Miami (Associated Press)-looks like a game in financial paradise.
In 2010, China was experiencing economic turmoil. State-owned enterprises hoped to expand globally and set their sights on Latin America. Latin America is a region lacking capital but rich in natural resources, while Asian giants lack it. The result: that year, state-to-state loans reached a record $35 billion.
Ten years later, the once troubled relationship is beginning to mature in a certain mature way, which shows that China may be more and more wary of the wrong partners it once did.
The data comes from the latest report from the Washington Dialogue think tank “American Dialogue” and the Boston University Global Development Policy Center. Both companies have been tracking China’s RMB diplomacy in Washington’s backyard for many years.
China’s growing economic and diplomatic influence in the region worries American policymakers, who are at a loss as to how to resist its rise. The task now falls in the hands of the Biden administration, which warns that China’s footprint in the region is a threat to national security. However, as China replaces the United States as the largest trading partner of several South American countries, it will not be easy to catch up with the United States.
At the same time, according to this study, the United States may lag far behind China during the pandemic, when China donated more than $215 million in supplies, from surgical gloves to thermal imaging technology, to its allies in the region. In contrast, the United States Agency for International Development and the State Department provided $153 million. China has also conducted clinical trials or plans to produce vaccines in five countries (Argentina, Brazil, Chile, Mexico and Peru).
Rebecca Ray, an economist at Boston University and one of the authors of the new report, said: “There is no doubt that part of the region’s response to COVID is the face of the Chinese.” “For the United States, This is a missed opportunity, but since the U.S. manufacturing bottomed out in the 1990s, there has been virtually no way to compete. We also bought many medical supplies from China that were shipped to Latin America from China.”
But while the epidemic opened the door to popular Chinese aid, it also made it more difficult for the government to pay Beijing’s bills. According to data from the International Monetary Fund, Latin America and the Caribbean experienced a severe recession of 7.4% last year, eradicating nearly a decade of growth.
With the tightening of borrowers, China has been hit. Last year, Ecuador negotiated to postpone the debt repayment provided by oil transportation by nearly US$900 million. Venezuela-by far the largest borrower in the region-is thought to have experienced a similar grace period. at the same time,
Dialogue Asia-Latin America project leader Margaret Myers (Margaret Myers) said: “In the context of unprecedented challenges in the region, China is now unlikely to lend again.” “On the contrary, it must work hard to resolve the situation. I have a problematic product portfolio.”
The slowdown in lending to Latin America reflects a widespread decline across the globe, as China intensified its own recovery efforts amid the pandemic. The ruling Communist Party has lent billions of dollars to build ports, railways and other infrastructure in Asia to Africa, Europe and Latin America to expand China’s access to markets and resources.
But after some borrowers struggled to repay their loans, Beijing became more cautious. Officials said they will study the project and financing more carefully.
The China Development Bank and the Ministry of Foreign Affairs did not answer questions about the reasons for the decline in China’s loans to Latin America.
Even as loans dries up, China’s purchases of Latin American soybeans, iron ore and other commodities remain strong, estimated at $136 billion. Although China’s purchases of American agricultural products have risen sharply, the Trump administration has reached a pledge to end the declining trade war.
Chinese state-owned energy companies have also actively purchased energy assets that have withdrawn from Western investors at selling prices. This study shows that overall, China’s M&A transactions surged to US$7 billion in 2020, almost twice the value of transactions in 2019.
The transaction includes the sale of Peru’s largest power company to China Three Gorges Corporation by Sempra Energy of San Diego, California. Another $5 billion deal was announced last year, granting State Grid Corporation of China control of a major Chilean utility company, but no agreement was reached. Included in the data because it has not yet been completed.
For leaders in the region, China’s loans for large-scale air ticket infrastructure projects are hard to resist. Interest rates are low, unlike loans provided by the World Bank and the International Monetary Fund, with fewer additional conditions and faster approvals, allowing leaders to promote their achievements in time before the next election.
Even Columbia-Washington’s most determined regional ally, is a country with a cool attitude towards China-and has recently joined the trend. Last year, a consortium including China Port Engineering Corporation started construction on the first subway project in the capital Bogotá, which cost US$3.9 billion. No US company bid for the project, and the project did not directly benefit from any loans from China.
US officials tried to fight back, pointing out that US overseas aid is long-term and more transparent.
The Western Hemisphere Affairs Bureau of the State Council said in a statement: “Beijing’s assistance in the region is generally to promote the commercial or political interests of the People’s Republic of China.”
In January of this year, at the end of the Trump administration, the U.S. International Development Finance Corporation and Ecuador signed an unprecedented agreement to fund infrastructure projects of up to 2.8 billion U.S. dollars. These funds are said to be used “to reinforce the predatory Chinese debt.” Financing”.
However, DFC’s total funding (US$60 billion) is insignificant compared to the US$1 trillion allocated by China for the “Belt and Road” initiative to expand its global influence.
The US loan package to Ecuador is significant because it also requires the government to privatize oil and infrastructure assets and ban Chinese technology.
Myers said: “This will definitely limit China’s influence.” “But by adding more debt burdens to future generations and encouraging the use of fossil fuels, does this really help Ecuador in the long run? If you don’t do this, then it might backfire.”
Associated Press writer Joe McDonald contributed to this report in Beijing.
Joshua Goodman on Twitter: @APJoshGoodman