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Banking

Investment flows: China ups Venezuela infrastructure credit

$4 billion loan in return for oil; China bolsters strategic relationships in South America

China has cemented its position as Venezuela’s biggest foreign lender by agreeing to a new $4 billion credit line for infrastructure projects in the Latin American country.

On May 18, China Development Bank, the country’s state-owned development bank, agreed to the new loan as a contribution to the China-Venezuela Joint Development Fund, which was created in 2008. Venezuela and China have both contributed to the fund, which totals $32 billion, for social and infrastructure projects in the South American country. But China has contributed much more than Venezuela, mostly in the form of new credit lines. In effect, China has become the country’s lender of last resort.

"The fact that China is prepared to lend to the country indicates that it believes Venezuela is capable of paying it back"

Victor Rodriguez, LatAm Alternatives

"The Venezuelan government has been advised well about pursuing this relationship with China," says Victor Rodriguez, chief executive officer of LatAm Alternatives, a hedge fund manager and director of the Latin American chapter of the Hedge Fund Association.

"This growing relationship is a reflection of the economic balance of power today.

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