CARACAS/BEIJING (Reuters) – China is likely to extend an agreement proving crisis-stricken Venezuela with favorable loans repayment terms but will not lend fresh funds to President Nicolas Maduro’s government, according to sources in Caracas and Beijing familiar with the situation.
During a decade, China plowed more than $50 billion into the OPEC member’s coffers through oil-for-loan agreements that helped Beijing secure energy supplies for its fast-growing economy while bolstering an anti-Washington ally in Latin America.
Flow - Cash - Years - Venezuela - Change
But the flow of cash halted nearly three years ago when Venezuela asked for a change of payment terms when a fall in oil prices and declining crude output pushed its state-led economy into a hyperinflationary collapse.
Though unwilling to throw Venezuela a financial lifeline, the state-run China Development Bank (CDB) will likely extend next month a grace period begun in 2016 that allows Venezuela to make only interest payments on its loans, the sources said.
China - Requests - Funding
However, China has ignored several requests for new funding.
“Given Venezuela’s falling oil production, it’s natural for Chinese banks not to renew loans,” said one Chinese oil industry source who asked not to be identified.
Oil - Industry - Source - Conditions - Proverb
A second oil industry source, asked if the conditions would be tightened, cited a Chinese proverb, saying China would not “drop stones on somebody who has fallen into a well.”
Venezuela still owes China $19.3 billion, according to one Venezuelan finance industry source who has tracked the information via contacts in both countries.
Volume - Long - Term - Fund - Remains
Some $10.4 billion of that is owed under the $20 billion Large Volume Long Term fund signed in 2010. A further $8.4 billion remains outstanding under the Joint China Venezuela Fund via three tranches of $4 billion to $5 billion each, according to the source.
China’s policy is not to lend new funds until old loans have been paid off – which cannot happen under the interest-only scheme created in...
Wake Up To Breaking News!