VIO News Blog

February 19, 2009

Venezuela and China Create Strategic Alliance

The joint development fund between Venezuela and China grew by $6 billion in deals signed this week to reach a total of $12 billion, according to the AP. The BBC reports that the funds could be used in Venezuela to support education, health, infrastructure, farming, and mining. Citing common interests and a “strategic alliance,” President Chavez said Venezuela would supply China with a million more barrels of oil per day (a fourfold increase) by 2015.

Also in oil news, Venezuela will boost its oil output by 12 percent over seven years through joint ventures with foreign firms in the Orinoco oil belt. Bloomberg reports that a leaked government document cited development costs of $18.4 billion for the projects. Meanwhile, rumored oil production cuts by OPEC are now said to be aimed at raising crude prices to $70 per barrel, according to the AP. Venezuela’s oil minister said the market is oversupplied and prices should be stabilized.

Two opinion pices today weigh in on Venezuela’s recent national referendum, in which voters chose to end term limits for elected officials. A Washington Times op-ed — one of nearly half a dozen recent ones in that paper criticizing Venezuela’s referendum — accuses the president of “buying votes.” The elections were free and fair, though, and social programs that have redirected oil revenues to the poor have helped halve the poverty rate over nearly a decade. The op-ed also overlooks the fact that Venezuela has been democratic for over half a century, citing just “two decades” of democratic gains. It also ignores the fact that experts recognize a dramatic increase in popular participation in politics under President Chavez. An editorial in the Corpus Christi Caller-Times of Texas makes similar doom-and-gloom economic predictions with little basis in fact in order to claim that Venezuela is “in sorry shape.”

The only bad news on the economy in Venezuela today concerns fraud by private foreign firms. After $8 billion in fraud by Stanford International Bank was revealed and investors rapidly withdrew yesterday, Finance Minister Ali Rodriguez tried to ease concerns, saying: “The public needs to maintain confidence in Venezuelan banks. This is an immediate takeover. The problem facing Stanford is separate from the Venezuelan financial system.” Venezuela followed Panama and Colombia in taking over Stanford operations.

Reuters reports that Stanford Bank, owned by a Texas billionaire, was long “a favored investment vehicle for Latin America’s wealthy and upper class.” The New York Times describes how the bank “lured clients in provincial cities,” amassing about $2.5 billion from among 10,000 clients in Venezuela — about a third of Stanford’s business, but only 0.2 percent of total banking deposits throughout Venezuela.

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