China is already Venezuela’s second main commercial partner and Chavez has made all efforts to tie his regime to China, what could be called the CHI-CHA connection. He has obtained from China significant amounts of cash, promises of more money to come and technical assistance, amounting to some $80 billion in the last four years.
The breakdown is as follows: $32 billion in loans, some in dollars, some in yen, not all delivered in cash; financing of $4 billion in weapons and airplanes; a promise by the Chinese to invest $40 billion in the heavy oil deposits of the Orinoco river region (not yet materialized) and some $4 billion in technical assistance in railroad, port and housing construction, as well as mining, agriculture and space technology.
An excellent paper by Evan Ellis (“China’s cautious Economic and Strategic Gamble in Venezuela”, China Brief, Volume XI, September 2011), states that the association with China has given Chavez much needed money, without the need to be transparent on how he manages it.
Predictably, the Chinese have increasingly demanded that Chavez acquire their products and services. Some 300,000 Chinese made electrical appliances, iceboxes and the like have been bought. Other contracts include the construction of 26,000 houses with Chinese company CITIC, a $7.5 billion railroad construction project, some $470 million in mining projects, the acquisition of commercial and military aircraft, a $500 million artificial satellite and radar equipment. According to Ellis the number of joint projects nears 140.
Such an association has given the Chavez’s regime temporary oxygen but has also made it more vulnerable and dependent. Venezuela will have to pay the Chinese with future oil production, some 200,000 barrels per day for the next ten or more years. Being over dependent on the Chinese has made Chavez especially vulnerable, since China’s withdrawal from Venezuela would lead to Chavez’s political collapse.
Why would China withdraw their support of Chavez? Because Chavez could fail to deliver what China needs: oil and a convenient political vehicle to extend their presence in Latin America. In plain terms Chavez has become a political pawn of China in the Western Hemisphere.
The main threat to this Chi‐Cha link is represented by a change in government in Venezuela, something that seems not only possible but also probable in the short term. For a new, democratic, government some of the characteristics of the China‐Chavez relationship are clearly not in the national interest and, even, unconstitutional. A new government could denounce this association, endangering China’s money and objectives in Venezuela.
Another obstacle could be the posture of the U.S. regarding the relationship. In case of strong U.S. objections China might have to downsize it or abandon it altogether, since the U.S. is clearly more important to China than Venezuela in a geopolitical sense.
As things stand today Chavez has become a Chinese puppet in Latin America.