Illustration by Shari Avendaño

From investment to debt, the dangers of playing against loaded dice

Between 2000 and 2014, Venezuela received more resources from China than any other country in the world. Despite being located some 14,000 kilometers away, a population of 30 million coupled with enormous energy potential, characterized by an erstwhile billion-dollar oil industry, held significant appeal to China. This, coupled with a new, nationalist political model that appeared compatible to China’s new commercial strategy, provided a catalyst for both nations to strengthen relations. Yet opacity has characterized the signing of almost 500 agreements.

This is the first in a two-part series of investigative journalism that takes a detailed look at the strategy behind the many loans and commercial agreements made by the governments of President Hugo Chávez, between 1999 and 2013, and President Nicolás Maduro between 2013 and 2016, when debt defaults and widespread mismanagement of projects granted to Chinese companies in the country caused relations to cool significantly.


It all started with a loan of $30m.

October 1999. Hugo Chávez, a former high-ranking military official previously jailed for a failed coup d’état in February 1992, was inaugurated as President of Venezuela after winning 56% of the ballot in elections held in December the previous year.

Within six months of ascending to the presidency, the self-proclaimed socialist leader had embarked on a 22-day international tour of Europe, the Middle East and Asia in search of political and economic allies. The trip would take him to the People’s Republic of China, a nation he came to describe as “a true model and example of mutual respect”.

While in Beijing, Chávez met with Chinese President Jiang Zemin, hailing China as a “great friend of Venezuela”. Comparing his own country favorably to China thanks to its ideologies and previous struggle for sovereignty, he signed no fewer than seven commercial agreements under a new grand alliance.

Among these treaties, a loan set up to create a joint committee on energy is of particular interest, as it resulted in the purchase of agricultural machinery from China. The amount was thirty million dollars. It became the cornerstone in a relationship that was to grow exponentially over the next two decades.

In his October 2019 paper Chávez and China: 20 years on, Jorge Dias, an academic at the Venezuelan Center for China Studies, notes that Chávez sponsored the signing of 15 cooperation agreements with China between February and December 1999 alone, while his predecessors in the Miraflores Palace, the headquarters of the Venezuelan government, had signed only 20 agreements in the preceding 25 years of diplomatic relations.

Lawyer and essayist Xulio Ríos, Director of the Observatory of Chinese Politics at the University of Santiago de Compostela in Spain, points out that prior to Chávez, Venezuela’s presidents had signed 42 agreements since the first visit of President Luis Herrera Campins to China in 1981.

Both figures reflect the extent to which both Chávez and his Chinese counterparts prioritized the strategic commercial relationship since rising to power 21 years ago.

A May 2020 report by Transparencia Venezuela, part of the anti-corruption watchdog Transparency International, states that 486 agreements were signed by Venezuela and China between 1999 and 2019 during the governments of Chávez and Maduro and their counterparts Jiang Zemin, Hu Jintao and Xi Jinping. The real figure could be even more. The same report found that detailed public documentation exists for just 62 of the agreements.

During the first year of the Chávez administration, trade with China reached $188.8m, representing an increase of three percent compared to 1998.  Between 1992 and 1999, trade totaled $1.28bn, with an annual average of $142.13m, confirms Dias.

At the time, Venezuela was China’s ninth largest trading partner in the region. Over the 15 years that followed, this mutual economic interest was to transform dramatically into an unprecedented flow of Chinese money into Latin America.

Venezuelan oil: Lock, stock, and barrel for China

During the period of economic growth led by Chinese leader Deng Xiaoping at the end of the 20th Century, China intensified its quest for new supplies of resources to supply the energy demands of both its population and its world partners.

Even before the arrival of chavismo, with its blend of socialist and populist ideologies, right-leaning Venezuela had captured China’s attention in its search for new strategic energy allies, thanks to its status as oil power of the Americas.

