Exclusive: Venezuela gets grace period on oil loan deals against China, sources say
CARACAS (Reuters) – The Venezuelan government has negotiated a deal with Chinese banks for a grace period until the end of the year on some $ 19 billion in loans that are being repaid by oil shipments, three sources say in Caracas knowing the situation.
The government of the late socialist leader Hugo Chavez borrowed more than $ 50 billion from China under oil-for-loan deals, which were mostly guaranteed by the state-owned Development Bank of China. Chavez’s successor, President Nicolas Maduro, stopped making associated payments as the economy of the South American nation of OPEC collapsed.
The grace period is the result of talks Caracas sought with Beijing earlier this year to seek financial support amid falling oil prices and the coronavirus pandemic, according to sources, who asked not to be identified.
“This arrangement will be in place until at least December, and then they will reassess it,” one of the sources said.
Venezuela’s Information Ministry and state-owned oil company PDVSA, as well as the Development Bank of China, did not respond to requests for comment.
The Chinese Foreign Ministry’s spokesperson’s office, in a faxed response to questions from Reuters, said, “I am not aware of the situation you are talking about. I would like to point out that China and Venezuela have a long history of practical cooperation. “
Without the grace period, Maduro’s government is expected to make some $ 3 billion in payments this year, or the equivalent of a quarter of 2019 crude exports. Local economists estimate that the country’s oil export earnings Venezuela in 2020 will reach about $ 4 billion.
Ecuador said last week it had obtained a grace period on a line of credit with the Development Bank of China, allowing it to defer $ 417 million in one-year payments.
Since last year, Venezuela has been unable to meet its loan obligations, in part because of US sanctions aimed at forcing Maduro out of power, which creates penalties for companies that buy oil. Venezuelan crude.
Chinese state oil company CNPC has stopped buying crude directly from PDVSA due to the sanctions, according to three other Venezuelan sources with knowledge of the situation.
“It helps, but it doesn’t alleviate the cash flow problem,” one of the sources said.
In 2016, Maduro’s government negotiated a grace period that allowed it to make interest-only payments on debt, a deal that lasted for at least a year, the sources said. reut.rs/3kBCY11, reut.rs/2XTphR7
China, which was Venezuela’s biggest financier during Chavez’s time, stopped providing new funds to Venezuela seven years ago.
Maduro said earlier this year that Venezuela was receiving personal protective equipment and medical advice from China to deal with the COVID-19 pandemic, as part of a larger effort by China to provide assistance in Latin America.
Additional reporting by the Beijing Newsroom; Written by Brian Ellsworth; Editing by Angus Berwick and Steve Orlofsky