• Mon
  • Jul 28, 2014
  • Updated: 12:58pm
NewsWorld
VENEZUELA

Chavez death clouds Beijing's loan-for-oil deal

China Development Bank anxious over fate of a reported US$28b in loans to Venezuela

PUBLISHED : Thursday, 07 March, 2013, 12:00am
UPDATED : Thursday, 07 March, 2013, 3:47am

The sudden death of Hugo Chavez will be greeted with nervousness at China Development Bank, where Venezuela has become its largest foreign borrower.

Wholly owned by the Chinese government, CDB has developed a close business relationship with Venezuela - which has borrowed US$36 billion from China in recent years - mainly to support Beijing's growing demand for natural resources.

CDB, which is led directly by China's State Council, has been working as the de facto agent bank for the Chinese government, handling the majority of loans to Venezuela, industry sources said.

Chavez once proudly announced on state television that the CDB was "the [bank] with the most money in the world. It has half the money in the world and is allied with Venezuela".

Since 2007, CDB has loaned Venezuela's government-owned Bank for Economic and Social Development more than US$28 billion, according to a report by the Brookings Institution in Washington. Just a few months ago, CDB entered a new round of negotiations with Venezuela for a long-expected loan-for-energy deal, which some analysts and media reports suggested could be worth up to US$6 billion.

CDB chairman Chen Yuan established good personal ties with Chavez. When Chavez was running for re-election last year, Chen submitted a 600-page proposal advising him how to improve and manage Venezuelan infrastructure, which he was said to have appreciated, according to China's Superbank, a new book about the CDB.

But while CDB was keen to maintain good relations with the Venezuelan president and his government, the Chinese bank was increasingly concerned about the long-term political fate of the South American state, given Chavez's diagnosis of cancer in 2011.

CDB wants to ensure that its largesse is perceived as benefitting Venezuela as a whole - and not just Chavez - to increase the likelihood that a post-Chavez government will not renege on the loan agreement

"CDB wants to ensure that its largesse is perceived as benefitting Venezuela as a whole - and not just Chavez - to increase the likelihood that a post-Chavez government will not renege on the loan agreement," said Erica Downs, a Brookings fellow, in a research report about CDB.

"Moreover, CDB's concerns about getting repaid by both the Chavez administration and its successor may also explain why the Venezuelan government took the unusual step of incorporating the terms of the loan agreement into a law," Downs added.

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

 
 
 
 
 

Login

SCMP.com Account

or