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Venezuela and China Form Bilateral Development Fund

Mérida, November 7, 2007 ( 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!"

Published on Nov 7th 2007 at 10.37pm