Shadow Government

Why is China Bankrolling Venezuela?

If Xi is starting trouble in America's backyard, its time for the United States to say something.


When Chinese leader Xi Jinping meets with President Barack Obama in Washington later this month, there will be no shortage of items of the highest strategic order to discuss. Still, President Obama ought to carve out a few moments to discuss Chinese activity in our own neighborhood. Specifically, he should raise the issue of why China is continuing to loan billions of dollars to Venezuela, whose problematic government is in a political and economic tailspin of its own making and has now begun to lash out at its neighbors.

This week, beleaguered Venezuelan president Nicolas Maduro was in Beijing rattling the tin cup, securing another $5 billion loan from his hosts — a deal in which, as The Economist described, as it is “hard to see any economic advantage to China.”

Certainly, Chinese commercial engagement in Latin America is nothing new. Over the past decade or so — when times were good — China moved to lock in long-term access to energy and raw materials through an aggressive trade and investment push, including free-flowing loans with little fiscal oversight.

But now the economic worm has turned: Chinese growth is slowing and commodity and oil prices are sinking, blurring the lines now between what may have passed as straight apolitical commercial deals with activity that is now carrying more ominous strategic undertones.

Consider the fact that, according to Evan Ellis of the U.S. Army War College, “Of the more than $100 billion that [Chinese] banks have loaned to the region since 2005, more than three quarters has gone to the nations of ALBA and Argentina.” (ALBA, or Bolivarian Alliance for the Peoples of Our America, is an anti-American construct of the late Hugo Chávez and deadbeat Argentina has long been excluded from international capital markets.)

In particular, Venezuela, despite its terrible credit risk, has benefited from Chinese largesse to the tune of some $56.3 billion in loans since 2007.

Whatever Beijing’s motivations, the practical effect of said loans, according to Ellis, has “enabled countries such as Venezuela to continue as de facto sanctuaries for criminal and insurgent groups, and also, as points of entry into the region for Russia, Iran and other actors with potentially hostile intentions toward the United States.”

As is evident from today’s headlines, the situation is getting worse. With the highest inflation rate in the world, plunging foreign earnings from collapsed oil prices, widespread food and medicine shortages, and soaring crime, the hapless Maduro government is doing what all good authoritarians do when faced with intractable domestic problems: it’s picking fights with its neighbors.

When Maduro is not trying to bully small Guyana over a major oil find in territory Venezuela claims as its own, he’s provoking a humanitarian crisis with Colombia, closing a key border crossing and expelling upwards of 1,000 Colombians living on the Venezuelan side of the border, causing another 9,000 to flee homeless and without property. (For good measure, he also accused Colombia of plotting his assassination for the umpteenth time.)

It is not as if President Obama has to pound the table with his Chinese counterpart. If the Chinese want to engage in risky economic behavior abroad, that’s their business. But when their economic engagement in our neighborhood enables bad behavior that threatens regional stability, then that is our business. The president simply needs to impart that his administration is watching with growing concern the direction of events in Venezuela and distinguish between what we consider helpful efforts to achieve a peaceful resolution there or those that we do not. For good measure, he could add that, given the changing international environment, it is increasingly difficult to see an economic rationale behind lending more money to a country near to our shores and bent on such a destructive agenda.

After all, it is not going to be China or Brazil or anyone else for that matter, that will be called upon to help the Venezuelan people rebuild their country after the collapse of chavismo or else deal with the regional repercussions of that collapse. It will be the United States. It appears, then, we ought to have some say on the matter.

Parker Song-Pool/Getty Images

José R. Cárdenas was acting assistant administrator for Latin America at the U.S. Agency for International Development in the George W. Bush administration.

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