Flailing regime is seen as easy pickings for China’s ‘debt-trap diplomacy’
Venezuela’s President Nicolas Maduro took his exhausted country by surprise on Wednesday by boarding a flight to China.
The visit — widely believed to be a pitch by Maduro’s fiscally-crippled government for a loan — is likely to sound alarms in capitals around the hemisphere as governments try to guess what Venezuela is offering China and what China’s motives might be for lending money to a country that can’t pay its debts now.
Venezuela watchers say that if China is reopening those taps, it can only be in return for far-reaching concessions, leading some to ask whether Beijing is about to establish its first real beachhead here in the Americas.
Maduro is desperate to achieve a deal. The administration is surviving day by day.– Venezuelan economist Diego Moya-Ocampos
“At this stage of the collapse of not only the Venezuelan economy, but also the regime, I believe that Maduro is ready to sell the farm at any price,” said Diego Arria, Venezuela’s former permanent representative to the UN, now exiled in New York. “There is no limit to what he can surrender to the Chinese at this stage.”
Maduro seemed unconcerned about his hosts’ intentions as he toured Mao’s mausoleum on Friday. “We’ve come to render homage to the Great Helmsman Mao Zedong. I feel very moved remembering one of the great founders of our multipolar 21st century, without hegemonic empires that blackmail, that dominate,” Maduro said in comments broadcast by Venezuela’s official VTV network.
Debt trap diplomacy
When China, flush with hard currency from exports, emerged as a big lender to developing nations, it was welcomed by many as offering an alternative to institutions controlled by Washington and former colonial powers.
But the borrowers soon found that China has nothing to learn from the debt hegemons of the past when it comes to blackmailing and dominating cash-poor countries.
Last December, Sri Lanka handed over Hambantota — its most modern port — to Chinese state-controlled firms. The surrender came after years of the island nation struggling to make payments on high-interest loans from China.
Across the Indian Ocean, some Zambians speak of China as the new colonial power. This week, their government had to deny publicly it’s in talks to turn over its national broadcaster, its national electrical company and international airport to Chinese creditors.
The U.S. government believes that China is interested in using predatory lending and port investments to expand its footprint in the Americas, with the leftist alliance of Venezuela, Cuba, Bolivia, Nicaragua and El Salvador as its entry point.
El Salvador’s government has hinted it intends to invite China to develop its Pacific port of La Union, prompting a warning from U.S. Ambassador Jean Manes in July:
“They are trying to find weak spots in the region, where they can make these kinds of arrangements. We are concerned that it is not only investment in a port, but then they want to do something with their military and they want to expand Chinese influence in the region.”
Venezuela ripe for the taking
With a population weakened by hunger and a corrupt government that seems willing to go to great lengths to remain in power, no country in the hemisphere presents as many opportunities for China’s debt-trap diplomacy as Venezuela.
Venezuela’s soil contains two things China needs: the world’s largest proven oil reserves and abundant coltan, a mineral used in smartphones.
“Venezuela has given so much already to the Chinese,” said Arria, “not only in oil concessions, but in mining. A concession of the Venezuelan ports is also a potential giveaway.”
Arria, a diplomat who served as president of the United Nations Security Council in 1992, said the Chinese would never have provoked the U.S. by seeking a military presence in this hemisphere in the past. Now, he’s not so sure.
“I think they have taken the temperature of the area, and what other countries might do. There’s no doubt they’re getting bolder.”
‘Lender of last resort’
Venezuelan economist Diego Moya-Ocampos is chief analyst for the Americas at the London-based risk consultancy firm IHS. He said Venezuela is caught in a downward spiral: it lacks the money to keep up its oil infrastructure, and falling oil production in turn means less money coming in.
From about three million barrels a day at the turn of the century, Venezuelan production has fallen to a 60-year low of 1.2 million, mostly because of corrupt and incompetent management.
China is already entitled to take 375,000 barrels a day of Venezuelan oil as payment on existing debts.
“If things keep going the way they’re going, they will close the year below one million barrels a day. So Maduro is desperate to achieve a deal. The administration is surviving day by day,” Moya-Ocampos said.
“China now has become Venezuela’s lender of last resort, and the future of Maduro’s regime depends on which stance the Chinese take.”
One thing is certain, said Moya-Ocampos: “(The Chinese are) going to make sure they’re going to be paid.”
Importing ‘people control’
China’s cooperation with the Venezuelan government extends beyond loans. It’s also sharing its expertise in the technology of totalitarianism.
Venezuela is too cash-strapped and chaotic to mimic Beijing’s Orwellian system of mass facial recognition, but China has helped it to develop a new digitized Carnet de la Patria (“Fatherland” ID card) that the state uses to control its citizens.
“The system of the Carnet de la Patria is the same as the ‘libreta’ (ration book) in Cuba and in many communist systems to control access to food,” said Venezuelan-Canadian human rights activist Alessandra Polga.
“It’s coercion. If you’re not registered under the carnet you can’t work, you can’t get your pension, you can’t even fill your car. Everything is connected to the same database.”
One factor might give the Chinese pause, said Moya-Ocampos — the prospect of never getting their money back.
“The opposition have warned that according to Article 150 of the constitution, any strategic arrangement or new loan needs to be approved by Venezuela’s legislature,” he said. “If not, then if in the future the opposition takes control, there is no guarantee they would pay back.”
Venezuela’s opposition wrested control of the country’s National Assembly in the 2015 election with a “supermajority” that would have allowed it to overrule Maduro. The ruling Socialist Party responded by simply creating a new “constituent assembly,” with different voting rules that guaranteed it a majority. (Most foreign governments, including Canada’s, continue to recognize the elected National Assembly of 2015 as the lawful government of Venezuela.)
Moya-Ocampos said regime change likely would lead to the repudiation of any new Chinese debts. “Nobody, the Chinese included, can guarantee that the incumbent leadership is going to be the same five years from now.”