China scaling back lending to Latin America

Latin America

There are more signs China is refocusing its investment efforts with the news that the country has greatly scaled back lending through its policy banks to developing Africa and Latin America.

In 2020, for the first time in 15 years, there were no loans extended to Latin America by the China Development Bank or the Export Import Bank, according to the Global Development Policy Center at Boston University, which keeps tabs on Chinese policy lending to the region.

China extended USD 35 billion (EUR 29.05 billion) in country-to-country loans to the Latin American region in 2010, much of it linked to the supply of commodities like copper, oil, ore, and soy.

While the move comes as China struggles with growing corporate debt-load at home, China’s economic leadership may also be looking to better long-term growth opportunities in Asia, as Latin American GDP per capita has decreased in recent years, while emerging Asian economies have grown their per capita GDP, according to data published by Spanish bank BBVA, which has operations on both continents. Also, Latin American countries have a much higher debt-to-GDP ratio than developing Asian economies. 

Even as China has pulled back state-backed lending to Latin America, Chinese construction companies continue to pitch for business across the region. A major Chinese construction firm, China Communications Construction Company (CCCC), is part of the consortium which has won the contract to build a 1,500-kilometer train line across Mexico. And Chinese hydropower engineering firm Three Gorges has purchased Peru’s leading electricity generating company. Another state-owned firm, China Harbour Engineering Co., is building the metro system in Bogotá, Colombia.

Previously, the presence of major Chinese companies has typically led to follow-on investments in fisheries and aquaculture, as in Walvis Bay in Namibia, where China Harbour Engineering Co. completed a USD 700 million (EUR 581 million) project to widen and deepen the country’s main port. Subsequently, senior executives from the firm said the firm would invest further in Namibia.

“We will focus on fish, aquaculture, and fish processing” China Harbour Project Manager Feng Yuanfei told the 21st Century Economic Observer, a leading Chinese business newspaper, in 2017. The same article featured comments from a CHEC executive in Cameroon who criticized the small scale of French aid projects in the country. CHEC didn’t respond to SeafoodSource requests for comment.

Photo courtesy of China Harbour Engineering Co./Shutterstock

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