[LINK] "Crude Collapse Seen Boosting China’s South American Clout"
Juan Pablo Spinetto and Anatoly Kurmanaev of Bloomberg write about how Chinese investment is coming to play an increasingly critical role in many South American economies, particularly the radical and oil-dependent Venezuela and Ecuador.
The worst commodities rout in six years is opening the door for China to increase its influence in Latin America, home to the biggest oil reserves outside the Middle East.
China, with the world’s largest foreign reserves at almost $4 trillion, agreed to a combined $27.5 billion of funding and investment with Venezuela and Ecuador in separate deals announced by South American officials this week in a bid to shore up their battered finances.
As crude’s 50 percent nosedive erodes reserves and funding options of OPEC’s two Latin American members, China, the world’s largest importer of commodities from oil to soybeans, is taking the opportunity to secure more resources in exchange for credit. While details of the accords weren’t divulged, locking in more oil supply to China may reduce the amount the countries have available to sell on the open market once prices improve.
“An opportunity to boost access in South America has emerged,” Paulo Vicente, a professor of strategy at Fundacao Dom Cabral business school, said in e-mailed comments. “This is the ideal situation for the Chinese to enter as saviors.”
Venezuelan President Nicolas Maduro said yesterday he obtained $20 billion of new investment, without providing details. A day earlier, Ecuador signed loan deals with China for $7.5 billion, including a $5.3 billion credit line from the Export-Import Bank of China, according to an e-mailed statement.
Former President Hugo Chavez and his successor Maduro have turned to China amid tense relations with U.S.-funded multilateral organizations. China has lent more than $45 billion to Venezuela in the past decade, mostly in return for oil supplies, including a $4 billion loan in July.
The worst commodities rout in six years is opening the door for China to increase its influence in Latin America, home to the biggest oil reserves outside the Middle East.
China, with the world’s largest foreign reserves at almost $4 trillion, agreed to a combined $27.5 billion of funding and investment with Venezuela and Ecuador in separate deals announced by South American officials this week in a bid to shore up their battered finances.
As crude’s 50 percent nosedive erodes reserves and funding options of OPEC’s two Latin American members, China, the world’s largest importer of commodities from oil to soybeans, is taking the opportunity to secure more resources in exchange for credit. While details of the accords weren’t divulged, locking in more oil supply to China may reduce the amount the countries have available to sell on the open market once prices improve.
“An opportunity to boost access in South America has emerged,” Paulo Vicente, a professor of strategy at Fundacao Dom Cabral business school, said in e-mailed comments. “This is the ideal situation for the Chinese to enter as saviors.”
Venezuelan President Nicolas Maduro said yesterday he obtained $20 billion of new investment, without providing details. A day earlier, Ecuador signed loan deals with China for $7.5 billion, including a $5.3 billion credit line from the Export-Import Bank of China, according to an e-mailed statement.
Former President Hugo Chavez and his successor Maduro have turned to China amid tense relations with U.S.-funded multilateral organizations. China has lent more than $45 billion to Venezuela in the past decade, mostly in return for oil supplies, including a $4 billion loan in July.