Venezuelan crisis

As Venezuela implodes, so do the dreams of thousands of fleeing Chinese

Tens of thousands have returned to China following implosion of economy and descent into violence

PUBLISHED : Monday, 14 August, 2017, 10:31pm
UPDATED : Wednesday, 30 August, 2017, 6:04pm

As formerly oil-rich Venezuela descends further into chaos, the dreams of one of South America’s largest Chinese communities can be counted as collateral damage, along with one of Beijing’s most high-profile efforts at economic diplomacy.

There used to be 400,000 ethnic Chinese living in Venezuela, which sits atop the world’s biggest oil reserves, but tens of thousands have returned to China in the past three years as its economy has imploded and violent protests have taken over the streets.

Mey Hou, a mother of three from Enping, in Guangdong province, fled Venezuela with her children in December 2015, bringing down the curtain on 15 years of hope for a better life overseas.

Her husband and one of her brothers returned to China last year, but another brother decided to remain in Venezuela.

The family’s 17-year odyssey, spanning half the globe, coincided with massive Chinese financial backing of the socialist regime of the late Hugo Chavez and his successor Nicolas Maduro and the subsequent collapse of Venezuela’s economy as oil prices plummeted. China Development Bank (CDB), a state lender, has poured at least US$37 billion into the country of 30 million people, with most of it repayable in oil.

Chavez’s anti-US rhetoric was once music to Beijing’s ears, and Venezuela’s rich oil reserves were a potent lure for energy-hungry China, but the country now serves as a reminder to Chinese individuals, businesses and officials of the perils of venturing abroad.

As a deep-pocketed Beijing ramps up efforts to gain global influence through its infrastructure expertise, the lessons from Venezuela could resonate for some time to come.

When Hou, now 39, arrived in the Venezuelan capital Caracas on a tourist visa in 2000, she was impressed by the country’s booming economy and lifestyle prospects. She lived a South American dream for more than a decade: marrying a fellow Chinese immigrant, having three children, gaining permanent residency, running two shops and helping her two younger brothers migrate to Venezuela.

But the dream started to crumble and she returned to Enping, a county-level city in Jiangmen in the Pearl River Delta, one and a half years ago with two suitcases, her three children and her US dollar savings.

“My shops were robbed,” Hou recalled. “We could only run back to China and leave them.”

She said at least 50,000 people with roots in Enping, which has a long history as a source of Chinese migrants, had returned to China from Venezuela last year.

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Her brother David, who still lives in Caracas, used to make a good living supplying building materials such as sand, stone and cement to construction sites run by big Chinese state-owned enterprises.

“China-led projects were once ubiquitous, with several thousand Chinese workers living in the capital,” he said, adding that most Chinese workers had now left Venezuela for safety reasons.

David Hou speaks fluent but heavily accented Spanish and has developed a taste for Venezuelan coffee, drinking two to three cups a day. But he said inflation, tipped to hit 1,500 per cent this year, was making life difficult for Venezuelans.

“Nowadays, having a meal at a decent cafe in Caracas costs at least 200,000 Venezuelan bolivars,” he said, but the minimum wage for a local worker was only about 170,000 bolivars a month.

Lisa Tan, a third-generation Chino-Venezolano (Chinese-Venezuelan) born in Caracas in the 1960s who runs a shop in the capital, said massive currency depreciation meant US dollars were the only currency worth hanging on to.

“In 2007, 100 US dollars could be exchanged into about 4,600 Venezuelan bolivars,” she said. “Now, on the black market, 100 dollars can fetch around 800,000 bolivars.”

In the weeks of intensifying chaos since that interview, the black market rate has weakened further to 1.2 million bolivars to US$100.

Venezuela’s strongest rate, known as DIPRO, is unrealistically set at 10 bolivars to the US dollar (1,000 bolivars to $US100) and reserved, says the government, for essentials such as food and medicine.

“Doing business in Venezuela to earn local currency is meaningless,” Tan said.

Even though Venezuela’s economy has collapsed, she insists she won’t leave.

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Her grandfather arrived in Caracas from Jiangmen in the early 1900s, and his brother married a Venezuelan woman.

“Many of my relatives are mixed Chinese-Venezuelan,” she said. “We are second- or even third-generation Chino-Venezolanos. Venezuela is our home.

“We feel heartbroken and homeless now when thinking of leaving the country. But the situation is horrible and only getting worse.”

The first immigrant from Enping arrived in Venezuela 160 years ago. Others followed, becoming shopkeepers and restaurateurs and expanding into other trades and mining, with the Chinese community eventually swelling to about 400,000 people. Enping’s Bureau of Foreign and Overseas Chinese Affairs estimates that 70 per cent of them could trace their origins back to the city, which was a major source of emigrants in the late 19th and early 20th centuries.