During a 1996 visit to Venezuela, Chinese Prime Minister Li Peng signed agreements with President Rafael Caldera that earned him the extraction rights for two Venezuelan oil fields the following year. When production started in 1998, following a $358m investment from China, it was the largest China-funded project in the whole of Latin America.

The key to the relationship was Orimulsion, a bitumen-based fuel developed in Venezuela as a substitute for coal in thermal power plants that is found in abundance in the Orinoco Belt, an area widely considered to hold the largest deposits of heavy crude in the world.

At the time, the new fuel was $10 cheaper per ton than fossil fuel. Agreements between both states reported by global news agency Inter Press Service in November 1996 revealed that China would purchase five million tons of Orimulsion per year from Venezuela. One month later, Venezuela shipped 140,000 tons of Orimulsion destined for thermoelectric plants and steelworks in China.

Just as it was at the time, China’s economic development continues to be based on access to raw materials that are found in foreign markets. This reflects its “distinctive” approach to foreign policy, characterized by a “pragmatic diplomatic agenda” in developing countries that have important energy resources, explains Silvia Hernández Rada, an expert in international studies at UCV and researcher at the Center for Projective Policy Studies at the Simón Bolívar University (USB).

“China’s rapprochement with Venezuela is a direct result of its energy dependence,” says the author in her article Venezuela and China: Economic relations during the Hugo Chávez regime (1999-2011).

While the agreements of the 1990s demonstrate China’s interests in Venezuela, the relationship reached new heights under Chávez—a self-confessed admirer of China’s former communist leader Mao Zedong—as part of his new political project of social justice and national sovereignty.

Gathering considerable momentum from the very start of the Chávez presidency, the Sino-Venezuelan relationship was based on “similar foreign policy lines and actions on both sides, which were clearly apparent in petro-diplomacy, the need to diversify the market, and the shared vision of a common rival, the United States”, Hernández Rada points out.

China’s prevalence in Venezuela’s diplomatic and energy panorama during the Chávez era is not only reflected by the number of bilateral agreements signed between 1999 and 2013. It is further reinforced by the six visits that the leader of the so-called “Bolivarian Revolution” made to Beijing in 1999, 2001, 2004, 2006, 2008 and 2009. This would earn him the record of carrying out the most visits to China of any sitting Latin American and Caribbean president.

“There was a sound political relationship behind the special relationship with China. If there had not been, not even oil would have helped find common ground between the Chinese Communist Party and United Socialist Party of Venezuela, and the South-South relationship,” explains Carlos Eduardo Piña, an expert in political science at UCV and researcher of Sino-Venezuelan economic relations at the National Autonomous University of Mexico (UNAM).

Thanks to Venezuela’s oil reserves, Chávez knew very well how to position himself as China’s main strategic partner in Latin America. This gave him a considerable advantage over the other self-proclaimed socialist leaders in the region such as Brazil’s Luiz Inácio Lula Da Silva, Néstor Kirchner, from Argentina, and Evo Morales, from Bolivia.

Ríos quotes Venezuelan Foreign Minister Jorge Arreaza as saying that Xi Jinping considered Chávez to be “the most charming individual he had ever known”, while Beijing endowed him with the title of “great friend of the Chinese people”.

For reasons ranging from economic interests to ideological alignment, the relationship was elevated to the level of “Strategic Partnership for Mutual Benefit” during a 2001 visit to Caracas by Chinese President Jiang Zemin.

At the beginning of the 21st Century, China developed a capital expansion strategy thanks to its entry into the World Trade Organization, explains Piña. This was based on the main pillars of its foreign policy: to relate to world powers and project itself as an emerging power; to strengthen its ties with Asian countries; to interact with international organizations; and to partner with peripheral countries such as Venezuela.

At 309 billion barrels, Venezuela has the largest proven oil reserves in the world, according to data released in April 2019 by the US Central Intelligence Agency.

