Miguel Rodriguez, an opposition member of Congress who leaked government memos from the Oil Ministry, predicted that the loans will “end up accelerating the bankruptcy” of Petroleum of Venezuela SA, known by its Spanish acronym, PDVSA.
Oil Minister Rafael Ramirez was so alarmed that he warned President Hugo Chavez that the terms of the loan - which require payment in hundreds of thousands of barrels of oil at cut-rate prices - are creating a “very heavy financial load for PDVSA.”
He said the loans are unconstitutional partly because they violate a national law prohibiting the use of state resources as loan guarantees.
“These are illegal debt mechanisms,” he said.
“The president uses the ‘China fund’ as if it were money in his own pocket,” he said.
“Venezuelans have no access to timely, reliable information, and as a consequence, we have no idea how much money is left, how much we owe or the terms under which we have to pay it off,” Mr. Capriles said during a debate in November.
Since 2007, Mr. Chavez's government has received some $32 billion from China to finance infrastructure construction throughout the country and for oil projects in the Orinoco tar sands, the world’s single largest petroleum reserves, with 513 billion barrels of recoverable heavy crude oil.
Fueling the Chavez machine
Critics say the Chinese have given Mr. Chavez an untracked source of money that has propped up his political machine.
Others also suspect that the deals violate Venezuelan law and that Mr. Capriles, if he becomes president, would renegotiate and possibly cancel many of the loans.
“This poses a risk to China of a new government repudiating the loans,” he said.
“The whole arrangement, as far as it is known, is very muddy,” he told The Times. “It is a mortgage on our future oil development.”
Because it has been tapped repeatedly to pay for Mr. Chavez’s various social projects, PDVSA has been forced to go on a borrowing spree in recent years. In 2006, it borrowed $2.5 billion. As of December, that figure had shot up to $34.9 billion.
Chavez haggles for cash
It shows that Mr. Chavez originally requested one loan of $116 billion over a decade, a deal that would have required Venezuela to repay Beijing 250,000 barrels of oil per day for 10 years. That would be about one-third the amount the United States imported from Venezuela in November alone, the last month for which U.S. figures are available.
The Chinese appear to have balked and asked to see in advance a list of Mr. Chavez’s projects that he would finance with the loans. A PDVSA manager named Asdrubal Chavez, however, presented the Chinese with a preliminary list of projects that totaled only $38 billion.
No other details are known about the deal.
Oil is now trading at more than $100 a barrel.
After Mr. Rodriguez made the documents public, Mr. Ramirez of PDVSA announced in November that the structure of the company’s payments had been changed and that PDVSA would be paid $7 billion for Chinese oil shipments in 2011.
“In the event of a regime change, an immediate, urgent effort must be undertaken to evaluate all important aspects of the Venezuela oil industry,” he said.
Mr. Giusti said it would be unwise to nullify Chinese deals without thoroughly reviewing them.
“Each one of them, as many others, should be evaluated commercially and strategically on its own merits and shortcomings,” he added.
“If current conditions are not fair, they should be renegotiated and only canceled if the other party is not willing to do it.”
In recent years, China has become a major lender in Latin America.
Chinese state banks have lent more than $75 billion to regional governments since 2005. In 2010, they made more loans than the World Bank, Inter-American Development Bank and Export-Import Bank of the United States combined, according to a report by the Washington-based Inter-American Dialogue.
Venezuela and Ecuador together received 61 percent of all loans in the region.
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