Archive for September 19th, 2010

Chavez gets first installment on Chinese loan. Brace yourselves!

September 19, 2010

So, for the seventh or eight time this year, the Government made headlines with the US$ 20 billion loan from China to Venezuela, as Chavez said the first US$ 4 billion had been deposited. This is the same agreement reached in April, which is still a little murky, and which was announced again in August.

Funny thing is, the money already arrived according to Chavez, but it was only this week that the Venezuelan National Assembly approved the deal.These Chinese guys are great, they send the money ahead of time, that’s how much they trust Hugo!

Half of the money of the loan will be in Yuan and half in US$ and Venezuela will send 200,000 barrels of oil a day to China. That is, until the money gets paid some time after 2020 with current oil prices, you have to forget about any future cash flow from 200,000 barrels of oil a day.

Whether you believe Venezuela produces 2.5 or 3 million barrels of oil a day, this may not seem like much, except that we are using some 800,000 barrels of oil a day locally, so the real “exports” of the country are 1.7 to 2.2 million barrels of oil a day, from which you have to subract like 160,000 barrels for which the country gets no cash flow (Cuba, Argentina, Petrocaribe) and now an additional 200,000 barrels less of cash flow a day.

Not pretty…

And then, Reuters is saying (Thanks Setty) that the recent fire in Bonaire, will limit what Venezuela can send to China.

If oil doesn’t go into a bubble we will be in trouble. And right now it actually looks like it may do exactly the opposite in the short and medium term, as it seems to be breaking down (Thanks PR!):

Brace Yourselves!