Venezuela crisis touches down in China

Disagreement over Venezuela representative leads to IDB cancelling annual meeting, leaving “no winners”

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Economist Ricardo Hausmann, a representative of the self-declared Venezuelan president Juan Guaidó, is at the centre of an international dispute (image: World Economic Forum)

On the occasion of its 60th anniversary and for the first time ever, the Inter-American Development Bank (IDB) planned to hold its annual general meeting in China – until it was dramatically cancelled on Friday night.

The summit, which was set to begin Tuesday in the city of Chengdu, Sichuan province, was called off as the question of who should represent Venezuela, a country in the grip of a political crisis, came to the fore, challenging China’s diplomacy.

Last week the IDB voted to replace the representative of disputed President Nicolás Maduro with the Harvard economist Ricardo Hausmann, who was put forward by national assembly leader Juan Guaidó, who declared himself president in January.

By designating Hausamnn, the IDB became the first multilateral financial institution to officially recognise one of Guiadó’s team.

The decision created a sudden diplomatic dilemma for China, which has been a non-lending member of the bank since 2009 and has tried to maintain a neutral position on the political crisis on events in Venezuela, one of the IDB’s 48 member countries.

Hausmann: Maduro, China critic

The main event at the summit would’ve been the IDB governors meeting at the end of the week, which usually includes finance ministers or central bank members of member-countries.

Hausmann is a staunch critic of Maduro. He was planning minister under President Carlos Andrés Pérez in the 90’s and was the IDB’s chief economist for six years.

Hausmann has also been critical of China’s international operations and its oil-backed loan packages. In an article published by Project Syndicate in January, he wrote:

“In principle, China’s massive savings, infrastructure know-how, and willingness to lend could be great for developing countries. Alas, Pakistan, Sri Lanka, South Africa, Ecuador, and Venezuela have learned the hard way, Chinese development finance often delivers a corruption-filled sugar high to the economy, followed by a nasty financial (and sometimes political) hangover.”

Though there was some tension over Hausmann’s attendance behind the scenes, it quickly escalated. According to Reuters, China proposed to not invite any representatives from Venezuela so as to “depoliticise” the meeting. The news agency also reported that the US had threatened to pull out of the meeting after China refused to grant Hausmann a visa for the trip.

It’s a tremendous shame to see world leaders step back from multilateralism at a moment of political crisis

The Beijing Youth Daily quoted Chinese Foreign Ministry spokesperson Yan Shuang as saying that China deeply regretted the IDB’s decision to cancel and move its annual meeting, adding; “China will, as always, strengthen cooperation with Latin American and Caribbean countries and the Pan-American Bank to achieve mutual benefit and common development.”

“Missed opportunity”

According to Rebecca Ray, a researcher from Boston University who specialises in Chinese development finance to Latin America, there are no winners from this week’s meeting cancellation. “It’s a tremendous shame to see world leaders step back from multilateralism at a moment of political crisis,” she said.

Ray said that Latin America’s borrower-run alternative banks to the IDB and the International Monetary Fund, such as Latin America Development Bank (CAF) have not had to cancel their meetings because of differences over Venezuela.

“It is only when Beijing and Washington allow multilateral organisations to become venues for competition rather than cooperation that the business of development has to grind to a halt,” she said.

Calling off the meeting meant a “missed opportunity” for other countries looking to receive loans and to advance Chinese collaboration with the bank on sustainable development projects, according to Ray.

In a tweet posted Sunday, Álvaro Mendez, co-director of the London School of Economics’ Global South Unit, called the IDB’s decision “deeply embarrassing” and suggested that the bank had caved in to US pressure.

 

China on the fence over Venezuela

At the root of the tension is China’s continued financial support of Venezuela.

$67billion

the amount China’s policy banks have lent to Venezuela since 2005

Its state-run development banks have lent US$67 billion according to the Inter-American Dialogue, much of which has been repaid with oil, allowing Maduro’s regime to stay afloat as international prices tumbled.

However, China has of late shown itself to be disinclined to be used as a political crutch for Maduro and has remained largely on the margins over who to recognise as the US has attempted to force a choice on other countries.

Since Guidó’s January manoeuvre and the escalation of the political crisis, China has insisted on a negotiated transition. In a typically non-committal statement, Hua Chunying, a Ministry of Foreign Affairs spokesperson, said at the time:

“We call on all parties involved to be calm and rational, and seek a political solution under the Venezuelan constitution through peaceful dialogue. China supports the Venezuela government’s efforts to protect national sovereignty, independence and stability. China has always adhered to the principle of non-interference and objects to external intervention into Venezuela’s internal affairs.”

However, in the intervening months, China has reportedly opted to keep channels open with both sides. The position differs to that of Venezuela-allied Russia and Turkey, both of which back Maduro. The position is consistent with China’s foreign policy, which promotes “pragmatic cooperation”.

Discussions, sending of messages have taken place

In February, the Wall Street Journal reported that Chinese diplomats met with Guiadó’s staff in Washington to get guarantees over their investments. However, the Chinese foreign ministry denied the reports a day later. “In reality, this is fake news” Hua said.

The same week, President Trump’s Venezuela envoy Elliott Abrams told US congress that the meeting between China and the Venezuelan opposition had, in fact, taken place.

“I don’t believe there are any negotiations, using that term narrowly. Discussions, sending of messages have taken place,” he said.

Guiadó himself has attempted to reassure China: “What suits China and Russia best is the stability of the country and a change of government… Maduro doesn’t protect Venezuela, he doesn’t protect anyone’s investments,” he said in an interview with Reuters.

Last month, China vetoed a resolution put forward by the US to the UN Security Council calling for free presidential elections in Venezuela and guaranteeing the entry of humanitarian aid to the country. Russia, which has been Maduro’s most vocal backer, also vetoed.

The same day, China backed a rival Russian resolution, expressing concern over the “threats of the use of force” in Venezuela and the “attempts at intervening in the internal affairs” of the country. With only four in support, the proposal was also voted down.

China’s efforts at maintaining its distance from the crisis in Venezuela have been severely tested with the cancelled IDB meeting, which was due to take place in Sichuan Province. In part, this is because half the IDB’s members recognise Guiadó, whilst only a few – Bolivia, El Salvador and Nicaragua – still recognise Maduro. Others, notably Mexico and Uruguay, still seek a negotiated transition.

In supporting Hausmann’s proposed attendance at the summit, however, it seems the US and the IDB forced China’s hand.