In June 2019, the Venezuelan oil ministry estimated these reserves at 303 billion barrels after incorporating calculations for the Orinoco Belt. In December 1998, Venezuela was producing over 3.3 million barrels of oil per day, according to data from Petróleos de Venezuela (PDVSA), Venezuela’s state-owned oil company.

“Oil forms the basis of the entire relationship,” says Piña. “Either way, Chávez knew how important this was. No other country had Venezuela’s oil capacity or the potential of any strategically-important raw material. That is why China is so close to Venezuela”, he explains.

Economic relations between China and Venezuela increased by a “considerable” degree from 2000 onwards, believes Ríos. The new millennium saw the start of a “growing presence of China-funded companies in Venezuela” he says. Piña, meanwhile, considers these activities to be fundamentally restricted to bilateral trade.

These were the first steps taken by China in what was to become an unprecedented injection of funds into the country over the 15 years that followed. It can be seen through the four main avenues of loans, trade, direct investment, and infrastructure projects.

The commitment by the two states was sealed with two multi-billion dollar funds and energy sector related loans, propelled in 2014 by the elevation of bilateral ties to the level of “comprehensive strategic partnership”.

An unprecedented funneling of funds

The speed of China’s commercial expansion at the beginning of the 21st Century turned it into a major capital accumulator, becoming the world’s leading creditor and equipping it with a unilateral reach capable even of competing with the International Monetary Fund, points out Luis Angarita, an expert in international economic relations at UCV.

China’s commercial expansion in Venezuela did not represent an exclusive deal, says Angarita, an authority in international relations, “it is a policy that China was to apply globally”.

Piña, however, refers to the total loans from 2007 to 2015 to highlight the unparalleled nature of the flow of Chinese resources into Venezuela.

In its most recent report on the subject, Transparencia Venezuela places the sum of Chinese resources flowing into Venezuela between 2000 and 2019 at $68.68bn, based on a review of Venezuela’s state-owned Gaceta Oficialnewspapers, data from the Red ALC-China, a network of China-focused academics in Latin America, Venezuela’s Public Debt Act, formal agreements registered by the Venezuelan Embassy in Beijing and Piña’s own research.

91.2% or $62.63bn of China’s financing corresponds to commercial loans, the report suggests. Except for $1.57m in donations, the remaining $6.05bn corresponds to direct investments made by Chinese companies in Venezuela.

China’s foreign trade expansion policy, known as the ‘Go Out Policy’ or ‘Going Global Strategy’, led to resources valued at over $350bn being sent to 139 countries between 2000 and 2014. Transparencia Venezuela believes that 19% of those funds were received by Venezuela alone.

Published on September 9, 2020, the report concludes that Venezuela received the most loans from China of any Latin American country, accounting for 45% of the total granted by China to the region between 2000 and 2019.

Two funds created by China and Venezuela show just how far the relationship had developed.  The China-Venezuelan Joint Fund, known as the FCCV, and the Large Volume Long Term Fund, or FGVLP, totaled $50.30bn, according to research by Piña and his colleague Carlos Brandt published in Venezuela-China relations (2000-18): Between cooperation and dependency. The total represents around 80% of all loans granted by China to Venezuela.

The FCCV was the first fund to be created, with the framework agreements for its establishment signed during the sixth meeting of the Sino-Venezuelan High-Level Joint Committee in November 2007, in Caracas. A Six-Party Framework Agreement; and Four-Party Framework Agreement included tenders from the China Development Bank (CDB), Venezuelan Economic and Social Development Bank (BANDES), PDVSA, and China National Petroleum Corporation (CNPC).

The purpose of the new $30bn fund was to finance economic and social development projects in infrastructure, industry, agriculture, mining, energy, technology, and technical assistance, among other areas.

In one of her frequently-cited articles on Chinese financing, lawyer, professor and expert in administration Natalia Boza Scotto, a member of the Red ALC-China, explains that although it was not explicitly mentioned in earlier versions of the FCCV, “there is a high probability that an agreement for the repayment of loans with oil had been reached” following its inception in 2008.

