Peking (lame) duck

Too many cranes, too few bills
Too many cranes, too few bills

A few weeks ago I wrote an article for Foreign Policy’s Transitions blog about Nicolás Maduro’s China trip. Given the influence China is playing in how Venezuela shapes its policies, I labeled Maduro the Manchurian President. (If you have trouble accessing the article, here it is in Portuguese)

Tom O’Donnell expands on this and provides some alarming facts in his latest post. The money quote:

“Consistent with [China providing loans with strings attached], in the summer of 2011, businessmen working with PDVSA in Caracas told me how any proposals for projects drawing on this Chinese loan were first being sent for approval to the Chinese embassy in Caracas, then passed to Beijing and,  if approved, the money would be closely watched over when it was sent to Venezuela.

Not to put too fine a point on this, but Chavista functionaries directly knowledgeable of meetings in Caracas between leading Chavistas and Chinese officials also told me, in mid-2011, how Beijing had sent inspectors into Bolivarian ministries and national facilities to see what had been done with their previous grants and loans.  And, they were very negatively impressed.  This became widely known in Venezuela.” (emphasis is mine)

Imagine that – a foreign power dictating how Venezuela should spend the proceeds from its oil sales. Why, it’s almost enough to want to start a Revolution, contra los apátridas.

Oh, wait…

Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.


  1. Lo peor de todo is that my nationalist rage is tempered by the sense that at least the Chinese loans are subject to some sort of oversight.

    The alternative to this isn’t some festival of Soberanía, it’s the Fonden/Bandes model, where no one gets to put a stop to it when public funds are stolen.

  2. Chinese have effective enforcement methods for those who do not follow orders. Maduro could be in a puddle of trouble without a lifeboat if he steals from China.

    • Roy – talking out of where the sun don’t shine———-as usual. The IMF sets economic policy. China does not. The IMF makes you sell state industries to private investors. China does not.

      The whole post is based on “hearsay” with not one shred of evidence presented. For example – what Ministries are monitored by Chinese officials? What are the names of the Chinese officials and what do they disapprove of – give specifics? I suppose they disapprove of the National Railway Plan?

      Yet another masterpiece of manipulation by CC’s drooling Milton Friedman’s and The Pinochet Foundation’s leading shill.

      • actually, Arturo, we’re waiting for specifics from you, on what are the loan terms set by the Chinese government. Educating us with ‘deep throat’ information, since you seem to give the impression of knowing more than what aporrea says, would be a far more productive use of your time on this blog, than constantly berating us on information, about which even you are not clear.

  3. Thanks for the plug, Juan. Much appreciated.

    The thing about it was that, the Chinese were said to have been appalled at what they found — for example at the prorts. One foreign reporter in Caracas told me this part of the story– saiying the Chinese discovered that the insurers (Lloyds was it?) rated the ports at the level of ports in Iraq.

    i don’t know how much of this process people know about; but, for example, both people with and not with the state/officialismo told me that when the Chinese first asked for an accounting from Chavez’ administration, the ministeries were ordered to report on their past use of Chinese grants and lonas and such. However, some Bolivarian ministeries didn’t produce any report at all. Apparently, according to a person close to the officialista leadership, this was when the Chinese demanded to go see for themselves and sent their inspectors.

    One foreign correspondant was amazed at the whole thing, saying he had heard that the inspectors had produced a book-length report. His rethorical question to me was :”How is this any different than the IMF?”

    I think there is an explanation for why this sort of thing hasn’t caused a major nationalist backlash from chavismo: I found a number of chavista functionaries rather self-effacing and sincerely saying “we are not well formed” (educated and/or prepared); and that they have had to rely on the Cubans (much as they resented them) for their expertise in many things. They said that lately (this was 2011) there was enthusiam growing about the idea of turning to the Chinese for education and training. People were being sent to China. (So, I expect that Diosdado’s marvelling, during his recent visit to China, at the capacity of the Chinese “Communist Party School” where Venezuelan cadre will be trained, and similar things reported to have been discussed during the Premir’s visit to Caracas are further developments along this line.)

    In general, they were impressed at how the Chinese navagite the global scene, stand up to the USA, etc. … and so seem a good alternative to the Cubans.

    On the other hand, I don’t get any of that sort of message out of Pdvsa. There the shortcomings of the Chinese equipment and the need for European and/or USA parts and technology, etc. is recognized.

