An Econometric Analysis of Chinese Trade and Loans in Venezuela’s Economy

Youseff Leonardo Carnevali Jaimes

Abstract


Abstract

Purpose- Economic relations between China and Venezuela have rapidly grown over the previous two decades as well as trade relations between China and most of the Latin American economies. This research study will survey Venezuelan and Chinese trade balance’s performance and the Chinese loans provided to Venezuela in order to analyze their effect in the Venezuelan economy while comparing with Venezuela’s main trade partner ( the United States) since 1997 until 2013. Also, this study will analyze how Venezuela’s trade surpluses with China are used to face its biggest economic problem which is foreign currency constraints which promote expansionary monetary policies to incentivize growth. In a likely manner, it will be analyzing China’s interest in Venezuela as a key element of its commercial diversification in the new Latin American markets. It is observed that China assumes the level of substantial risk by carrying out heavy investments and loans in Venezuela that has been classified as a volatile and insecure economy by exhibiting unsounded monetary and fiscal policies. This study also gives a general overview of Chinese trade and loans in Latin America to see the Chinese upward trends in the region while also comparing it with the region’s main trade partner (the United States). This study ponders upon the Chinese investing strategies for dealing with Venezuela economic risk which is assessed by looking at macroeconomic and fiscal indicators. Finally, this research estimates that China undertakes a trade expansion into the Venezuelan market as an entrance door to the Latin market aiming to diversify and to consolidate its international presence into a service provider model.

Keywords: Trade balance, Venezuelan and Chinese trade, Chinese loans, expansionary monetary policies, foreign currency constraints.


References


References

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Economic Commission for Latin America and the Caribbean (ECLAC), (2013). People’s Republic of China and Latin America and the Caribbean Ushering in a new era in the economic and trade relationship.

IMF Policy Paper, (2013). Global Liquidity credit and Funding Indicators. Retrieved from: http://www.imf.org/

Ministry of Commerce People’s Republic of China information retrieved from: http://english.mofcom.gov.cn/

National Bureau of Statistics of China, Statistical Yearbook information retrieved from: http://www.stats.gov.cn/english/

US Department of Commerce, Bureau of Economic Analysis information retrieved from: http://www.bea.gov/

Venezuela Central Bank, (2014). Information retrieved from: http://www.bcv.org.ve/


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ISSN : 2251-1555