Venezuela and China Form Bilateral Development Fund

Mérida, November 7, 2007 (venezuelanalysis.com)-
The governments of China and
Venezuela signed several new
bilateral agreements, including a bilateral development fund in Caracas on Tuesday. The
two countries plan to deepen cooperation in the areas of energy, technology,
and financing, and increase the supply of Venezuelan oil to the Asian country.
Venezuelan President Hugo Chavez emphasized the historical significance of the
new relationship between the two countries.

"Never in history has Venezuela had the allies that we now have in the
world," said Chavez, explaining that after years of colonialism, Venezuela
is now "free". The event comes after Venezuela
signed economic agreements with many different countries in recent weeks,
including Russia and Algeria.

President Chavez was
accompanied by Venezuelan Minister of Planning and Development Jorge Giordani
and Energy Minister Rafael Ramirez, along with several representatives from the
People's Republic of China.

Out of a total of 11 new
agreements, the most important was the creation of a joint development fund
between the two nations for a total of $6 billion to be invested in various
development projects in both countries and to foment the cooperative
relationship between them.

Of the $6 billion, the Chinese
Development Bank will contribute $4 billion, and Venezuela's National Development
Fund (Fonden) will provide the other $2 billion. Chavez stated that the fund
could possibly reach as much as $10 billion in the near future.

Also signed was an agreement to
create a joint technical office between Venezuela's Social Development Bank
(Bandes) and the Chinese Development Bank to direct future strategic
development projects in infrastructure, industry, and energy.

Energy Minister Rafael Ramirez
also signed agreements with the China National Petroleum Company for
cooperative projects in the energy sector, including an increased participation
of the Chinese oil company in Venezuela's
vast Orinoco reserves. The two also agreed on
a plan to supply Venezuelan fuel oil to the Chinese market.

Chavez emphasized the
importance of an agreement to increase the supply of Venezuelan petroleum to
the Asian country. He said that by the end of this year the total supply to China would be
at 350,000 barrels daily, and would reach 500,000 barrels daily by the end of
2008. He assured that the supply will continue to increase year by year to
reach around one million barrels per day by 2010 or 2011.

"Venezuela never sold any oil to China because it was really far away," said
Chavez, recalling that only a few years ago Venezuela's
supply to China
was zero.

Venezuela's
strategy is to diversify its markets to not depend so much on supplying oil to
the United States.
China, with 500,000 barrels
of Venezuelan oil daily, would come much closer to the US's current
level, which consumes about 1.5 million barrels of Venezuelan oil per day.

The two countries also plan to
increase China's
oil refining capacity and to develop the necessary fleet of oil tankers to
transport the oil to the Chinese market. An agreement was signed between the PDVSA
affiliate PDV Marina, and China's
Petrochina International Company.

"This accord is extremely
important because it will allow us to lower costs in transportation and not
depend upon intermediaries, which inflate the costs a lot," said Chavez.

Other joint companies will also
be formed to produce telecommunications equipment in Venezuela such as cellular phones.
One of the companies will be called Venezolana de Telcomunicaciones and will
use technology from the Chinese company ZTE.

Another joint company will be
formed between Telecom Venezuela
and China's Huwei to produce
telecommunications equipment to be sold throughout Latin
America. China's Electrical Appliances Corporation will
form a joint company with Venezuela's
Corporation of Intermediate Industry to produce appliances in Venezuela such
as refrigerators, stoves, and air conditioners.

Chavez emphasized that the
country's increased relations with countries like China
is a historical change, and compared the socialist revolution of China to the situation in Venezuela
today.

"Look at the history of China. What was
the situation of the Chinese people 50 years ago, before the arrival of the
Chinese Revolution?

Study the situation of misery
that they lived in, the situation of education, health, extremely backwards,
until the conditions matured and the Chinese Revolution took place; the people
being the fuel of that revolution," he said.

"Here we are building our socialism after years
of colonialism and of being the back yard of the empire. We are going to
transform Venezuela
into a world power!"