'Edelmina Flores thanks God and Hugo Chávez for her apartment in a new housing complex in the Venezuelan president's home state of Barinas. She might also want to thank the Chinese government. Since 2007, the China Development Bank has lent Venezuela $42.5 billion, backed by revenue from Venezuelan crude. That sum accounts for nearly a quarter of the bank's overseas loans. At least $12 billion was promised in the past 15 months, when stagnant oil output and higher borrowing costs among major emerging markets made raising capital more expensive.
The money has provided a crucial boost for Chávez, who despite a battle with cancer is running for a third term. Most polls show Chávez leading Henrique Capriles Radonski, the opposition coalition candidate, on the eve of the Oct. 7 ballot, but not dominating as in 2006, when he won 63 percent of the vote. To woo constituents, the Chávez government has finished more than 250,000 houses since last year. In the past 12 months, government spending has risen 30 percent, according to Bank of America Merrill Lynch (BAC), fueling growth of 5.4 percent in the second quarter.
Venezuela pays off the loans with oil, the size of its payments depending on the price of crude. Currently, servicing debt consumes about 200,000 of the 640,000 barrels a day that Venezuela sends China. Apart from nailing down a steady source of oil, Beijing benefits in other ways. Flores's apartment is one of 5,360 units being built two miles outside the Barinas state capital by Citic Construction, a subsidiary of China's largest conglomerate. Citic is in talks with state oil company Petróleos de Venezuela (PDVSA) to acquire a stake in the Petropiar Chevron-PDVSA joint venture in the Orinoco Belt, the source of Venezuela's heavy crude.
Chinese companies are filling pent-up demand for everything from cars to televisions as currency and import restrictions lead to supply shortages. Since 2010, Chávez's government has purchased 3 million air conditioners, televisions, and other appliances from Qingdao Haier. The loans go toward importing cars made by Wuhu-based Chery Automobile, too.'