Overview

[China-Venezuela Joint Fund] China Funds USD 2.4 Million Santo Domingo Irrigation Project (linked to Record ID#37829, 58677, 35985, 37528)

Commitment Year•2010Country of Activity•VenezuelaDirect Recipient Country of Incorporation•VenezuelaSector•Agriculture, Forestry, FishingFlow Type•Loan

Status

Project lifecycle

Implementation

Pipeline: PledgePipeline: CommitmentImplementationCompletion

Timeline

Key dates

Commitment date: Jan 1, 2010

Start (actual): Jan 1, 2010

Stakeholders

Organizations involved in projects and activities supported by financial and in-kind transfers from Chinese government and state-owned entities

Ultimate beneficial owners

At least 25% host country ownershipAt least 25% Chinese ownership

Funding agencies

State-owned Policy Banks

China Development Bank (CDB)

Receiving agencies

State-owned Banks

Banco de Desarrollo Económico y Social de Venezuela (BANDES)

State-owned Funds

China-Venezuela Joint Fund

Implementing agencies

Government Agencies

Venezuela Ministry of People's Power for Agriculture and Land

State-owned companies

Pétroleos de Venezuela S.A. (PDVSA)

State-owned Funds

China-Venezuela Joint Fund

Collateral providers

State-owned companies

Pétroleos de Venezuela S.A. (PDVSA)

Loan description

China-Venezuela Joint Fund Funds USD 2.4 Million Santo Domingo Irrigation Project

Interest type•Unknown

Collateral

The borrowing was collateralized with PDVSA income from daily oil sales (in quantities not less than 230,000 barrels per day) to China National United Oil Corporation (ChinaOil), which was deposited in a collection (escrow) account at China Development Bank (CDB). Banco de Desarrollo Económico y Social de Venezuela (BANDES) opened and maintained a USD-denominated collection (escrow) account with CDB into which all proceeds from oil export sales -- under an offtake agreement (petroleum sales and purchase contract) between PDVSA and ChinaOil -- were deposited for the purposes of (a) making regular debt service payments to CDB, and (b) maintaining a minimum cash collateral balance. The borrower was required to maintain a minimum cash balance in the collection (escrow) account equivalent to no less than 1.3 times the aggregate amount of principal, interest, and any other amount due during the next repayment period. If the minimum cash balance was not maintained, then PDVSA would be responsible for increasing the amount of fuel and/or crude oil to be delivered under the petroleum sales and purchase contract to ensure that (a) the actual debt service coverage ratio was maintained at the required level at the required times; and (b) the amount in the New Collection Account was sufficient to meet the required balance requirements set out in the facility agreement. If PDVSA did not do so, then BANDES was responsible for transferring funds to the CDB-controlled bank account to 'remedy any shortfall.' The lender also had the ability to block the debtor from withdrawing the funds.

Narrative

Full Description

Project narrative

On May 26, 2010, it was announced that the China-Venezuela Joint Fund (abbreviated FCCV in Spanish) (see Record ID#58677) would fund USD 2.4 million for the development of irrigation and agricultural infrastructure in Santo Domingo. This project is called "El Sistema de Riego Santo Domingo" or "Agrosocialista Santo Domingo" in Spanish. Hugo Chavez had discussed plans to develop agriculture around the Santo Domingo river as early as February of 2008, but this project was not officially announced until January of 2010. Implementing agencies included PDVSA Agrícola, a subsidiary of PDVSA, and the National Institute of Agricultural Research (INIA), a subsidiary of the Ministry of People's Power for Agriculture and Land, which carried out 56% of the work. 42 hectares were already in full production in May of 2010. An additional 10 hectares were cleared in 2019, and it was planned that the rice would be distributed in open air markets. It is unclear when this project was completed, or if it ever was.

Staff comments

1. In a 2009 speech, Chavez said "rice production in the Santo Domingo irrigation system in Barinas, 5 million bolívares, with the People's Republic of China...Corn production, in the Santo Domingo irrigation system, with China, 8 million bolívares". VEF 13 million in 2009 was equal to USD 6 million, according to TUFF internal currency calculations. This is much higher than the USD 2.4 million figure given in the 2010 project announcement. It is possible that this project was funded from both Tranche A (see Record ID#35985) and Tranche B (see Record ID#37528) of the China-Venezuela Joint Fund (see Record ID#58677), and therefore the total project cost should be higher. This is further evidenced by the statement in the Correo del Orinoco article that 42 hectares had already been cleared. The more conservative, 2010 number was used, and the commitment date is currently recorded as 2010. It may be earlier. 2. No transaction amount is recorded because it is captured by the China-Venezuela Joint Fund.