- Former minister alledges loans used for corrupt purposes
- Venezuela reliant on China because it won't comply with IMF
The billions of dollars China loans to Venezuela in exchange for oil are a “disgrace” and used for corrupt purposes that go undisclosed to the general public, said Harvard professor Ricardo Hausmann.
Venezuela, which has tapped China for more than $45 billion over the last decade, is increasingly reliant on the world’s second-biggest economy for cash because of its unwillingness to comply with the requirements of the International Monetary Fund, Hausmann wrote in a Sept. 28 opinion piece for Project Syndicate. Those loans have become more important than ever as the nation’s international reserves tumbled with oil prices to a near 12-year low.
“The Chinese have not required that Venezuela do anything to increase the likelihood that it regains creditworthiness,” wrote Hausmann, a former Venezuelan planning minister. “They merely demand more oil as collateral. Whatever the IMF’s faults,” China Development Bank “is a disgrace.”
The loans have “built-in privileges for Chinese companies” in sectors including telecommunications, appliances, cars and oil drilling, Hausmann said. An e-mail to the bank seeking comment, sent after business hours, wasn’t immediately returned.
Venezuela’s information ministry didn’t immediately respond to e-mails seeking comment on Hausmann’s allegations. The Harvard professor said in July that the country will have no choice but to default next year.
Earlier this month, President Nicolas Maduro signed a $5 billion loan with China to boost oil output. Despite dwindling production by state producer Petroleos de Venezuela SA, exports to China have risen steadily in recent years as Venezuela seeks to repay loans from the world’s second-largest oil consumer. Much of the money owed is repaid through oil shipments, which currently stand at about 700,000 barrels a day, Maduro said Sept. 2 at the signing ceremony in Beijing.
The global downturn in oil prices has weighed heavily on Venezuela’s economy, which is plagued by the world’s highest inflation rate and rampant shortages of consumer staples.
Venezuela’s reluctance to mend ties with the IMF means “they eschew the massive resources and wisdom that the international community can offer at a time of economic crisis to lessen the pain and hasten recovery,” Hausmann wrote.