But the situation in Venezuela has deteriorated rapidly since the death of socialist strongman Chavez in 2013, with the government’s spending plans, framed when oil was selling for more than US$100 a barrel, collapsing after prices plunged to below US$50 a barrel. Shop shelves are empty, food is scarce, electricity supply is limited to just a few hours a day, there’s rioting and looting in the streets and government supporters wielding wooden sticks and metal bars have attacked opposition lawmakers at the parliament.

Falling oil prices also dealt a severe blow to Venezuela’s ability to repay Chinese loans, illustrating the geopolitical risks that accompany Beijing’s global quest for resources and influence.

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“Through its loans-for-oil ties to Venezuela, China has become the No 1 source of sovereign foreign finance for Venezuela, which has been all the more important since Venezuela has been cut off from many other sources of international finance,” said Matt Ferchen, a resident scholar at the Beijing-based Carnegie–Tsinghua Centre for Global Policy.

“For China, Venezuela has been the top recipient of CDB loans, with only the possible exception of Russia. Yet because of Venezuela’s crisis, the country has not been able to repay its loans on the terms originally agreed with China nor has it been able to supply as much oil, in as timely a manner, as the two countries had agreed. Now Venezuela’s economic and political crisis has a direct, negative impact on China’s economic and diplomatic interests.

“If it fails to play a more constructive role in Venezuela’s current crisis, China risks eroding its image in Latin America and elsewhere as a credible partner in South-South development and as a competent manager of political and economic risk.”

Simon Shen, co-director of the International Affairs Research Centre at Chinese University of Hong Kong, said China’s dollar diplomacy offered effective competition to ideologically driven Western aid, which had strings attached, and he saw no reason to change it. However, while a hands-off approach was politically appropriate, China should set clear conditions and goals when it came to economic returns.

Ferchen said that if China supported stability in Venezuela, it could not remain silent as it descended into chaos, violence and autocracy.

“While it’s almost impossible, and probably not desirable, to imagine China becoming directly involved in Venezuela’s domestic political crisis, China can and should work with other Latin American and international multilateral institutions ... to think about concrete measures to re-establish effective economic governance and competent, depoliticised management of Venezuela’s massive supply of heavy oil,” he said.

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China’s global expansion efforts have suffered previous setbacks, with more than 30,000 Chinese workers evacuated from Libya in 2011 and all Chinese investments in that country abandoned as a civil war intensified.

The financial casualties in Venezuela have been heavy. Among them is a U$$7.5 billion, 462km high-speed railway project that has been abandoned, leaving derelict factories and unfinished construction sites mouldering away in the tropical sun.

The Chinese government has discovered its options are limited when it comes to protecting itself and its citizens from exposure to Venezuela.

Foreign Ministry spokesman Lu Kang said in April that China hoped and believed the Venezuelan people could properly handle domestic affairs and maintain social and economic stability, which appears optimistic in hindsight but was in keeping with China’s long-standing non-interference policy.

A month later, China’s tourism administration warned of the risks of travelling to Venezuela

Meanwhile, calls have been growing in China for Beijing to be more prudent in its quest

to secure energy supplies and other raw materials from overseas and in its befriending of regimes that publicly denounce the US-dominated world order.

A top leadership meeting chaired by President Xi Jinping in late June said the safety of Chinese overseas businesses and investments was an issue that had to be taken seriously. The Chinese Academy of Social Sciences, the top government think-tank in Beijing, has twice named Venezuela as the most dangerous place for Chinese businesses to invest.

Tan said at least 68 shops, many of them Chinese owned, had been looted in late June in the town of Maracay, 80km from Caracas, and the unrest had been spreading.

“We are trying our best to deposit US dollars and send money back to China and relatives overseas,” she said. “I only use credit cards to shop and carry with little cash.”

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Tan said the price of daily necessities was soaring and some, such as edible oil, cornflour and sugar, had been impossible to find in supermarkets and shops for a long time.

“Now, you can only buy sugar from street-corner speculators at the black market price, about 7,700 Venezuelan bolivars a kilogram,” she said. “A lot of local people are jobless, and many are even scavenging for food.”

Tan said Chinese speculators were smuggling edible oil, cornflour and sugar from Brazil, and could earn between US$5,000 and US$8,000 a container, but that was adding to tensions.

“Locals are becoming angrier about Chinese speculators,” she said, adding that such grass-roots concerns were now more important than grand investment schemes.

“To be honest, I think the so-called close Sino-Venezuela relationship was of little help to Chinese or Venezuelans living here. The people need peace and a stable supply of cornflour and sugar, not those suspended, China-supported building and infrastructure projects.”