China clamps down on loans to Latin America amid virus
MIAMI — It seemed like a match made in finance heaven.
In 2010, China, its economy roaring and state companies looking to expand globally, set its eyes on Latin America, a region starved of capital but rich in natural resources the Asian giant lacked. The result: a record $35 billion in state-to-state loans that year.
Fast forward a decade and the once-torrid relationship is starting to mature in ways that suggest China may be growing wary of its once do-no-wrong partner.
For the first time in 15 years, China’s two biggest policy banks — the China Development Bank and the Export-Import Bank of China — made no new loans to the region in 2020, capping a multiyear slump driven by Latin America’s worsening economic slide.
The data comes from a new report by the Inter-American Dialogue, a Washington think tank, and Boston University’s Global Development Policy Center, both of which have been tracking for years China’s yuan diplomacy in Washington’s backyard.
China’s growing economic and diplomatic influence in the region has worried U.S. policymakers, who have been at a loss to counter its rise. The task now falls to the Biden administration, which has warned that the Chinese footprint in the region is a national security threat.
Meanwhile, the U.S. may have fallen even further behind during the pandemic, when China donated more than $215 million in supplies — from surgical gloves to thermal imaging
technologies — to allies in the region, according to the research. By comparison, the United States Agency for International Development and State Department has provided $153 million. China also conducted clinical trials or plans to manufacture vaccines in five countries — Argentina,
Brazil, Chile, Mexico and Peru.
But while the pandemic has opened the door to much-welcomed Chinese aid, it’s also made it harder for governments to pay their bills to Beijing. A 7.4% recession in the Latin America and Caribbean last year wiped out nearly a decade’s worth of
growth, according to International Monetary Fund data.
With borrowers squeezed, China has taken a hit. Last year, Ecuador negotiated to delay for a year nearly $900 million in debt payments serviced by oil shipments. Venezuela is believed to have received a similar grace
period.
The slowdown in lending to Latin America reflects a broader, global pullback, as China turns inward to bolster its own recovery efforts amid the pandemic. The ruling Communist Party has lent billions of dollars to build ports, railways and other infrastructure
across Asia to Africa, Europe and Latin America in order to expand China’s access to markets and resources.
But Beijing has grown more cautious after some borrowers struggled to repay loans. Officials say they will examine projects and financing more carefully.