Venezuela's president in China, signs agreements

[Judi Lynn]

Venezuela's president in China, signs agreements

The Associated Press
Published: Sunday, September 22, 2013 at 7:55 a.m.
Last Modified: Sunday, September 22, 2013 at 7:55 a.m.

China and Venezuela signed various agreements Sunday during a visit by the Venezuelan president that is meant to strengthen economic ties between the South American nation and its leading creditor.

President Nicolas Maduro told his Chinese counterpart, Xi Jinping, that the main goal of his trip was to further consolidate and expand the strategic partnership between the two countries that late President Hugo Chavez began with Chinese leaders. Chavez died in March after 14 years in power.

The two leaders signed 12 agreements Sunday, including ones related to a finance fund deal, education, and a joint development between Chinese state-owned oil producer Sinopec and Venezuela's national oil company. They also signed a cooperation and exchange agreement between China's space flight administration and Venezuela's science and innovation ministry relating to remote satellites. No details were given on any of the agreements.

Maduro told Xi that Venezuela was in an important phase of economic transformation and wanted to diversify its economic structure.

More:
http://www.tuscaloosanews.com/article/20130922/API/1309220601

[Marksman_91]

1. No doubt asking for some cash

Maduro and his buddies have pretty much left the country broke, so now they're borrowing as much as they can to inject some capital in the country before another big devaluation of the bolivar follows

[Judi Lynn]

2. The U.S. owes China vast amounts of money. We're not impressed. n/t

[Marksman_91]

3. So because the US owes big money to China, it's fine that Venezuela does as well? Not sure I follow

[Judi Lynn]

4. So who said it's "fine?" n/t

[Socialistlemur]

5. The trip was intended to close the deal for an additional $5 billion loan

The $5 billion loan by the Chinese is loaded, it requires repayment in oil. Notice the note about oil agreements, it's cover for the deal structure.

As we know, Venezuela didn't really nationalize the oil industry as claimed by Chavez. They changed the legal structure. The Chinese don't like it so other than a couple of joint ventures they are taking over Venezuela's oil fields using a loan mechanism called the Chinese Fund.

I saw a reference to the USA being in debt to China but the situation isn't the same. The USA sells bonds. These bonds are repayable with US dollars. And as we know the USA has an enormous capacity to print money without driving up inflation. So when the Chinese turn in their bonds, which pay an extremely low interest rate, they can be repaid with paper dollars.

On the other hand the Venezuelan loan is either dollar or yuan denominated. Venezuela can't pay it with their Bolivars, which are collapsing because inflation is extremely high. The deal requires they pay with oil. Venezuela's exports are mostly oil, because the country's other exports have collapsed as a result of Chavez's and Maduro's mismanagement (this involves an overpriced currency sustained with currency exchange controls and arbitrary nationalizations coupled to really poor management of the newly nationalized companies). The problem for Venezuela is that oil production isn't increasing, more and more of the oil they produce will have to be used to pay the Chinese loans, they have a subsidized internal market which generates huge losses for PDVSA and the other sectors of the economy are a mess. This set up is really unsustainable.

I think the government's aim is to drive the National Assembly to relinquish its law making constitutional power to Maduro, who would then be free to write whatever he wants (or the Cubans want) into law. I think that regime is headed towards dictatorship Cuban style. And the Cubans are nothing but a bunch of fascists. So Venezuela seems headed towards a form of national socialism. Nazis in other words. A bunch of incredibly incompetent thieves allied with the ex Stalinist dinosaur in Havana will put Pinochet to shame.