The modus operandi for the fund and the associated debt repayments was as follows, suggests Boza Scotto.  CDB delivers resources to BANDES, and PDVSA then sells oil to CNPC, which in turn deposits payments for oil shipments into the BANDES account at CDB. The money then goes to the lender, that is, China, to pay for the loan, interest and any other amounts owed.

The second of the two funds, the FGVLP, was born of an agreement conceived by the ninth Sino-Venezuelan High-Level Joint Committee in Beijing, in August 2010, and approved the same year. Its objective was “to foster cooperation between both parties in large-scale projects in the areas of infrastructure, social development, energy, mining and agricultural development, and to accelerate social and economic development in Venezuela”.

The FGVLP included CDB funding of a similar scale both in US dollars and in renminbi, the Chinese currency. The debt maturity was 10 years and did not include any requirements to contribute resources from Venezuela’s National Development Fund (FONDEN), a state-owned financial institution. Under the FGVLP, China’s outlay to Venezuela totaled $20.30bn.

It is in this agreement, Boza Scotto remarks, that the payment of the debt by oil shipments from PDVSA to China National United Oil Corporation (ChinaOil), a CNPC subsidiary, is mentioned explicitly for the first time.

The money for both funds was granted by Chinese state-owned financial entities, mainly the Bank of China, CDB and Export-Import Bank of China.

Based on PDVSA’s financial and management reports, Piña and Brandt identified $11.95bn in loans from China to finance activities in Venezuela’s oil sector, and more specifically for joint ventures located in the Orinoco Belt.

Piña and Brandt’s research confirms that between 2009 and 2013, China approved a further series of credit lines totaling $5.19bn to support PDVSA’s financial needs, oil infrastructure projects and mining exploitation plans.

Due to a lack of available or clear information, Piña and other sources such as the Washington-based think-tank Inter-American Dialogue do not include a presumed $5bn figure from 2018 in their calculations of loans from China to Venezuela, although it has been reported by the Maduro administration.

Speaking from Beijing, Venezuela’s Finance Minister Simón Zerpa announced that CDB would issue a $5bn loan on behalf of the Chinese government to help revitalize Venezuela’s domestic oil production.

The Caracas official referred to the funds as “direct investment” and anticipated “three or four new funding programs” to increase production in the Orinoco Belt and for PDVSA’s “other areas of production”.

These figures have not been included in any calculations, as no independent organization, financial institution or think tank has been able to verify independently whether the loans were in fact carried out.

Debt restructuring looms large

When looking at Venezuela’s debt to China across both funds, Piña estimates the total to be $15.13bn as of 2015. Due to the economic crisis, and slump in gross domestic product caused by the collapse in both production and price of oil, its main currency of payment to China, Venezuelan debt was restructured in 2016, he notes.

According to unofficial BANDES data cited by Transparencia Venezuela, total debt as of December 2019 was $16.73bn. A payment of $3.10bn to China had been planned for 2020, representing 57% of the national budget of the disputed presidency of Nicolás Maduro.

Venezuela’s debt to China for loans linked to the two large cooperation funds is three times its national budget of $5.44bn for 2020, and the level of debt servicing with China in 2020 is estimated at $3.10bn. Transparencia Venezuela emphasizes that there is no publicly-available information outlining the distribution of the debt, the contracted amount, the amortized amount, or the balance, interest or terms.

In his 2019 paper Chinese Investments and Loans in the Venezuelan Oil Sector (2000-18), Piña indicates that Venezuela had allocated roughly 712 million barrels of oil to repay Chinese debt and honor tranches A and B and their respective renewals of the 2008 FCCV fund. This is an average of 198 thousand barrels per day.

Approximately 634 million barrels have been used to repay the 2010 FGVLP fund, with average crude shipments running at 176 thousand barrels per day.

