Venezuela arranges oil for credit deal with China.
With lower oil prices Venezuela has suffered from the global recession and GDP shrank 3.3 per cent last year. However China needs oil for its growing economy and has been able to negotiate a mutually helpful oil for debt swap that has enabled Chavez to avoid turning to the IMF for a loan. The IMF still imposes neoliberal restraints on borrowers that often help global capital more than the borrowing countries. The United States is still the largest purchase of Venezuelan oil however! This is from the Wall Street Journal.
Chávez, Shunning IMF, Gushes About China Oil-for-Credit Deal
By DAN MOLINSKI
CARACAS—China has become a much-needed funding source for recession-racked Venezuela, as well as a welcome alternative to the International Monetary Fund, which President Hugo Chávez continues to shun.
Mr. Chávez, a socialist who for years has been cultivating strong ties with China, said last week that Venezuela has already spent most of the $8 billion Beijing recently loaned it. He said he likes the arrangement so much so that he is asking for more.
"They [China] have provided $8 billion, and we're talking about them bumping that up to near $20 billion," Mr. Chávez said. "That's our proposal, and it's being discussed now."
The credit-for-oil arrangement benefits Venezuela, which puts the money in a fund used mostly for job-creating infrastructure projects as its oil-dependent economy reels from the impact of lower crude prices. Gross domestic product shrank 3.3% last year.
It also benefits China, which has plenty of access to dollars through its massive holdings of U.S. Treasury bonds, but faces increasing oil needs to fuel its robust economic growth.
After oil prices soared to records in mid-2008, China accelerated the reconfiguration of state-run refineries to handle more of the cheaper, heavy crudes—the kind Venezuela produces.
Officials at the Export-Import Bank of China and the China Development Bank were unable to provide information regarding the Venezuela fund.
The two banks have been involved in four credit-for-oil deals that China has signed since the start of last year—with Russia, Brazil, Kazakstan, and Venezuela.
Mr. Chávez is also using the loan from China to thumb his nose at the IMF and other Washington-based multilateral lenders, which he says have forced "savage neoliberalism" on Latin America and other regions in return for low-interest loans.
"When Venezuela used to get financing, the IMF would come here and impose conditions and rules, and sometimes it would even dismantle our laws," Mr. Chávez said last week. "But now, with China and Venezuela, we're on equal footing."
An IMF official in Washington said the institution wouldn't comment on Mr. Chávez's remarks.
While other Latin American countries have gone to the IMF for loans during the past decade, Mr. Chávez has never in his 11 years in power asked the organization for money, not even when the Venezuelan economy was going through some rough patches.
IMF country loans often arrive tagged with a requirement that the government undergo macroeconomic reforms such as privatizing unprofitable state concerns, reducing public spending, and meeting strict fiscal targets.
IMF conditions on loans "go against Chávez's DNA," said Boris Segura, an economist with the Royal Bank of Scotland, who said it is unlikely Mr. Chávez and the IMF would ever agree to a loan deal.
The deal with China makes sense for Mr. Chávez and China, Mr. Segura said, as it satisfies China's need for more natural resources, and doesn't seem to have any political agenda attached.
In 2007, Mr. Chávez said Venezuela was quitting the IMF, blaming its policies of tight budget controls and privatizations for the poverty that continues to grip his country and the region.
Technically, however, Venezuela remains an IMF member as a formal withdrawal would have broken by-laws of the country's sovereign debt and required that it fully pay back bondholders.
With credit-for-oil deals with China, it seems unlikely Mr. Chávez will be returning Venezuela to the arms of the IMF anytime soon. Two of Mr. Chávez's predecessors—Carlos Andres Perez and Rafael Caldera—swore during their presidential campaigns not to make deals with the IMF, only to agree to them once they were in office and facing economic woes.
The deal with the Chinese has the added benefit of boosting Venezuela's oil deliveries to China, which could help Mr. Chávez in his efforts to reduce oil sales to the U.S., currently the main buyer of Venezuelan crude.
Venezuela says it sends about 400,000 barrels of oil a day to China and hopes to lift that to one million barrels a day before long. Chinese data for 2009, however, show imports of Venezuelan crude oil and fuel oil at just under 200,000 barrels a day.
Venezuela currently produces about 2.3 million barrels of crude oil a day, according to independent estimates.
—Simon Hall in Beijing and David Winning in Sydney contributed to this article.