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Venezuela-China, explained: The

Belt and Road
Jesús Hermoso and María Victoria Fermín Published January 14, 2019

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This is the second of a four-part series, which will be published on Mondays this

month, that spotlights the Venezuela-China relationship.

Part One: China’s choice to penetrate the Latin American market

Part Two: China, Venezuela, and the New Silk Road in between
Part Three: The geopolitics of the dragon in Little Venice
Part Four: China, a long-term partner for Venezuela?

Key points:

In 2001, Venezuela became the first Hispanic country to enter into a “strategic
development partnership” with China, a relationship that was elevated to
“comprehensive strategic partnership” in 2014, and which now totals at least 790
investment projects in Venezuelan territory. They range from infrastructure, oil,
and mining to light industry and assembly.

China’s development projects in Venezuela have disappeared over the past 11

years, mostly devoured by corruption or by the debt default that the South
American country has incurred with the Asian giant, which froze many direct
investments.

Loans from China to Venezuela reached at least $50 billion by 2017, with some
estimating the number to have been as high as $60 billion. (The uncertainty
regarding the figure is the result of opaque loans, split into payments of $2
billion and $5 billion each.)

As of 2016, China has stopped issuing new loans to Venezuela. Since then,
Chinese representatives have sought unofficial meetings with individual
members of the opposition, trying to secure guarantees that the debt, about $20
billion, will eventually be paid back.
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In 2000, there was an immigrant population of approximately 60,000 Chinese in

Venezuela. Eighteen years later, President Nicolás Maduro estimates there are
500,000 Chinese citizens residing in the country.

Venezuela has gold reserves with a commercial value of more than $200 billion.
In Coltan, reserves are valued at at least $100 billion, and iron is estimated at
more than $180 billion. China worked with Venezuela on the Venezuelan Mining
Map in an area of 111,800 square kilometers (12.2% of Venezuelan territory), and
currently has direct investments of over $580 million.

PART TWO

China, Venezuela, and the New Silk Road

connecting them
At the inaugural speech of the first ministerial meeting under the China-CELAC
(Community of Latin American and Caribbean States) Forum in 2015, held in
Beijing, Chinese president Xi Jinping 习近平 said that China’s purpose in Latin
America was to increase commercial exchange with the region to $500 billion
within the next 10 years, and direct investment to $250 billion. Three years later, at
the second China-CELAC Forum in Chile (CELAC was formed in Venezuela in 2011,
and does not include the U.S. or Canada), China’s foreign minister Wang Yi 王毅
reinforced Xi’s declaration, calling Latin American countries “a natural extension”
of the Belt and Road Initiative.

Investments in China had not always been part of the Belt and Road Initiative —
Xi’s grand political-economic project proposed in September 2013 that now counts
th 70 t i d ff t 75 t f th k i th
more than 70 countries and affects 75 percent of the known energy reserves in the
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world — but they very much are today. Meanwhile, China has promised “conditions

of equality,” even as the country has yet to make significant direct investments in
Venezuela.

In September 2018, Venezuelan president Nicolás Maduro traveled to China for the
16th meeting of the China-Venezuela high-level commission and was promised by
Wang Yi that China would strengthen cooperation and bilateral relations with
Venezuela through the Belt and Road. Unfortunately, details about exact
agreements and numbers remain scant.

Photo: EFE

Although Venezuela has made political statements of support for Belt and Road, it
has yet to sign any direct investment contracts (only more general “investment
agreements”), unlike other Latin countries, including Panama (the first to sign),
Bolivia, Antigua and Barbuda, Trinidad and Tobago, and Guyana. However,
Chinese loan investments have expanded in Latin America, with a particular
preference for investment in Venezuela. The Chinese Development Bank has
lent $150 billion in the last 12 years to Latin America, of which at least a third was
directed at Venezuela.
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Photo: Presidential Press

As for China, it is now close to reaching $250 billion in direct investments, Xi

Jinping’s promise at the first China-CELAC Forum in 2015:

China is expected to actually sign direct investment deals of $260 billion — $10
China is expected to actually sign direct investment deals of $260 billion $10
billion more than Xi’s original promise — due to China’s demand for copper for
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construction industry and iron for steel production (it is the world’s largest
producer). But these agreements are marked by opacity and the numbers are
difficult to verify.

A mining country on China’s strategic route

In 2012, China signed an agreement with Venezuela to develop the Venezuelan

mining map. The president of CITIC Group, Chang Zhenming 常振明, was received
directly by President Hugo Chávez. But journalistic investigations and details of
this agreement — which contained sensitive (and secretive) information, including
a map showing the richest spots on Venezuelan soil — disappeared from the
archives of many Venezuelan media outlets.

