MasterBlog en Español: Shortsightedness or revolutionary cunning?
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miércoles, 21 de abril de 2010

Shortsightedness or revolutionary cunning?


Shortsightedness or revolutionary cunning
?   
 
This weekend it was learned that the China Development Bank is to grant Venezuela a mega loan of $20.2 billion, 50% in dollars ($10 billion) and the remaining 50% in yuan (70 million yuan = $10.2 billion).
There are several outstanding aspects of this mega loan that give cause for concern:
First of all, the high degree of opacity in which the transaction has been conducted. For example, no one knows anything about the terms of payment or what this huge amount of money will be used for.
If one puts this loan in the context of the agreement between the state-owned PetroChina (40%) and PDVSA (60%) to produce and upgrade 400,000 b/d of extra-heavy crude starting in 2014 in Junín 4 Block in the Orinoco Oil Belt, it would be a fair guess to say that the $10 billion to be granted in dollars is possibly intended to finance the 60% of the investment to be made by PDVSA, while the remaining $10.2 billion that the Chinese are to lend in yuan would be earmarked for “other expenses” of the State.
And that is something that gives cause for considerable concern. This mega loan in yuan would tie Venezuela’s future imports to Chinese products, which could result in a yet another step being taken towards changing its natural trading partners, such as Colombia and the United States. So, where does that put Venezuela’s Bolivarian solidarity with its neighbors in the American Continent if, now, it is going to favor distant China at their expense?
Another aspect that gives food for thought is the huge amount of the loan, which will put the Republic in hock for years. Here are just some of the consequences:
1) Every Venezuelan -man, woman or child- will have to shoulder $720 of that new $20.2 billion debt.
2) This debt that Hugo Chávez is thinking of contracting will increase the country’s foreign public debt -currently in the order of $40 billion, not counting PDVSA’s debt- by more than 50%. This would be even worse if, as claimed in the national press, the loan were to be paid in future oil production. While this is a point that the government has not yet clarified, experts warn that it is a perverse mechanism that should be rejected outright.
3) And lastly, this huge amount also sounds the warning bell as analysts ask themselves where, apart from Junín 4, will so much money be invested?
Many think that, among other far from “holy” destinations, the money could end up financing the 2010 and 2012 election campaigns, contributing to handouts in the continent to spread Chávez’s revolutionary project, and being spent on weapons to confront the empire and on the nuclear and space tests that Chávez apparently talked of recently with Russian Prime Minister Vladimir Putin.
Others, more naive, still hope that a cent or two will be left over to invest in health, security, education, the maintenance of infrastructure, and public services or that, at least, a trickle could be used to put the power back on in Venezuela.

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