Editor’s note: The views expressed are those of the authors alone and do not necessarily represent the views of AidData.
When U.S. forces captured Venezuelan president Nicolás Maduro two weeks ago, the world watched with bated breath for the response from China and Russia. Despite years spent propping up Maduro’s regime—including over $105 billion in loans from China, as detailed by AidData’s Chasing China report—their combined response ended as a routine condemnation at the UN Security Council.
Such a muted reaction only appears surprising. In fact, the Beijing-Caracas friendship did not fracture last week, but rather had already broken a decade ago. After a brief honeymoon period with Maduro driven by Beijing’s desire to access oil and to secure a friend in the Western hemisphere, China has increasingly tried to get out of its marriage through de-risking and diversifying. Venezuela’s experience will likely be a harbinger of future developments in the region—and perhaps no country will be more on notice now than Venezuela’s regional ally, Cuba.
De-risking Beijing’s portfolio in Venezuela
As AidData executive director Brad Parks told the New York Times, sanctions imposed by the United States have made it far more difficult for Venezuela to service its outstanding debt to China—the true size of which remains unclear. In response, we find that Beijing has taken a variety of measures to de-risk and build exit ramps for its supposedly “all-weather” friendship with Venezuela.
China’s relationship with Venezuela, historically cool, thawed dramatically during the Chávez administration. The two countries developed exceedingly close financial ties after 2005, as Venezuela was ostracized from global diplomatic circles and financial markets and China wanted access to its oil-rich resources. To support its new partner, Beijing supplied billions of dollars in loans to Venezuela and gained access to oil in return. Crucially, oil itself was the lynchpin for Beijing to offer such free-flowing money to Caracas. China backed 91.3% of its loans to the country with commodities, with almost $95 billion in loans secured by Venezuela’s vast oil resources.
However, this bid for oil ran afoul as early as the mid-2010s, leading to a de-risking frenzy by Beijing to minimize further losses. Global oil prices began to crater in 2015, with WTI crude oil prices dropping from $103.6 per barrel in July 2014 to $47.22 just six months later. This sudden price collapse, in addition to the costly process to refine Venezuela’s heavy sour crude oil, put commodity-backed loans from China at risk of non-repayment. BANDES, Venezuela’s national development bank and the sole recipient of at least $63.1 billion worth of Chinese state-directed loans, was unable to service its outstanding debt repayments, leading to two restructurings in 2016 and 2020. PDVSA, Venezuela’s state-owned oil company, received its last oil-backed loan from China in 2018. Beijing’s portfolio was therefore already distressed by 2015, ten years before the U.S. intervened.
But Beijing’s largest de-risking bet was a massive reduction in new financing. In 2015, China Development Bank was happy to provide Venezuela with over $20 billion to support the country’s balance of payments and oil development—totaling a staggering $105 billion in commitments from 2000 to 2023. The honeymoon with Maduro quickly ended, however, and since 2017, Chinese official entities have only provided token investments and low-cost “people-to-people” programming, such as scholarships and in-kind medical donations. Together these have been worth just $47.5 million—only 0.004% of China’s total portfolio to the country during the same period.
Adding to this crisis for Chinese creditors, U.S. sanctions and actions taken by the Maduro government fueled a flight of Western businesses, amplifying the impacts of declining oil profits, widespread mismanagement, and deteriorating infrastructure, causing precipitous drops in crude oil production. Venezuela produced 2.65 million barrels per day of crude as recently as 2015. By 2020, after rounds of sanctions under Presidents Obama and Trump, production dropped to just 570,000 barrels per day.
But the U.S. was not alone in undercutting Venezuela's oil industry. Following renewed pressure from Washington with Executive Order 13884, state-run PetroChina suspended loading Venezuelan crude in August 2019. This suspension stayed in place until the Biden administration eased sanctions in 2023.
Pivoting to Venezuela’s neighbors
While Venezuela has stagnated, the rest of Latin America has been developing, and China has moved away from prioritizing its communist and socialist “special friends” in the region to a broader view of potential partners. This includes substantial loans to Brazil’s Petrobas and Guyana Deep Water III’s floating production storage and offloading vessel to exploit Guyana’s Stabroek Block, as well as other large-scale infrastructure loans in Colombia and Peru.
Guyana has emerged as a new focus in the region after ExxonMobil discovered oil reserves in 2015. The ExxonMobil-led consortium began production in 2019 and Beijing paid close attention, developing a strategy to join in on exploration despite its historical investment in the fields in neighboring Venezuela. Guyana received a growing share of Chinese financing in the region, securing over $956 million between 2020 and 2023.
These new investments help geographically diversify the oil China sources from Latin America, and they are often syndicated in partnership with banks from a number of other, mostly Western countries. These banks share skin in the game and provide Chinese lenders with protection from sovereign pressure on their investments.
Guyana’s Floating Production Storage and Offloading (FPSO) Prosperity project shows these dynamics at play. In 2021, alongside a consortium of nine Dutch, Canadian, Singaporean, French, Norwegian, and Japanese banks, Bank of China and the Industrial and Commercial Bank of China contributed $194 million in lending for the construction of the FPSO Prosperity—destined for the Strabroek field and now owned by ExxonMobil. While U.S. allies and China exchange adversarial rhetoric over Venezuela’s oil, their companies are more than happy to collaborate just next door.
China’s realignment in Latin America
Ultimately, these winds portend poorly for another Latin American country that has bet on China: Cuba. As with Venezuela, Beijing thus far has been more than accommodating when it comes to Havana’s inability to pay off sovereign debt. China repeatedly pushed out repayment deadlines on a tranche of loans from 1990 that were originally due in 2000—first to 2010 and then to 2020. In 2016, Beijing forgave $2.83 billion of debt and rescheduled $3.17 billion more. And in November 2022, Chinese creditors once again pushed out repayment deadlines to November 2027. Given the increasing pressure that U.S. Secretary of State Marco Rubio is likely to put on Cuba in the next 21 months, and lack of financial support from other creditors, Havana is extremely unlikely to meet this repayment deadline.
With little to offer China other than a vote at the UN, Beijing may no longer have the patience to extend credit to its old ally, now a distressed asset.
