Q&A
Matt Ferchen
{
"authors": [
"Matt Ferchen"
],
"type": "legacyinthemedia",
"centerAffiliationAll": "",
"centers": [
"Carnegie Endowment for International Peace",
"Carnegie China"
],
"collections": [
"China and the Developing World"
],
"englishNewsletterAll": "",
"nonEnglishNewsletterAll": "",
"primaryCenter": "Carnegie China",
"programAffiliation": "",
"programs": [],
"projects": [],
"regions": [],
"topics": [
"Economy"
]
}
Source: Getty
In The Media
Will Latin America and China’s Energy Partnership Change?
China’s economic relationship with oil-rich Venezuela has always been risky, but it has recently become more instable, given low oil prices and the Latin American country’s domestic politics.
By Matt Ferchen
Published on Apr 7, 2016
Source: Latin America Advisor
Inter-American Dialogue: Over the past 10 years, China has loaned some $70.2 billion to Latin America for its energy sector alone, according to data from the Inter-American Dialogue’s China-Latin America Finance Database. How will Latin America’s energy sector be affected as China’s economic outlook and investment strategies evolve? How are low global oil prices changing China’s engagement with the energy sector in Latin America and the Caribbean? Is China responding to concerns about the environmental and social implications of the methods it uses when investing in the region’s energy sector? Will there be local unrest and pushback from the advances?
Matt Ferchen: When looking at the China-Latin America energy relationship over the last decade and into the near future, one country stands out: Venezuela. No Latin American country has established a bigger, or more problematic, energy relationship with China than Venezuela. And in turn, China’s engagement with Venezuela stands out for its sheer scale, riskiness, and now, instability.
In theory - and maybe at the beginning it approached this ideal - the relationship should have been simple and mutually beneficial: China needed oil and was willing to pay for a long-term energy partnership with Venezuela. And in turn, Venezuela sought to expand its oil export markets as well as to attract new sources of foreign energy investment; China fit the bill. What has gone wrong? Even before the dramatic drop in oil prices began in the middle of 2014, Venezuelan leaders’ politicization of the country’s oil resources and of PDVSA itself limited the expansion of oil flows to China. With the drop in oil prices contributing to the country’s steep descent into economic and political crisis, Venezuela is in an increasingly poor position to be the energy partner China had hoped it would be.
Yet China has not been blameless, its banks and oil companies misunderstood and miscalculated the direction and instability of Venezuelan politics and economic management, and so failed to anticipate the inevitable and harmful effects on Venezuelan oil management and output. Going forward, the immediate future for China-Venezuela oil ties rests on whether China is willing and able to work with Venezuela and possibly other countries and institutions to help put Venezuela and its oil industry on a more sustainable path.
About the Author
Matt Ferchen
Former Nonresident Scholar, Carnegie-Tsinghua Center for Global Policy
Ferchen specializes in China’s political-economic relations with emerging economies. At the Carnegie–Tsinghua Center for Global Policy, he ran a program on China’s economic and political relations with the developing world, including Latin America.
- How China Is Reshaping International Development
- Why Unsustainable Chinese Infrastructure Deals Are a Two-Way StreetArticle
Matt Ferchen, Anarkalee Perera
Recent Work
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Endowment for International Peace
- The Iran War’s Global ReachCollection
As the war between the United States, Israel, and Iran continues, Carnegie scholars contribute cutting-edge analysis on the events of the war and their wide-reaching implications. From the impact on Iran and its immediate neighbors to the responses from Gulf states to fuel and fertilizer shortages caused by the effective shutdown of the Strait of Hormuz, the war is reshaping Middle East alliances and creating shockwaves around the world. Carnegie experts analyze it all.
- Southeast Asia’s Agency Amid the New Oil CrisisCommentary
There is no better time for the countries of Southeast Asia to reconsider their energy security than during this latest crisis.
Gita Wirjawan
- Fuel Crisis Forces Politically Perilous Trade-Offs in IndonesiaCommentary
As conflict in the Middle East drives up fuel costs across Asia, Indonesia faces difficult policy trade-offs over subsidies, inflation, and fiscal credibility. President Prabowo’s personalized governance style may make these hard choices even harder to navigate.
Sana Jaffrey
- In Its Iran War Debate, Washington Has Lost the Plot in AsiaCommentary
The United States ignores the region’s lived experience—and the tough political and social trade-offs the war has produced—at its peril.
Evan A. Feigenbaum
- What GDP Means in a Soft Budget Economy Like ChinaCommentary
The GDP measure is an attempt to measure value creation in an economy. This measure, however, can vary greatly between economies that have disciplinary mechanisms that force them to recognize investment losses quickly and economies that don’t, and can postpone this recognition for many years.
Michael Pettis