  4. The main priority for the Chinese is to get paid and to get paid well for whatever money they loan or invest in Venezuela . Only to the extent govt mismanagement prevents that they are concerned with helping the regime bureaucracy do better . They dont want colonies that mimic their model . for one thing they think they are special and that the model works for them because they are special and will not work for people who are as undisciplined disorderly happy go lucky as is the case of Venezuelans . Its part of the colonial mentality, people “without the law” cannot improve themselves . It flatters them that their model cannot be copied !! Chinese dont view themselves as missionaries for a new higher civilization, thats a western christian conceit . If we had no oil to use as collateral to their loans they would not look at us.

  5. After thinking about the caption on the photo, I think from the Chinese perspective, its the opposite:

    Too many bills, too few cranes.

    We all know in the end what the Chinese want. I wonder what they would do if the government, as its crisis deepens, cuts them off, defies them, or in any way stands up to them?

    • Who would Venezuela go to if it screws China over as it did the oil majors? Getting a huge cash influx from big oil would require a change of government. Russian oil companies are already pulling out and the Russian government does not have money to waste on Venezuela.

      As far as I can tell, any Chavista government is required to grovel in Beijing and be contended with any scraps they get. Is a Chavista government institutionally capable of doing a policy 180 and doing what it takes to get new upfront payments from big oil?

      • (That said, down the line, once the Chinese projects are producing I can see some Chavista expropriating them/changing contractual terms to get more cash now, but that won’t be for years now).

        • I’ve thought about this for a while. Given the reliance on China at the moment, its not really plausible, but down the road a bit, I can completely see it happening. This holds particularly true if someone of a more nationalist ideological bent acquires the reins of power. Think Chavismo 2.0 under a certain Senor Hair. I can see him portraying the Maduro faction as traitors to the legacy and the Chinese and/or Cubans as facilitators of that betrayal and nullifying agreements with them, consequences be damned.

          Of course, worst case scenario…but still.

          I used to think the Chinese were somewhat of a counterbalance to the Cubans until I thought about the other leg of that triangle and realized how involved Sino-Cuban relations are and how, after Venezuela, China is Cuba’s biggest trade partner with many bilateral agreements in place. Cuba is a piddling part of the Chinese economy, but to Cuba, China is a significant part of their economy accounting for about 3% of the GDP in trade alone (and just under 20% of total trade) and not including further FDI.

          Do you think that perhaps China, given all the money they’ve thrown away, figuratively or literally on Venezuela, might have divined the way the wind was blowing years ago and continues pitching money at Cuba for further leverage given the Castro Bros. ties to Venezuela? Or at least optimizing their roles to further cement themselves to Venezuela via Cuba. That’s an end run of sorts that Maduro can’t fix.

          MacArthur would probably have modified his saying about never getting involved in a land war with Asia to a trade war, had he survived to see this age.

          • An interesting idea that China is leveraging Cuba to control Venezuela.

            I know China puts a lot of effort in promoting Cuba-Chinese co-operation. How well it is convincing Chinese people I’m a lot less sure! I know a Chinese student that studied for one year in Cuba. What was supposed to be a fully paid for college experience didn’t turn out to be so great. The monthly stipend was 200 non-convertible pesos, the college cafeteria food was unmentionably disgusting and it was strongly implied his parents should send him money, as far as getting side work forget it. Also he was made to attend nationalist Cuba parades and expected to join a Chinese-Cuban friendship group at the college. All of that, and the fact that the degree wouldn’t be recognized widely even back in China made him change his mind and study in the US instead.

  6. Certified economist Mark Weisbrot has always used Chinese loans as the underpinning of his argument that Everything Will Be Okay.

    ” But in practice, Venezuela can undoubtedly borrow more from China, in effect rolling over the principal as needed. Perhaps most importantly, the Venezuelan government’s ability to borrow from China, with which it has established a strategic partnership, gives it a very important source of non- market and low-interest credit that the government might tap in an urgent situation.”

    This strategy could be named the Preferential Option for Chinese Imperialism.

    • Love the framing: “certified economist”, as though mark weisbrot’s knowledge base needs bolstering by adding “certified” to his Economics-Soft degree. Oh wait. It does need bolstering!

      • Actually, before Syd’s comment, I thought of Weisbrod as conventionally-educated, but wrong. Now I see his thesis in economics was supervised by W. H. Locke Andersen, associated with the magazine Monthly Review. MR was the main organ of Maoism in the English-speaking world for many years.

        Somebody should reread Weisbrot’s thesis, on “Ideology and Method in the History of Developmental Economics.” There will be a lot of nonsense, I think.

