Credit Risk

China’s Bailing Out Venezuela’s Corrupt Regime. That’s Got to Stop.

Things are so bad under the Maduro regime in Caracas, it’s hard to figure out how it survives. Until you look at the bucks coming in from Beijing.

Photo Illustration by Elizabeth Brockway/The Daily Beast

Socialist solidarity appears to be alive and well; Karl Marx would be oh so proud. China, whose one-party system has managed to successfully open up much of its economy in recent decades, has decided to prop up one of the worst socialist experiments in history: Venezuela. We believe this is dangerous, both for Venezuelans and for the region.

China’s ultra-pragmatic actions should surprise no one. And let’s be honest, this actually has nothing to do with socialism. China’s global soft power projection is ubiquitous today, and its frantic search for sources of energy is entirely understandable. So while they may bully their Asian neighbors, its businessmen and state-run companies are all over Africa, and invest very heavily across the Americas. In fact, China today has provided more money to the region in recent years by way of loans than the Inter-American Development Bank and the World Bank combined.

As Americans, we voted in a president who understands the dangers of unchecked Chinese power. YouTube videos and memes mocked the then-candidate Donald Trump’s perceived obsession with the “other” superpower. Yet as Venezuelan-Americans, we have internalized this concern which transcends economic nationalism or artificial islands in the South China Sea.

For almost two decades, China financed Venezuela when things appeared great under the two Hu’s (Hugo Chavez and Hu Jintao), with repayment sent back to Asia in barrels of oil. And why not? It was, to use a Trumpism, a good deal. It made sense for both parties, especially as cheap Chinese mobile phones, motorcycles, and home-building materials helped Venezuela’s populist government win support among the poor. Trade between the two countries was less than $500 million per year before 1999 when Chavez came to power. Ten years later it had reached $7.5 billion.

Indeed, Chavez’s authoritarian regime had the good fortune of high oil prices to cover up its hopeless economic mismanagement. But today it’s a different story. Venezuela is a mess. The corrupt and inept Maduro regime rapes the economy in the midst of low oil prices. The result is hyperinflation, food and medicine shortages, and a country on the verge of becoming a failed state.

Yet China has not given up. Just like a bad gambler, it continues to double down, financing modernization projects in a desperate attempt to increase production and bail out the regime. Energy hungry China sees in Venezuela a long-term source of oil in which it is worth investing to modernize the infrastructure and increase oil extraction capacity. China is Venezuela’s second largest oil consumer, and so far has loaned Venezuela some $60 billion, $20 billion of which Venezuela has yet to repay. With endemic corruption and mismanagement in PDVSA, the national oil company, the Chinese will be lucky to see this again, whether in cash or in oil.

In the meantime, Venezuela is entirely at the mercy of its Chinese creditors. Sovereignty has been surrendered for cheap credit. At least the Venezuelan people are benefitting from this, no? Unfortunately not. Alas, with the most corrupt regime in the history of Venezuela, the incoming cash merely fills the coffers of the regime and its cronies.

So, while Maduro and Chavez signed agreements with the Chinese to develop over 600 projects, the vast majority of them remain incomplete. Some never even started. They were apparently propaganda tools aimed at people with short memories. What ever happened to the railroads, the Chinese-funded housing projects, the scores of manufacturing plants? They were mere smokescreens for a corrupt socialist elite to maintain its own power at all costs while plundering the economy at the expense of the people.

Yet it still continues. While the people starve, president Maduro enriches his family and allies, and Vice President Tarek El-Aissami funds drug running, his close friends, and a bit of terrorism just for fun. All the while, the great financing dragon keeps breathing fresh fire into the engine; over $20 billion since 2014.

So candidate Trump was right all along. China’s actions are dangerous and irresponsible for America. But also for the Americas. Their continued double-down financing of the Venezuelan regime in return for cheap oil props up an illegitimate corrupt state, while the rest of the nation starves.

Martin Rodil is president of the Washington-based Venezuelan American Leadership Council (VALC).