Venezuelan President Nicolas Maduro on Tuesday said that new investments from China would help his country dramatically boost its oil production, doubling down on financing from the Asian nation to turn around its crashing economy.
Already a major economic partner, China has agreed to invest US$5 billion more in Venezuela, Maduro said following a trip to Beijing, adding that the money would help it nearly double its oil production.
“We are taking the first steps into a new economic era,” he said. “We are on track to have a new economy and the agreements with China will strengthen it.”
A once-wealthy oil nation, Venezuela is gripped by a historic crisis deeper than the Great Depression in the US. Venezuelans struggle to afford scarce food and medicine, many going abroad in search of a better life.
Venezuela’s inflation this year could top 1 million percent, economists have said.
After two decades of socialist rule and mismanagement, Venezuela’s oil production of 1.2 million barrels a day is one-third of what it was two decades ago, before then-Venezuelan president Hugo Chavez launched the socialist revolution.
Under the deal, Venezuela would increase production and the export of oil to China by 1 million barrels a day, Maduro said.
However, China is taking a strong role in its new agreements. Over the past decade, China has given Venezuela US$65 billion in loans, cash and investment. Venezuela owes more than US$20 billion.
The head of China National Petroleum Corp (中國石油天然氣) is soon to travel to Venezuela to finalize plans on increasing oil exports.
Russ Dallen, a Miami-based partner at brokerage Caracas Capital Markets, said the influx of money appears to be investments that China would control.
“The Chinese are reluctant to throw good money after bad,” Dallen said. “They do want to get paid back. The only way they can get paid back is to get Venezuela’s production back up.”
Venezuela also agreed to sell 9.9 percent of shares of the joint venture Petrolera Sinovensa SA, giving a Chinese oil company a 49 percent stake.
The sale would expand exploitation of gas in Venezuela, Maduro said.
He has also launched sweeping economic reforms aimed at rescuing the economy that include creating a new currency, boosting the minimum wage more than 3,000 percent and raising taxes.
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