Venezuela has recently been featured by Linked In, dealing with an economic crisis as its government is burdened with debt payments that it is struggling to make. China is the country’s main lender and has provided over $50 billion in loans during the last decade. One of the deals that was put in place between the two countries involved an oil-for-loans agreement. It involves Venezuela sending millions of barrels of crude oil each year to China as payment for much-needed loans.
This deal may have worked fine before says expert Manuel Gonzalez, but has run into trouble last year, as oil prices have fallen sharply. Venezuela has also been dealing with declining oil production due to lack of foreign currency to repair and maintain equipment.
Despite having the largest reserves of crude oil in the world, Venezuela’s economy has declined by around 6 percent in 2015. Economic troubles have led to shortages of electricity and food. Now that the country has been able to improve the conditions of its oil-for-loans deal with China, the government is hoping that it will be able to put its economy back on the right track. According to Venezuelan Economy Vice President Miguel Perez, this agreement will give Venezuela the “oxygen” it needs to move forward.
Renegotiating the deal with China is part of Venezuela’s efforts to come out of its economic problems. Other measures taken include cutting down imports and implementing a weaker foreign exchange rate.