SpeedyGgggs: February 2012

BUENOS AIRES — Opposition groups in Venezuela are warning that billions of dollars in Chinese loans are driving the state oil company toward bankruptcy.

Miguel Rodriguez, an opposition member of Congress who leaked government memos from the Oil Ministry, predicted that the loans will "end up accelerating the bankruptcy" of Petroleum of Venezuela SA, known by its Spanish acronym, PDVSA.

Oil Minister Rafael Ramirez was so alarmed that he warned President Hugo Chavez that the terms of the loan - which require payment in hundreds of thousands of barrels of oil at cut-rate prices - are creating a "very heavy financial load for PDVSA."

In a memo addressed to "Comrade President," Mr. Ramirez said that the loans caused PDVSA to lose $12.5 billion last year.

Mr. Rodriguez told The Washington Times that he is preparing legal action to challenge the loans before Venezuela's high court.

He said the loans are unconstitutional partly because they violate a national law prohibiting the use of state resources as loan guarantees.

"These are illegal debt mechanisms," he said.

Mr. Rodriguez said the leaked documents are proof that the loan conditions are bad for PDVSA. He also said that $23 billion of what critics call the "China fund" are unaccounted for.

"The president uses the 'China fund' as if it were money in his own pocket," he said.

Opposition presidential candidate Henrique Capriles, who is slated to face Mr. Chavez in an election in October, has attacked the deals for their lack of accountability.

"Venezuelans have no access to timely, reliable information, and as a consequence, we have no idea how much money is left, how much we owe or the terms under which we have to pay it off," Mr. Capriles said during a debate in November.

Since 2007, Mr. Chavez's government has received some $32 billion from China to finance infrastructure construction throughout the country and for oil projects in the Orinoco tar sands, the world's single largest petroleum reserves, with 513 billion barrels of recoverable heavy crude oil.

In November, Venezuelan Finance Minister Jorge Giordani said Venezuela pays China with nearly 500,000 barrels of oil per day, though some analysts doubt those numbers.

Fueling the Chavez machine

Critics say the Chinese have given Mr. Chavez an untracked source of money that has propped up his political machine.

Others also suspect that the deals violate Venezuelan law and that Mr. Capriles, if he becomes president, would renegotiate and possibly cancel many of the loans.

Gustavo Coronel, a former PDVSA board member, said in an email that the loans "show signs of being illegal [and] not properly authorized by the National Assembly."

"This poses a risk to China of a new government repudiating the loans," he said.

Diego Arrias, a former Venezuelan ambassador to the United Nations, said he thinks a new government would renegotiate the loans.

"The whole arrangement, as far as it is known, is very muddy," he told The Times. "It is a mortgage on our future oil development."

Because it has been tapped repeatedly to pay for Mr. Chavez's various social projects, PDVSA has been forced to go on a borrowing spree in recent years. In 2006, it borrowed $2.5 billion. As of December, that figure had shot up to $34.9 billion.

Chavez haggles for cash

Another document Mr. Rodriguez released summarized a February 2010 meeting between Venezuelan and Chinese officials and illustrates the fuzzy nature of Mr. Chavez's oil dealings.

It shows that Mr. Chavez originally requested one loan of $116 billion over a decade, a deal that would have required Venezuela to repay Beijing 250,000 barrels of oil per day for 10 years. That would be about one-third the amount the United States imported from Venezuela in November alone, the last month for which U.S. figures are available.

The Chinese appear to have balked and asked to see in advance a list of Mr. Chavez's projects that he would finance with the loans. A PDVSA manager named Asdrubal Chavez, however, presented the Chinese with a preliminary list of projects that totaled only $38 billion.

China, in turn, offered $11.5 billion. Mr. Chavez pressed for at least $20 billion and offered cut-rate prices per barrel of oil to get more money upfront.

"In order to close this deal, he offered China a price of $70 a barrel, substantially below the current and predicted price for the near term," said Mr. Coronel, who has reviewed the document.

No other details are known about the deal.

Oil is now trading at more than $100 a barrel.

After Mr. Rodriguez made the documents public, Mr. Ramirez of PDVSA announced in November that the structure of the company's payments had been changed and that PDVSA would be paid $7 billion for Chinese oil shipments in 2011.

Luis Giusti, a former president of PDVSA, said that if Mr. Capriles is elected, he should open an extensive investigation of PDVSA.

"In the event of a regime change, an immediate, urgent effort must be undertaken to evaluate all important aspects of the Venezuela oil industry," he said.

Mr. Giusti said it would be unwise to nullify Chinese deals without thoroughly reviewing them.

"Each one of them, as many others, should be evaluated commercially and strategically on its own merits and shortcomings," he added.

"If current conditions are not fair, they should be renegotiated and only canceled if the other party is not willing to do it."

In recent years, China has become a major lender in Latin America.

Chinese state banks have lent more than $75 billion to regional governments since 2005. In 2010, they made more loans than the World Bank, Inter-American Development Bank and Export-Import Bank of the United States combined, according to a report by the Washington-based Inter-American Dialogue.

Venezuela and Ecuador together received 61 percent of all loans in the region.

from the Miami Herald

CARACAS, Venezuela -- Venezuelan President Hugo Chavez celebrated the 20th anniversary of the failed coup attempt that launched his political career on Saturday, presiding over a military parade while fighter jets and helicopters roared overhead.

Chavez was flanked by allies including Cuban President Raul Castro and Bolivian President Evo Morales while his military showed off some of its newest and most sophisticated weapons, including Russian-made anti-aircraft missiles mounted on trucks.

Chavez also used the occasion to reiterate to Venezuelans that the military is firmly behind him as he runs for re-election in October.

"From now on we will have generals, admirals, officers and troops (who are) revolutionaries, anti-imperialists, socialists and Chavistas," the president said during the televised parade.

Presidents Daniel Ortega of Nicaragua and Michel Martelly of Haiti also accompanied Chavez at the parade in the military base Fort Tiuna in Caracas. They planned to attend a weekend summit of the eight-nation Bolivarian Alliance bloc, or ALBA, which Chavez has promoted.

Chavez was an army paratroop commander when he led the failed attempt to topple the government of President Carlos Andres Perez on Feb. 4, 1992. Chavez was jailed and later pardoned.

The government has held celebrations on the date since Chavez took office in 1999. Opponents have criticized the festivities while noting that dozens were killed in the coup attempt.

Chavez's adversaries have also strongly criticized the increasingly politicized military leadership as the president has recently promoted outspoken loyalists to top posts.

Chavez said the military coup attempt of 1992 was a rebellion against political leaders who were "subordinated to U.S. imperialism."

He said the sort of generals who were in charge two decades ago "will never again exist in Venezuela."