Venezuela to Tap $4 Billion of Chinese Credit Line for Development Efforts

Venezuela will tap $4 billion of a $20 billion long-term credit line with China to finance development projects, Vice President Elias Jaua said today.

China agreed to extend the line of credit to Venezuela in April. Venezuela will repay the $4 billion in part with future oil shipments, Jaua said today on state television.

Venezuela, the largest oil producer in Latin America, is diversifying its export markets and seeking loans from Russia to Japan in a bid to boost output and finance social programs. The financing from China is separate from a $12 billion bilateral investment fund that Venezuela pays for with about 400,000 barrels of oil a day.

“This is one of the most important financing agreements we’ve made in Venezuela’s history, not only because of the size but also the conditions of respect and sovereignty,” Jaua said. “We’re no longer dependent on financing from the International Monetary Fund. These are reliable, durable credit lines.”

The $4 billion will go toward financing 19 development projects involving electricity, agriculture, mining, technology and oil, Jaua said. The $20 billion credit line consists of $10 billion in U.S. currency and $10 billion in Chinese yuan. Jaua didn’t say which currency Venezuela is tapping.

President Hugo Chavez said in April that the credit line is the largest that China Development Bank Corp. has extended to any country. Trade between China and Venezuela surged to $8.9 billion in 2008 from $85.5 million in 1999, according to Venezuelan state bank Bancoex.

“This loan has a payback mechanism of progressively larger oil exports to China,” Jaua said today after meeting with a Chinese delegation in Caracas.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net.

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