In total, Venezuela used nearly 1.35 billion barrels of oil to service Chinese financing mechanisms between 2007 and 2016. Newspaper reports indicated at the time that Caracas was obliged to restructure its debt with China in 2014 due to the oil price crash.

From 2007 to 2008, Venezuela used between 86 and 89 thousand barrels of crude a day to service its debt to China. In 2009, there was a significant increase in the amount of oil used to meet the commitments with its Asian partner. The tally went from 215 thousand barrels per day that year to 387 thousand in 2010; 415 thousand in 2011; 451 thousand in 2012; 485 thousand in 2013; 477 thousand in 2014; 627 thousand in 2015; and 505 thousand in 2016, according to data issued by PDVSA.

Figures released by the Customs Agency in Beijing reveal that in 2017 China purchased 437 thousand bpd of Venezuelan oil, equal to 5.2% of its crude imports.

In March 2020, it was reported in Reuters and other press agencies that Maduro supporters had attempted to renegotiate the oil-for-cash agreements because of the economic effects of the pandemic, extremely low price of oil, and the harsh financial sanctions imposed by the US.

Negotiations between officials from both governments had not, at least publicly, resulted in any concrete agreement by the publication of this report.

Christi Rangel, research coordinator for Transparencia Venezuela, commented in the presentation of her findings that it was highly likely that new payment terms would be agreed for the $16bn-plus debt to China in the context of the COVID-19 pandemic.

“A debt restructure will certainly be necessary. In fact, there are sources that indicate it has already taken place”, she said.

In 2016, the inevitable happened. China accepted the proposed debt restructuring by extending the maturity dates, granting a two-year grace period, and reducing the quotas of the regular oil payment shipments from Venezuela.

Rangel also stressed that there is a lack of clarity from the Maduro government as to whether the recent resourcing of machinery and medical supplies from China are part of a donation program or represent further loans from Beijing.

In May 2020, Maduro’s interior minister Néstor Reverol reported that 252 “super tanker” trucks had arrived in the country to help distribute water to impoverished areas. The number of imported vehicles would rise to 1,000 between June and August, he said. The retired army general, who was reassigned by Maduro to the position of electricity minister in October this year, said that the trucks were part of “agreements” with China.

Venezuela received a seventh shipment of kits and medical items to combat COVID-19 on September 9, 2020. To date, the country had received 188 tons of rapid detection tests, polymerase chain reaction (PCR) detection kits, masks, protective glasses, medical kits, and medicines from its Asian partner.

Four months ago, Maduro’s health minister Carlos Alvarado stated that the arrival of Chinese aid was all part of ongoing “commercial cooperation” and “important donations.”

Li Baorong, China’s ambassador to Venezuela, added that presidents Maduro and Xi had reached “a consensus of joint cooperation in the face of the pandemic,” although he did not provide further details on the nature of the bilateral arrangement.

From loans to businesses

Research by authors such as Piña, Brandt and Dias helps us to keep sight of the balance of trade relations and foreign direct investment of Chinese businesses in Venezuela, which they see as a barometer of China’s wider interests in Latin America. Venezuela, of course, has a large population and a “friendly” executive. Not to mention the matter of over 300 billion barrels of proven oil reserves.

Piña meanwhile focuses on the remarkable increase in trade between China and Venezuela between 2000 and 2017. The failed coup against Chávez in 2002 and the 63-day oil strike against the his presidency, led to the deterioration of relations with the US and increased the confluence of interests between Caracas and Beijing, the author notes.

“While Venezuela vowed to reduce its dependence on the US by using its own energy resources, mainly hydrocarbons, China strategically positioned itself in the Orinoco Belt and Mining Arc as part of its internationalization strategy”, indicates Brandt.

Piña concludes his analysis by referring to two key figures. “In 2001, the trade balance was around $437m, but by 2017, this figure had reached $8.95bn.” After the US, Venezuela had now become China’s second largest trading partner, surpassing the European Union and India, according to 2018 figures from the United Nations-backed Trade Map and the European Commission.