One report, which survives only as a web cache, detailed a team of 352 Chinese
engineers who were described as the “undisputed heads” of 425 Venezuelan
geologists, technicians, and workers in 27 camps in 12 states of the country. CITIC
divided the country into six parts to perform airborne geophysical prospecting,
geochemical studies, research, and evaluation of mineral resources (with emphasis
on Guayana and the Andes), and exploration and calculation of reserves of iron,
gold, and bauxite (in Bolívar), phosphate (Táchira, Mérida, and Falcón), and copper
(Táchira). The nationwide investigation estimated the contract’s “total area of work
is 916,700 square kilometers.”

In 2016, China reached an agreement with Venezuela for the mining of coltan, the
so-called “blue gold,” which is used to develop electronic materials ranging from
smartphones to specialized medical equipment. The mineral reserves captured by
China through these agreements were worth at least $100 billion, based on the
value of reserves in 2010. This figure does not include subsequent discoveries.

On July 21, 2017, Venezuela and China signed an agreement worth $580 million for
other mining activities. $400 million of this was earmarked for a strategic alliance
ith th j Chi i f th d l t d ti f th
with three major Chinese companies for the development and promotion of the
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Arco Minero del Orinoco (the Orinoco Mining Arc), along with updating the
Venezuelan mining map.

These agreements have been extended in the Arco Minero del Orinoco project,
conceived by Chávez and the flagship project of the current president, Maduro. It is
an area of at least 111,800 square kilometers that corresponds to 12.2% of all
Venezuelan territory, rich in strategic minerals such as iron, gold, bauxite,
diamond, copper, coal, quartz, titanium, tin, nickel, and coltan, among many
others.

Gold reserves in Venezuela represent a commercial value of more than $200 billion,
while iron reserves have an estimated value of more than $180 billion. Both
resources are coveted by China, which has the most gold on the planet.

But there is another material from Venezuelan soil that could be extremely
valuable. Its name is torio (Thorium), and it has the potential of becoming an
ecological nuclear fuel. Professor Eduardo Greaves, an expert in nuclear physics
and a professor at Simón Bolívar University, pointed out that Venezuela has “a huge
deposit” of Thorium in the Cerro Impacto in the southern state of Amazonas, which
is part of the Orinoco Mining Arc, of which China knows all about, having directed
the development of the geological and mining map of the Venezuelan territory.
Greaves said these reserves could be used in thorium nuclear reactors for at least
300 years.

China has set its sights on this mineral, which can potentially become the green
energy of the future. In addition, it and India were the first countries to have a
Thorium reactor. China plans to use that reactor to build a pilot Thorium plant by
2020, with the hopes of replacing coal energy with nuclear energy.

In 2016, China planned to build at least 30 nuclear reactors in the next 15 years in
countries that are part of the Belt and Road. They have 33 reactors currently in use
d 22 d t ti di t d t f th I t ti l At i E
and 22 under construction, according to data from the International Atomic Energy
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Agency (IAEA); Thorium reactors are very much part of their strategy to replace
fossil fuels in the future.

Recently, Maduro said that China will finance the growth of oil production in the
country, but didn’t mention contracts in the mining area. “There are financial
commitments for the growth of oil production, the growth of gold production, and
investment in more than 500 development projects within Venezuela,” Maduro, in
Beijing, told VTV, a Venezuelan state television station. He did not provide more
details.

China has been pushing the Maduro government to maintain the flow of oil
payments. Maduro promised on October 19, 2018 that it would increase oil exports
to Beijing and Moscow so that they reach 1 million barrels per day, “rain or
shine.” However, a source at the Venezuelan state oil company told a local
newspaper that “the original agreements, which provide for the shipment of
600,000 and 300,000 barrels of oil per day to Moscow and Beijing, respectively,
now barely reach 300,000 and 150,000 barrels.” Although the flow of payments has
gone down, this has not weakened the relationship between China and Venezuela.

But the credit line is not the only big concern for China, which finds itself in the
middle of a commercial war with Venezuela’s first partner: the United States. In
next week’s installment, we’ll delve into the political implications of China’s
dealings with Venezuela, and look at the corruption that has resulted.

Part One: China, Venezuela, and the New Silk Road between
Part Three: The geopolitics of the dragon in Little Venice
Part Four: China, a long-term partner for Venezuela?

Jesús Hermoso is a Venezuelan journalist, researcher, editor, and writer. He is

editor of the Venezuelan independent media platform Efecto Cocuyo María
editor of the Venezuelan independent media platform Efecto Cocuyo. María
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Victoria Fermín is a Venezuelan journalist, currently reporter at Efecto Cocuyo.

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