South America takes increasing loans from China
Venezuela and Ecuador are set to borrow billions of dollars in return for oil guarantees.
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Pumping oil in Venezuela Image: blmurch |
China has agreed to a $4 billion loan to help Venezuela boost its oil output and is currently in talks with nearby Ecuador to loan a further $1.7 billion. China has quickly become the largest foreign lender to Venezuela in the last few years and has already agreed to over $32 billion worth of loans, which President Hugo Chavez's government will repay with oil shipments.
The latest capital injection will help Sino-Venezuelan companies increase oil production from 100,000 to 330,000 barrels-per-day, with a view to increasing that figure to 1.1 million bpd as early as 2014.
Currently, Venezuela exports 410,000 bpd to the oil-thirsty Asian giant and now the two countries are working together to build a 400,000 bpd refinery in China to manage the increasing volumes of trade. Week long talks between the two nations have been focused on fuelling China's development, in return for providing financial and technical support.
Not all Venezuelans are as confident in President Chavez's “oil-for-loans” deals, which continue to draw strong criticism from his political opponents. One member of the opposition likened the deals to “mortgaging the country.”
Meanwhile, in Ecuador, President Rafael Correa is in talks to add a further $1.7 billion in loans, despite already being $7.3 billion in debt to the growing superpower. The OPEC-member country signed a $2 billion credit deal with China in June and has borrowed a further $571 million in bank loans this October, as advances for oil sales and energy project financing.
Correa claims the high level of funding shows “a lot of respect for the Ecuadorean government”. The majority of the funds will help increase public spending on hospitals, roads and schools ahead of Correa's re-election bid in 2013.
