China cuts off Venezuela's cash
After pouring billions into Venezuela over the last decade, China is cutting off new loans to the Latin American nation. It's a major reversal of relations between the two nations, experts say. It also comes at the worst time for Venezuela, which is spiraling into an economic and humanitarian crisis.With the crash in the price of oil, it meant Venezuela had to increase its deliveries to China at a time when they were buying it cheap on the market. The country has become an embarrassment to the socialist cause and proof that they cannot manage an economy near as well as market forces in capitalism can. The government was completely inept at commanding the economy.
"China is not especially interested in loaning more money to Venezuela," says Margaret Myers, a director at Inter-American Dialogue, a Washington research group that tracks loans between China and Latin America.
Since 2007, China's state banks loaned Venezuela $60 billion, according to the Inter-American Dialogue. That's more that it loaned to any other Latin American country. China is considered Venezuela's most important creditor.
Of that, Venezuela still owes China approximately $20 billion, experts say, and there's no sign that it can pay back the amount amid its crisis.
Venezuela pays back the vast majority of its loans to China with oil shipments. Last year, Venezuela's state-run oil company, PDVSA, shipped about 579,000 barrels of oil per day to China, according to the company's financial audit.
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But this year, Venezuela -- which has the world's largestoil reserves -- has seen oil production crash to a 13-year low. Some of its service providers, such as Schlumberger(SLB), have dramatically lowered operations due to unpaid bills from the Venezuelan government.
Socialist president Nicolas Maduro has led a regime that mismanaged Venezuela's resources and pushed the economy into a crisis, experts say. China has now run out of patience.