Venezuela is a panorama of misery. Each month tens of thousands flee across borders from spiraling inflation, grinding poverty, rising crime and rapidly spreading disease. The deeper Venezuela sinks into turmoil, the more leverage China acquires over the government of President Nicolás Maduro. But rather than nudge Caracas toward an exit from political and economic crisis, Beijing has opted to watch and wait.
China’s position is not so surprising given its overriding concern to ensure long-term access to Venezuelan oil and other raw materials. With Maduro as an ally, Beijing has moved to expand its stake in Venezuela’s extractive industries. It lent Caracas approximately US$60 billion between 2007 and 2017, cash infusions that have alleviated growing financial pressure on the Maduro government.
Yet Beijing’s support is not without limits. Last year China balked at making new financial commitments because of an outstanding bilateral debt reportedly in excess of $19 billion. Frustration is also growing with the Venezuelan authorities, whose incompetence and corruption have led to a dramatic drop in oil production. Combined with lower oil prices, this decline has placed the country on the verge of full-scale default. While Beijing has shown some flexibility in restructuring debt repayments, it is reluctant to throw good money after bad.
Support for Caracas is also increasingly at odds with another strategic priority for China: strengthening commercial ties with burgeoning economies elsewhere in Latin America. Beijing has stated its intention to pump $250 billion in direct investment into the region and ramp up trade to $500 billion in the coming years. In January, Chinese Foreign Minister Wang Yi invited the Community of Latin American and Caribbean States to collaborate in the Belt and Road Initiative, President Xi Jinping’s “project of the century.”
But China and these promising economic partners are on opposing sides of a divide over the political impasse in Venezuela. In March 2017, the Maduro-packed high court stripped the opposition-led National Assembly of its prerogatives. Soon after, the president stage-managed the election – boycotted by the opposition – of a body to draft a new constitution.
That August, 13 Latin American and Caribbean nations, as well as Canada, founded the Lima Group when the Organization of American States proved unable to check this power grab. The Lima Group is leading efforts to broker an agreement between the Maduro government and the opposition Democratic Unity coalition. So far China has supported the government, albeit warily, in its refusal to compromise.
The Lima Group is backed by a broad international consensus that includes the US and the European Union. These external powers are increasingly alarmed by Venezuela’s troubles – and they largely blame the Maduro government for the implosion. They have begun to coordinate closely to tighten the diplomatic squeeze on Caracas.
But without China, Venezuela’s crisis will be hard to resolve. Beijing’s financial interests in Venezuela give it considerable clout.
As one of the government’s few remaining supporters, Beijing can either prolong Venezuela’s plight or join the Lima Group in persuading Maduro to bargain with the opposition. The resulting stability would not only better secure Beijing’s own interests, but it would also better safeguard regional peace and the well-being of millions of Venezuelans afflicted by epidemics of crime and disease amid economic meltdown.
In the long term, the goodwill that would be generated among Venezuela’s people and Lima Group members would far outweigh any short-term cost to relations with Maduro.
Beijing has signaled that it is unwilling to invest forever in Venezuela’s present dysfunction. The time is ripe for Lima Group states to engage with China to align objectives and policies as far as possible.
This article was authored in conjunction with Phil Gunson, senior analyst for the Andes at International Crisis Group, an independent conflict-prevention organization.