some $34 billion over the next ten years.
Even more devious is the total lack of transparency with which these funds have been handled.
Among other illegalities, the Chinese debt that PDVSA has to pay is NOT included on the state-owned oil company’s list of audited debts; nor is it listed among the external debts of the Republic. In fact, there is no accounting record of this debt in any official estimate of the total debt of the government and PDVSA combined.
Worse yet, no one in the Venezuelan Government has explained to the country who manages these funds, how much has been disbursed, how they are being administered, where they have been invested, what the payment terms and conditions are, or how much oil is actually being exported to China.
For that reason, it is important that the benches of the democratic opposition insist on these funds being examined with a fine tooth comb, as Deputy Miguel Ángel Rodríguez requested the National Assembly to do this week. This is an extremely serious situation that the next democratic government that will assume to Presidency of the Republic in 2013 will have to solve.VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.
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