(Bloomberg) -- The young politician spearheading efforts to remove Venezuela’s authoritarian leader called for a "transparent relationship" with China, a key investor in the country, saying any agreements made with the regime of Nicolas Maduro would be honored as long as they were lawfully done.
Juan Guaido, the National Assembly leader, is at the forefront of a renewed push to remove Maduro who, with his grip on the military and courts, has presided over crackdowns on protesters, the opposition and a hollowing out of Venezuela’s economy. The desperate conditions for ordinary people struggling with skyrocketing prices and power outages has spurred one of the biggest mass migrations of modern times.
“I will be very clear: all agreements that have been signed following the law will be respected,” Guaido said in a written interview. “If previous agreements were signed by adhering to the due process of approval by the National Assembly, they will be accepted and honored.”
Guaido has the backing of countries including the U.S. and Brazil, and is seeking to put a noose around Maduro’s access to funds, primarily oil and gold exports and income from state-dominated businesses. China is one of the biggest investors in Venezuela, and while it has been an ally of socialist administrations dating back to Hugo Chavez, Guaido portrayed it as having suffered from Maduro’s corruption and financial mismanagement.
"We want to establish a transparent relationship with China and put an end to the plundering of our resources that has prevailed under Maduro’s government, which has ultimately also affected Chinese investors,” he said. “China’s development projects in Venezuela have been falling as they have been affected and destroyed by corruption or debt default.”
The stance of China and Russia is crucial to Maduro’s ability to hold onto power. The countries have filled the investment and security vacuum caused by Washington’s decades-long estrangement from Caracas. But the resurgent U.S. interest makes things more complicated.
Russia has strongly supported Maduro while China has been more equivocal, mostly falling back on citing a longstanding policy of noninterference in other states’ affairs.
Asked three times last week if China still saw Maduro as Venezuela’s president, foreign ministry spokesman Geng Shuang simply noted that a special envoy of President Xi Jinping attended his inauguration in January. On Friday, Geng said China has “maintained close communication with all parties” and ties “shouldn’t be undermined no matter how the situation evolves.”
China is the second-biggest importer of crude from the country, but receives its barrels as repayments of debt. Venezuela hasn’t been able to send enough crude to meet its obligations in recent years as its production cratered and crude prices tumbled.
Beijing has invested more than $62 billion in Venezuela, mostly through loans, since 2007. Last year, it imported 3.6 percent of its oil supply from the country, down from just over 5 percent in 2017. In the throes of a financial crisis last September, Maduro flew to Beijing to win a $5 billion credit line from his “big sister” China. Chinese technology giants Huawei Technologies Corp. and ZTE Corp. have invested heavily in the country.
Not everyone views Beijing’s behavior as benign. Ricardo Hausmann, an acclaimed Venezuelan economist and adviser to Guaido who runs Harvard University’s Center for International Development, has called the China Development Bank a “disgrace.”
Still, China has shown itself able to navigate doing business in difficult places before. And it has probably learned lessons from Sri Lanka, Malaysia and the Maldives, where it cozied up to authoritarian leaders only to be caught wrong-footed by quick power shifts that saw new governments launch probes of Chinese-funded projects and loans.
While investments often come with strategic objectives, Beijing’s leaders are also pragmatic, and a change of leadership that incurred losses for China would be affordable for its $12 trillion economy.
“China is in a wait-and-see mode,” said Pang Zhongying, a former Chinese diplomat who is an international relations professor at the Macau University of Science and Technology. “People shouldn’t assume that China will lend a hand based on the similarity in socialist systems.”
Humanitarian aid would pour in in response to a change in government, and institutions like the International Monetary Fund and World Bank would probably play a role -- as the U.S. helped facilitate funding -- but Venezuela’s economy would require funds for infrastructure that would be unlikely to generate a return for some time. That’s where China, with its deep pockets and longer-term horizon, could come in.
“Any Venezuelan government will recognize the irreplaceable value of China as a large customer,” said Mei Xinyu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated with the Ministry of Commerce. “China’s lending is mutually beneficial for both sides.”
Read more: Why regime change is now on the table in Venezuela
Russia in contrast probably cannot afford to keep its investments open-ended and has some payments already due from the current regime.
“There is a lot of work to do in this regard and we want to continue working closely with China,” Guaido said, referring to reconstruction. He cited sectors including oil and mining, plus light industry and assembly.
“With the reactivation of our country’s productivity we see a cooperation with China as an opportunity, rather than a threat,” he added. “We are ready to begin a constructive relationship and dialogue with China as soon as possible.”
Guaido did not confirm if there had been any outreach to Beijing, only saying he would like to meet with officials "in the shortest possible time to relaunch our relationship." A person in Caracas with knowledge of the interactions said there had already been some contact with the Chinese embassy.
Those conversations center around a commitment to honor debts to China, plus Venezuela’s reconstruction needs, the person said, asking not to be identified talking about private conversations.
The outreach is being carefully done, the person added, because Guaido’s focus is on his relationship with the U.S., which views China’s presence in the region with suspicion. President Donald Trump has escalated trade tensions with China since coming to power, leading Beijing to claim the U.S. is increasingly attempting to contain it.
“If the regime changes quickly and peacefully, it will depend on whether the U.S.-backed government in Guaido recognizes the loans made under the past government,” said Gui Chenxi, an oil analyst at CITIC Futures. “For now, Guaido has signaled that payments will be maintained, but America will probably call the shots if he takes office.”
Guaido described the U.S. as both a commercial supporter and an important ally in the effort to oust Maduro. "Bilateral relationships are established on the basis of mutual respect and our relationship with the U.S. is historic,” he said.
Even so, he added "the fact that we have consolidated relationships with other nations does not mean that we cannot open ourselves up to establishing relations with other nations."
"We live in an interconnected world where all nations have their own potential,” Guaido said. "Within that space, China has an important role to play because of its capabilities and flexibility as a commercial partner."
--With assistance from Sarah Chen, David Tweed, Dan Murtaugh, Serene Cheong, Ramsey Al-Rikabi, Karen Leigh, Patricia Laya, Alex Vasquez and Brendan Scott.
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