MIAMI (AP): It looked like a match held in financial paradise.
In 2010, China, its economy and state-owned companies that wanted to expand around the world, set their sights on Latin America, a region without capital but rich in natural resources that the Asian giant did not have. The result: a record $ 35 billion in state loans that year.
A decade progresses rapidly and the relationship, once torrid, begins to mature in ways that suggest China may distrust its partner who does nothing.
For the first time in 15 years, China’s two largest policy banks: the Development Bank of China (CBD) and the Export-Import Bank of China, did not grant any loans to the region in 2020. , which culminated in a fall of several years driven by Latin America. worsening economic slip.
The data comes from a new report of the Inter-American Dialogue, a Washington think tank, and the Boston University Center for Global Development Policy, which have been tracking China’s yuan diplomacy in the Washington Garden for years.
China’s growing economic and diplomatic influence in the region has worried U.S. policymakers, who have been on the downside to counter its rise. The task now rests with the Biden administration, which has warned that the Chinese footprint in the region is a threat to national security. But since China has displaced the United States as the main trading partner of several South American nations, recovering will not be an easy task.
Meanwhile, the U.S. may have lagged even further behind during the pandemic, when China gave more than $ 215 million in supplies (from surgical gloves to thermal imaging technologies) to allies in the region, according to research. In comparison, the U.S. State Agency for International Development and the State Department have provided $ 153 million. China also conducted clinical trials or vaccine manufacturing plans in five countries: Argentina, Brazil, Chile, Mexico, and Peru.
“Certainly part of the region’s COVID response has a Chinese face,” said Rebecca Ray, an economist at Boston University and one of the authors of the new report. “It’s a missed opportunity for the United States, but since the fall of American manufacturing in the 1990s, there has been no way to compete. Many of the same medical supplies that China sends to Latin America we also buy in China. ”
But while the pandemic has opened the door to well-received Chinese aid, it has also made it difficult for governments to pay their bills in Beijing. A deep 7.4% recession in Latin America and the Caribbean last year ended growth for nearly a decade, according to data from the International Monetary Fund.
With compressed borrowers, China has been successful. Last year, Ecuador negotiated a one-year delay of nearly $ 900 million in debt payments handled by oil shipments. It is believed that Venezuela, by far the largest borrower in the region, received a similar grace period. At the same time,
“With the region facing unprecedented challenges, China is unlikely to lend more for now,” said Margaret Myers, head of the Asia-Latin America Dialogue program. “Instead, he has to struggle with his own troubled portfolio.”
The slowdown in lending to Latin America reflects a broader and global setback, 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 in Africa, Europe and Latin America in order to expand China’s access to markets and resources.
But Beijing has become more cautious after some borrowers have had trouble repaying loans. Officials say they will look at projects and funding more closely.
The Development Bank of China and the Ministry of Foreign Affairs did not answer questions about the reasons for the decline in Chinese lending in Latin America.
Although loans have been exhausted, Chinese purchases of soy, iron ore and other Latin American commodities remained robust, with an estimated value of $ 136 billion. This is despite a sharp increase in purchases from China of American agricultural products, promise reached with the Trump administration to end a debilitating trade war.
Chinese state-owned energy companies also aggressively bought energy-selling assets at outgoing Western investors. Overall, Chinese mergers and acquisitions increased to $ 7 billion in 2020, nearly double activity in 2019, according to research.
Among the offers: the sale of Peru’s largest power company by Sempra Energy, based in San Diego, CA, to China Three Gorges Corp. Another $ 5 billion deal he grants to State Grid Corp. included in the data because they have not been completed.
For leaders in the region, Chinese lending to large-scale ticket infrastructure projects is hard to resist. Interest rates are low and, unlike World Bank and IMF loans, there are fewer chains attached and approval is faster, allowing leaders to present successes in time for the next election.
Even Colombia, Washington’s staunchest regional ally and a country that lived up to China’s pleas, recently jumped. Last year, a consortium that included China Harbor Engineering Company opened the ground to Bogota’s first subway, a $ 3.9 billion project. No US company submitted bids for the project, which did not directly benefit from Chinese loans.
U.S. officials have tried to step back, noting that U.S. assistance abroad is long-standing and more transparent.
“Beijing’s assistance to the region is generally aimed at promoting the commercial or political interests of the People’s Republic of China,” the Western Hemisphere Affairs Office of the Department of China said in a statement. State.
In January, at the end of the Trump administration, the U.S. International Development Finance Corporation signed an unprecedented deal with Ecuador to fund up to $ 2.8 billion in infrastructure projects, money it said they could be used to “refinance Chinese predatory debt.”
But total DFC funding ($ 60 billion) is pale compared to the $ 1 trillion China has earmarked for its “Belt and Road” initiative to expand influence around the world.
The U.S. loan package to Ecuador was important because it would also require the government to privatize oil and infrastructure assets and ban Chinese technology.
“This would definitely limit China’s influence,” Myers said. “But burdening future generations with more debt and encouraging the use of fossil fuels, does it really help Ecuador in the long run? If not, it could be a counterattack against the United States. ”
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Associated Press writer Joe McDonald in Beijing contributed to this report.
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Joshua Goodman on Twitter: @APJoshGoodman