After the escalation of tension between Brazil and Venezuela, the Brazilian government does not intend to resume good relations with the Nicolás Maduro regime. While the relationship between the two countries is cooling down, the debt that Caracas owes to Brazil continues to be unpaid. The debt, which exceeds US$1.6 billion, has had payments suspended since 2017.
The relationship between Luiz Inácio Lula da Silva (PT) and dictator Nicolás Maduro has been strained in recent months and, as the People’s Gazette with members of Itamaraty, there is no interest, at this moment, in “rebuilding broken bridges” with the country. The Venezuelan autocrat escalated his tone against Brazil after the Brazilian government opposed Venezuela’s accession to the BRICS.
For analysts consulted by the report, the separation seen between the two countries could leave the issue of debt in the last plan. “The delicate moment of diplomatic relations between Brazil and Venezuela is obviously a factor that could influence the even greater delay in the payment that Venezuela owes to Brazil”, assesses Guilherme Gomes, international trade consultant at BMJ Consultores Associados.
“Although the negotiations on this debt are based on technical and contract-based criteria, there is a political element [por trás dessas negociações]”, points out Gomes. The analyst also assesses that a possible break between the two countries could culminate in Maduro’s decision to never resume payments.
When he took office for his third term, Lula tried to resume debt negotiations with Venezuela, betting on his rapprochement with Chavismo. The PT member defended the idea that payments, suspended since 2017, had not been resumed in recent years because former president Jair Bolsonaro (PL) had cut bilateral relations with Maduro during his term.
“Let’s be frank. The countries that did not pay, whether Cuba or Venezuela, are because the [ex-]president [Bolsonaro] decided to cut off international relations with these countries and in order not to charge and be able to keep accusing us, they stopped charging and I’m sure that in our government these countries will pay, because they are all friends of Brazil and will certainly pay the debt they owe to BNDES ”, said Lula in February 2023. But not even his approach to Maduro unlocked the payments.
Lula made a mistake in betting on rapprochement with Maduro to pay off debt
When he took over the Planalto for his third term, the PT member reestablished the diplomatic relationship with the country and bet on rapprochement with Maduro. Lula even received the Venezuelan dictator in Brasília and discussed the billion-dollar debt. The Ministry of Finance, together with wings of the Chavista regime, proposed negotiating the amount and resuming payments, but negotiations never progressed.
In the opinion of international relations analyst Cezar Roedel, this was a mistaken bet by Lula. “I believe that even with the previous relationship, Venezuela’s billion-dollar debt with Brazil would only be within the scope of Maduro’s narrative, without any resolute attitude towards paying it”, he analyzes.
Roedel points out that the country has become a Sino-Russian “puppet” in South America since it became the target of large investments from China and Russia in various sectors, including the military. With this rapprochement between Beijing and Moscow, Brazil lost relevance on the political board for Maduro.
“Maduro only demonstrates his tantrum of a depressing and expressionless dictator, even for the BRICS autocracies. If Maduro still had something to present, Russia and China would not have allowed Brazil to veto Venezuela’s entry. In any case the way, the debt issue was already compromised when there was a more friendly diplomatic relationship”, points out the expert.
Despite the noise caused with the country and the loss of relevance for Venezuela, Chancellor Mauro Vieira declared this week that Brazil should not break with Venezuela. “Although circumstances impose an inevitable reduction in the dynamism of the bilateral relationship, this does not mean, in any way, that Brazil should break relations or anything of that nature with Venezuela,” said the minister.
Venezuela’s debt
Venezuela’s debt with Brazil, as of October 31st of this year, was US$ 1.69 billion – around R$ 9.6 billion, at the current exchange rate – including late payment interest. The outstanding balance comes from loans made to the country through infrastructure works in Venezuelan territory. The money was contracted via the National Bank for Economic and Social Development (BNDES) and transferred directly to Brazilian companies that carried out the works in the neighboring country. The Venezuelan regime then became responsible for returning the borrowed amount.
In case of default, as is the case in Venezuela, the BNDES activates the Export Guarantee Fund (FGE) to receive the amount owed by the foreign country. The Union assumes the debt and Brazil is the one who must start collecting debt from the debtor country. The situation with Caracas is at this stage.
BNDES made loans totaling US$1.5 billion to Venezuela for operations related to engineering services. Among the constructions are line 5 of the Caracas metro and line 2 of the Los Teques metro, construction of the Astialba shipyard and Siderúrgica Nacional. The debt that the country owes to Brazil also includes the sale of Embraer aircraft to the Venezuelan state company Conviasa.
Of the amount financed by the financial institution, Venezuela paid US$680 million. There is still US$ 16 million related to outstanding installments in the compensation process and US$ 31 million constitute the outstanding balance of installments due, due until January 2025.
Maduro’s calculated removal
Lula has a historically close relationship with Chavismo, but this relationship has been affected in recent months after the proven electoral fraud orchestrated by Maduro to be re-elected as president of Venezuela. The Brazilian president even worked to hold democratic elections in the country but was unsuccessful.
Maduro, who expected support from Lula after the fraudulent electoral election, had to deal with demands from the Brazilian government – even though they were considered mild. After Brazil chose not to recognize his re-election, Lula bet on distancing himself from the Venezuelan autocrat. The PT member’s image was already being eroded, externally and internally, due to his attempts to help his Venezuelan friend.
Last month, after Brazil opposed Venezuela’s accession as a partner member of the BRICS (bloc formed by Brazil, Russia, India, China, South Africa, Saudi Arabia, Egypt, Ethiopia and Iran), the relationship with Venezuela reached to the height of the crisis. Maduro escalated his tone and the Bolivarian Foreign Ministry began attacking the Ministry of Foreign Affairs and Brazilian diplomats.
The situation, despite having caused internal discomfort behind the scenes at Itamaraty, did not generate a reaction from the ministry. However, after the Bolivarian National Police of Venezuela, controlled by the Maduro regime, published a montage of Lula with a threatening tone against Lula, the Brazilian foreign ministry reacted to the attacks orchestrated by the Venezuelan dictator.
“The Brazilian government finds with surprise the offensive tone adopted by statements by Venezuelan authorities in relation to Brazil and its national symbols. The option for personal attacks and rhetorical escalations, replacing political and diplomatic channels, does not correspond to the respectful way in which the Brazilian government treats Venezuela and its people”, says the note from Itamaraty.
This Sunday (10), in an interview with Ready TVLula spoke about the recent events involving the neighboring country for the first time. The Brazilian stated that Maduro is a “Venezuela problem”. “I learned that we have to be very careful when we deal with other countries and other presidents. I think that Maduro is a problem for Venezuela, it is not a problem for Brazil,” said Lula.
“I want Venezuela to live well, for them to take care of the people with dignity. I will take care of Brazil, Maduro will take care of it, the Venezuelan people will take care of Maduro, and I will take care of Brazil. And we will move forward. Because I can’t either I have to fight with Nicaragua, now fight with Venezuela, now fight with I don’t know who. I have to try to fight to make this country work,” he said.
