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Maduro Touts Special Economic Zones to Grease Wheels with China

By: Adriana Peralta - @AdriPeraltaM - Sep 23, 2014, 3:37 pm

EspañolOn Sunday September 21, Venezuelan President Nicolás Maduro announced the creation of two “Special Economic Zones” (ZEEs) through the signing of four agreements with Chinese companies, as part of the Chinese-Venezuelan Fund.

“I want to inform the Chinese businessmen of the creation of ZEEs in two cities, Puerto Cabello and Anzoátegui, with special conditions for foreign investment — initially from China, and later open to anyone wanting to invest,” Maduro said.

Maduro did not elaborate on what those special conditions will be, but he did say a total of US$2 billion will be invested.

Pedro Benitez, a member of the Democratic Action Party and the Public Policy Unit of Analysis at the Central University of Venezuela (UCV) told the PanAm Post that these agreements are nothing new: “Previous announcements of this type have been made, but official information regarding the details of these commercial exchanges is not available.”

According to Benitez, the arrangement is just another means of exchanging petroleum for cash that will allow Venezuela to honor its economic obligations, as opposed to Maduro’s claim that, “We are going to be exporters of construction materials.”

Construction the Driving Force behind the Special Economic Zones

The majority of Chinese companies that will invest in the Venezuelan ZEEs are in the construction sector, which Maduro says will reinforce his public-housing program, known as the “Great Venezuela Housing Mission” (GVMM). The stated goal of the initiative is to provide housing for 25 million Venezuelans through the construction of 6 million houses by 2019.

http://youtu.be/HuAnQy1TB8M

Benitez, however, dismisses the notion that the program will solve Venezuela’s housing problem: “Public-housing policy has existed since 2011, but it has not solved any problem. The urban slums in major cities are still there, despite government announcements and claims of housing construction.”

The first two agreements of the ZEE initiative were made with Sany Heavy Industry, a Chinese company that will manufacture heavy machinery and prefabricated housing material for both domestic and foreign markets. Sany Heavy will build eight industrial construction plants, each with six production lines. Ricardo Molina, minister of public works and housing, said the company will begin with the construction of 200,000 houses.

The third and fourth agreements were signed with Citi Construction and JAC Motors, which will manufacture windows, doors, and construction vehicles respectively.

As part of the program, Maduro will permit the importation of necessary construction materials.

Window of Opportunity or Dead End?

“The export window must be opened,” Maduro said during the press conference for the deal. In addition to the Venezuelan market, the goods produced are expected to be exported to Mercosur, PetroCaribe, and Bolivarian Alliance nations.

To strengthen Venezuela’s manufacturing base, Maduro proclaimed that “at least 20 percent of production must be exported.”

Again, Benitez sees the goal as dubious, since the agreements lack detail: “The Chinese-Venezuelan Fund is messy; there is no information regarding the price of oil Venezuela sells China, who pays transportation costs, nor how and when payment will be made. These new agreements signed as part of the fund simply resolve the immediate need for cash.”

As Benitez puts it, “Venezuela has an open line of credit with China.” He thinks the Maduro government will maintain this course as long as China values cheap oil. What Benitez does not know is how long the agreement will last, and what Venezuela will do without it.

The Chinese-Venezuela Fund began in 2007. The following year, Hugo Chávez signed an energy-cooperation deal with China with the goal of increasing Venezuela’s oil exports to China from 96,000 to 1 million barrels per day by 2012, in exchange for $4 billion in Chinese credit.

Benitez says that “In the long run,” though, “China benefits from these agreements, and Venezuela loses. Chinese businesses enters the country without any problem, but we never get to see the finished projects that the government periodically announces.”

Adriana Peralta Adriana Peralta

Adriana Peralta is a freedom advocate from El Salvador and a @CREO_org board member. She is a PanAm Post reporter and blogger, a 2005 Ruta Quetzal scholar, a trained engineer, and an SMC University masters student in political economy. She is also a Pink Floyd fan. Follow @AdriPeraltaM.