This article was originally published in Global Americans on April 2, 2020.
Latin America’s extensive dependence on China as a market for raw materials dealt a serious blow to the region at the onset of the Covid-19 crisis. Even in January, many countries faced lower demand and falling prices for key exports as China’s production and other activity ground to a relative halt. Now, as the region grapples with its own response to the pandemic, governments are bracing for unprecedented economic contraction, while looking anxiously to China for signs of relief.
As Beijing walks a fine line between much-needed stimulus and already staggering debt, China’s road to recovery is still uncertain, however. So, for that matter, is China’s possible role in Latin America’s own revival.
Even before the current crisis, China’s booming relationship with the region was slowing in important ways. Once a top creditor to Latin American governments, at times exceeding sovereign lending from the Inter-American Development Bank and World Bank, Chinese state finance to the region has all but dried up, according to a new report from the Inter-American Dialogue and Boston University Global Development Policy (GDP) Center. Chinese policy banks—China Development Bank (CDB) and China Export-Import Bank (Eximbank)—provided just $1.1 billion in finance to the region’s governments in 2019. By comparison, Chinese finance to the region peaked in 2010 at over $35 billion.
There are many possible reasons for the decline in Chinese sovereign loans to Latin America, including growing disinterest among Chinese banks in funding the region’s most fragile economies. Though once the primary recipient of Chinese loans—to the tune of $62.2 billion since 2007, according to Inter-American Dialogue and GDP Center data—Venezuela has received no new loans from China’s policy banks for the past three years. And in 2018, Beijing ended a grace period for Venezuela on its principal payments to China, a sign of waning financial goodwill toward the Nicolás Maduro government.