Venezuelan President Nicolas Maduro said Tuesday that new investments from China will help his country dramatically boost its oil production, doubling down on financing from the Asian nation to turn around its crashing economy.
Already a major economic partner, China has agreed to invest $5 billion more in Venezuela, Maduro said following a recent trip to Beijing, adding that the money would help it nearly double its oil exports to China.
"We are taking the first steps into a new economic era," he said. "We are on track to have a new economy, and the agreements with China will strengthen it."
A once-wealthy oil nation, Venezuela is gripped by a historic crisis deeper than the Great Depression in the United States. Venezuelans struggle to afford scarce food and medicine, many going abroad in search of a better life.
Venezuela's inflation this year could top 1 million percent, economists predict.
After two decades of socialist rule and mismanagement, Venezuela's oil production of 1.2 million barrels a day is a third of what it was two decades ago before the late President Hugo Chavez launched the socialist revolution.
Maduro says under the deal, Venezuela will increase production and the daily export of oil to China to 1 million barrels a day.
However, China is taking a strong role in its new agreements. Over the last decade China has given Venezuela $65 billion in loans, cash and investment. Venezuela owes more than $20 billion.
The head of the National Petroleum Corporation of China will soon travel to Venezuela to finalize plans on increasing oil exports.
Russ Dallen, a Miami-based partner at brokerage Caracas Capital Markets, said the influx of money appears to be investments China will control.
"The Chinese are reluctant to throw good money after bad," Dallen said. "They do want to get paid back. The only way they can get paid back is to get Venezuela's production back up."
Venezuela also agreed to sell 9.9 percent of shares of the joint venture Sinovensa, giving a Chinese oil company a 49 percent stake. The sale will expand exploitation of gas in Venezuela, the president said.
Maduro also recently launched sweeping economic reforms aimed at rescuing the economy that include a creating new currency, boosting the minimum wage more than 3,000 percent and raising taxes.
Economist Asdrubal Oliveros of Caracas-based firm Econalitica said he doubts that Venezuela can reach the aggressive goal to boost oil exports to China to one million barrels a day given problems faced by the state corporation PDVSA.
"Increased production I see as quite limited," Oliveros said. "The Chinese companies alone have neither the muscle nor the size to prop up production."