'Oil-for-loan' deals partly to blame for Venezuela's economic spiral

By Sarah McGregor and Saleha Mohsin on 2/2/2018

WASHINGTON (Bloomberg) -- China’s role in Venezuela, including oil-for-loan deals, is partly to blame for the South American country’s shrinking economy and the international community will probably shoulder the costs, U.S. Treasury Under Secretary for International Affairs David Malpass said.

“Most of the blame for Venezuela’s economic collapse and humanitarian disaster falls squarely on Venezuela’s rulers, but China has been by far Venezuela’s largest lender, supporting poor governance,” Malpass said in remarks at Center for Strategic and International Studies in Washington on Friday. “The result will raise the ultimate cost to the international community once Venezuela returns to democracy and economic reforms.”

Venezuela has borrowed from China in loans denominated in “barrels of oil,” said Malpass. “This has the effect of masking the exact amount of payments that China made to Venezuelan officials and that Venezuelans are expected to make to China in the future,” he said.

Malpass said he’s also concerned by China’s invitation to the Community of Latin American and Caribbean States to deepen economic and trade cooperation by joining its “One Belt, One Road” initiative. 

'Long-term dependency'

“China offers the appearance to an attractive path to development, but in reality this often involves trading short-term gains for long-term dependency,” he said.

U.S. Secretary of State Rex Tillerson earlier this week made a renewed call for Venezuelan President Nicolas Maduro’s government to face international isolation, a theme he plans to pursue at each stop in a six-nation tour of Latin America.

Tillerson’s comments on Venezuela denote “profound lack of knowledge," the country’s Defense Minister Vladimir Padrino Lopez read in a statement on state television. “How can the U.S. speak of dictatorship when political pluralism is allowed?”

U.S. sanctions haven’t yet deterred Venezuelan officials, who announced last month that they would proceed with presidential elections in April. Many opposition leaders are in exile or have been banned from holding elected office.

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