“The trade balance between the two countries has been favorable for Venezuela since 2005, due to the income generated by oil exports and a fall in imports from China”.

Chinese President Jiang Zemin celebrated the progress of bilateral trade and economic cooperation with Venezuela in 2001, referring to an 86% rise in bilateral trade to $351m in 2000 from the previous year which coincided with Chávez’ rise to power and a represented a new “historical record.”

Jiang also stated that bilateral economic cooperation had increased to the point that Venezuela had become “the principal destination for Chinese investment in Latin America”.  In doing so, it became a busy revolving door for privileged public-private capital flows to the region.

Jiang’s comments describe almost prophetically what the Sino-Venezuelan partnership would achieve in the years that followed, remarks Dias:

“Thirteen years after Chávez’ first visit to China, the panorama of China-LAC relations in 2012 looked markedly different. 25 of the region’s 33 countries had established relations with Beijing. Brazil had reached the level of Comprehensive Strategic Partnership. Venezuela and China had established a Strategic Partnership for Mutual Development, and four other countries held a Strategic Partnership with China. China-LAC trade reached $261.29bn in 2012, an increase of more than 3% from 1999 and representing 6.7% of China’s global trade”.

While trade was, along with oil, the primary focus of the relationship, academics such as Piña consider 2007 to be the year that marked the true level of strategic commitment of Sino-Venezuelan ties.

This was the year that China’s direct investments into Venezuela began. It is an economic phenomenon in which a company from “country A” invests its capital and creates a company in “country B”. There was no credit boost, simply the disbursement of direct resources from Chinese companies in Venezuela.

In his paper Venezuela-China relations, 2000-18, Piña states that outward foreign direct investment (OFDI) from China to Venezuela reached $6.09bn between 2000 and 2018.

“This represents 5.2% of the total investment made by Chinese companies in LAC and places Venezuela as the sixth highest recipient of resources in the region over the past 18 years. While the first transactions began in 2003, the majority were carried out between 2007 and 2016”, he points out, citing Red ALC-China’s OFDI Monitor for 2018.

Disbursements from Chinese companies included 22 transactions, 18 of which related to new projects, and four to mergers and acquisitions.

In the case of these new projects, most of the companies came under a scheme that required the creation of joint ventures funded by Chinese and Venezuelan capital. Initially, nine economic entities were formed in the oil, telecommunications, automotive, transportation and domestic appliance manufacturing sectors.

“This M&A activity included share purchases in companies already operating in the oil industry, as well as automobile and electronic equipment factories run by private companies,” says Piña.

The United Nations Economic Commission for Latin America and the Caribbean (CELAC, Spanish acronym) reports that China’s flow of direct investment to the region totaled $64.07bn between 2010 and 2015.

At $2.54bn, Venezuela is among the region’s countries to have received the least direct Chinese investment during this period. This was well exceeded by neighboring countries such as Argentina ($6.29bn), Peru ($18.38bn) and Brazil ($29.54bn).

Chinese direct investment into Venezuela has focused largely on the raw materials sector (60.7%), followed by services (29%) and manufacturing (10.3%).

“This investment pattern shares some similarities with that of companies of Chinese origin in LAC between 2000 and 2018. It is possible that their interest has been concentrated in the oil sector, and the extraction and commercialization of minerals”, concludes Piña.

Enrique Dussel Peters, professor at the School of Economics of the National Autonomous University of Mexico and coordinator of the Red ALC-China, points out that Chinese companies still lack the experience and information to invest in specific fields in the region, such as clients, environmental, labor and supplier laws.

In an article on Chinese direct investments into Latin America published in August 2019, he states that “in general, Chinese companies require long periods to adapt and learn in LAC, which affects costs and the amount of time it takes to start successful operations and receive profits. This process, however, is changing rapidly as the regular presence of direct investment from China in the region has led to a learning process for Chinese companies”.