  7. Chinese loans although cheaper than loans from the financial markets come with strings attached , their payment must be secured through the mortgaging of future oil deliveries which means that as those loans are paid Pdvsa recieves only a fraction of their price. This makes Pdvsas income insufficient to meet the many demands the regime makes upon it . Thus maintaining and raising production is key to keep the money flowing . Here Pdvsa has to face some daunting challenges , production from high medium crude fields is falling or extagnating part in due to natural depletion part due to Pdvsa mismanagement. To maintain or raise the production of these Pdvsa most luchrative fields enormous amounts of money and technical help are needed (which Pdvsa doesnt have and must obtain trhough deals with competent and deep pocketed oil investors), Venezuela past treatment of foreign oil interests is not precisely a welcome mat for these companies so Pdvsa must accept more stringent terms from these companies in order to attract their help and financing . this means that more a more extra heavy crude oil fields must be developed as time passes , these fields are much more diifficult and costly to produce , transport refine and market thus they bring in much less money than light medium crude fields and require much larger investments which again requires attracting foreign inverstors with the knowhow and big resources to develop these fields . the billions of bls are impressive but in practice they much less profitable in the long run that the fields that so far have been the mainstay of Pdvsa production . new refineries must be built and upgraded at great expense to refine these extra heavy crudes . Existing refinings in turn have become much less productive because of years of mismanagement and maintenance neglect causing Pdvsa to have to import high price products from the US simply to meed local market needs . There is in Pdvsa a race atainst time before the money from loans runs out because of lower production . they have to start development of new production or rescue lost production in a narrow window of time or theyre in heaps of trouble .this is causing some tensions inside the regime . Pdvsa is probably refusing to allow its oil to be used to obtain more financing for projects not linked to the rescue operation of itss oil production, they might allow a roll over of past loans but not increasing the burden of pdvsa of financing new loans through future oil deliveries . The dangers are too great . This is whats making Ramirez look so surprisingly rational , he has no choice even if that mean that some favourite social or political projects or subsidies have to beput on hold or on hunger rations..!! The chinese do sometimes allow a very minor part of the loans to be given without the mortgaging of future oil deliveries (less than 10% of the 5.000 USD financing discussed by Maduro in his last China trip) . So oil is the key , and not simply the number of bls underground but the kind of oil being produced and the higher costs difficulties and lower prices which affect it. .

  8. Interesting how ordinary chinese expatriates look on Venezuelans , knew someone who for years was be very close and intimate with them. Their view of us is tinted with scorn and a righteous sense of their own superiority .: venezuelans are lazy, uppity , chaotic inept and difficult to work with , thus their preference to handle venezuelan jobs by themselves , going as far as always attempting to use their own more dependendable chinese coolie labour. A surprising note is that they think that they are irresistible to venezuelan women who all lust to bed the ‘manly’ expatriates , Venezuelan secretaries often had sad infuriating tales to tell of their expatriate bosses ‘sexual harrasment’.. wonder why so little of this ever comes out . When the oil migration law came into effect chinese expatriates in the oil sectors where shoved aside by Pdvsa managers and left idle and isolated in empty offices causing deep resentment among them . There are deep cultural barriers between chinese expatriates and their venezuelan colleages or underlings aside from the language barrier which on both sides is very difficult to overcome .

      • Jeffry: if you are referring to my post, ‘they’ refers exclusively to the chinese expatriates working for a State company that has been active in Venezuela for some 10 years and who befriended this person I know . I agree that one cannot generalize on the attitudes of other chinamen living in the country and that maybe the attitudes of these expatriates was atipical By expatriates I mean the chinese employees of a chinese company working in venezuela !!

        • It would have been better if the original post had made that clear. Otherwise, something which may be true of the relatively few Chinese expatriates your friend knows, begins to be used stereotypically.

          • Jeffry: Sorry for my naivete , In the world I come from ,’expatriates’ are not inmigrants , they are the employees of a foreign company that are sent to do a job in a foreign land, Should have made that clear , The expatriates Im talking about were not necessarily few ,and the relationship with the person I know was long and quite close (drinking buddies?) . Ordinary Chinese inmmigrants probably have less reason to feel so full of themselves !! My own contacts with Chinese visitors have been quite happy ones with no reason for complaint whatsoever.

  9. Good day I am so thrilled I found your weblog, I really found you by mistake, while I was looking on Aol for something
    else, Anyways I am here now and would just like to say thanks for a tremendous
    post and a all round entertaining blog (I also love the theme/design), I don’t
    have time to read through it all at the minute but I have saved it and also added
    in your RSS feeds, so when I have time I will be back to read more, Please
    do keep up the fantastic work.


Please enter your comment!
Please enter your name here