Amid Venezuela’s economic woes, Maduro visits China to seek cooperation

Venezuelan President Nicolas Maduro’s visit to China from Thursday to Sunday is of great significance since Venezuela is mired in a severe economic crisis. The visit serves three goals: to learn from China’s economic reform and help Venezuela with the ongoing economic transformation as well as establish and improve its economic systems; to express willingness to participate in the Belt and Road initiative through enhanced development strategy and cooperation in industrial capacity and infrastructure projects; to brief Chinese enterprises about Venezuela’s investment opportunities and preferential policies and encourage them to invest in the Latin American nation.

Venezuela is China’s important partner in Latin America. Since 1974 when the two established diplomatic ties, they have been enhancing political, economic and social contacts. In the 21st century, the two have made steady progress in bilateral ties and cooperation. It was reported that the countries have signed agreements for over 790 programs, some of which are still under way.

Since 2014, a political crisis has been brewing in the nation; its economy has been mauled by a steep fall in international crude oil price and growing US sanctions. Oil production is the pillar of the Venezuelan economy and oil export accounts for 96 percent of its foreign trade income. The fall in international crude price has cut Venezuela’s export income sharply. Due to lack of reinvestment and sound governance, the country’s oil production has plunged by half. Venezuela now faces severe economic and social difficulties with rising deficits, hyperinflation and worsening public security.

These difficulties also pose a challenge to China-Venezuela cooperation. Some cooperation projects have been shelved or delayed due to shortage of funds. Nevertheless, the two sides forge ahead despite hardships. With the support of “China-Venezuela Cooperation Fund,” Chinese petroleum enterprises work closely with their Venezuelan counterparts to maintain and restore the latter’s production capacity by increasing oil production in Lago de Maracaibo and jointly developing la Faja Petrolífera del Orinoco, etc.

To provide housing for impoverished families and those living in dilapidated homes, Venezuelan government has planned to build 3 million social housing units by 2019 and to renovate slums. Chinese construction companies have taken an active part in the project and delivered over 10,000 high-quality houses equipped with furniture and home appliances, winning accolades from local people. In October 2017, China launched the third satellite for Venezuela after launching one remote sensing satellite and a communication satellite. Cooperation in space technology between the two countries has greatly enhanced internet, telecommunication and telecast across Venezuela, especially its remote areas.

Aside from cooperation in energy, infrastructure and science and technology, Venezuela and China also formed joint ventures in production of mobile phones, passenger vehicles, automobiles and computers to satisfy local demand. Nowadays, most home appliances, garments and articles for daily use in Venezuela are from China that in turn gets steady crude oil supply while increasing machinery export.

Currently, political turmoil, economic crisis and American sanctions are forcing the Venezuelan government to increase production and supply so as to shake off dependency on oil industry and establish a production-based development mode.

Since 2016, Caracas has focused on “15 engines” of economic development including mining, industry, tourism, telecommunication, established special economic zones and opened mining areas to foreign capital for attracting foreign investment. It has also adjusted the exchange rate regime for a stable financial market. This August, it rolled out a package of economic reforms, such as loosening foreign exchange control, issuing new currencies and coordinating domestic and international gasoline prices, to facilitate economic transformation. The Venezuelan government has expressed the wish to take an active part in the Belt and Road initiative proposed by China and help expand it to Latin America.

Venezuela’s ongoing economic reform and transformation has brought new opportunities for the two sides to tap into cooperation potential, expand fields of cooperation and achieve common development. Chinese enterprises will follow the principle of win-win cooperation and help Venezuela come out of the economic morass through pragmatic cooperation toward economic prosperity and social stability.

The author is a research fellow with the Institute of World Development under the State Council’s Development Research Center. opinion@globaltimes. com.cn