Piña highlights other variables that have aided the dynamics of Chinese direct investment in Venezuela. China has used its political, financial, and commercial institutions, such as the Ministry of Commerce, CDB and National Development and Reform Commission to promote the participation of its companies in different areas of the Venezuelan economy.

He also points out that Venezuela was responsible for generating a series of conditions that would make investments by Chinese companies in Venezuela “profitable”, such as facilitating profit repatriation, guarantees to purchase all Chinese goods produced in Venezuela, ensuring the hiring of skilled labor from China, and joint participation in fixed capital investment projects.

Transparencia Venezuela has raised concerns over exactly how Chinese companies benefitted from the absolute control exercised by Chavismo over the country’s institutions, such as Parliament, whose role it is to control and secure the highest values ​​of contracts with commercial partners.

In its September 2020 report, Transparencia Venezuela refers to the restrictive nature of the relationship. “These investments demanded the fulfillment of four rules. First and foremost, politics. Venezuela must recognize the One-China policy and suspend the visas of Taiwanese representatives. Second, China first. Labor, companies, technologies, and products must all be chosen over their Venezuelan counterparts. Third, progressive conditionality. Venezuela must pay the bulk of its debt with oil shipments, while being tied to technology and capital from China. Fourth, confidentiality. Prohibited by law, little is known about the fine print of these agreements”.

Research published in 2014 by the Venezuelan Institute of Advanced Studies in Administration (IESA, Spanish acronym) says that the adoption of favorable conditions for Chinese companies in Venezuela’s agreements with China has generated much debate in Venezuelan academic and business circles. Some believe that this strategy is in the country’s interests, while others feel that “it has been aimed at favoring Chinese investment to the detriment of foreign direct investment from other countries”.

Based on data from the Red ALC-China, the OFDI Monitor and Piña’s own research, Transparencia Venezuela has categorized the 22 transactions for Chinese foreign direct investment in the country.

As a result, some investments by companies such as China International Trust and Investment Company (CITIC) stand out.  One, a $1.61bn construction agreement from September 2014 under the Great Housing Mission, a state program for the development of housing in Venezuela; and two, a $944m investment the purchase-sale of 10% of the shares of Petropiar, a joint venture dedicated to the exploitation of hydrocarbons in the Orinoco Belt.

Two figures here are noteworthy. First, a $1.58bn disbursement made by the China National Petroleum Corporation for the purchase-sale of 9.9% of shares in Sino-Venezuelan oil company Sinovensa in 2018. Second, $549m in Chinese funding for the same company two years beforehand.

Other companies such as Yutong ($278m in 2015), Chery Automobile ($220m, 2009) and Haier ($59m, 2019) are included on the list of Chinese foreign direct investments into Venezuela.

At least 92 Chinese companies have participated in projects and agreements carried out in 21 of Venezuela’s 23 states, including the Capital District.

These bilateral linkages are opaque, to say the least. The ownership or capital of at least 50 of these companies has never been published.

There have been examples of joint ventures, such as Sinovensa, where Venezuela lost out significantly when forced to sell its shares. The Venezuelan parliament has also detected overpricing in numerous projects across the energy sector.

Agreements in the telecommunications sector have not fared much better, either. Contrary to the positive outcomes expected from such large-scale economic arrangements, concerns have been raised about the full extent of official censorship.

When viewed as a whole, the results of this relationship were neither positive for Venezuela, due to the minimal returns on the loans, nor China, due to the default brought about by the collapse in Venezuela’s oil industry from 2015 onwards.

It is estimated that $19.6bn worth of projects have not been successful.

Both countries enjoyed a 15-year period of robust and unprecedented partnership, but legal disputes over specific companies and Venezuela’s oil embargoes have raised tensions. Now, as Venezuela’s political and economic crisis deepens to alarming levels, ties between Beijing and Caracas are cooling considerably.

(Continues in the second installment)

Translated by Edward Longhurst-Pierce