As noted in previous Inter-American Dialogue and Boston University Global Development Policy Center briefs on Chinese development finance in LAC, China’s policy banks—China Development Bank (CDB) and China Export-Import Bank (Eximbank)—are no longer issuing the sorts of multi-billion-dollar, oil-backed loans that once characterized Chinese financial engagement with the region.
There are several probable reasons why Chinese sovereign lending to the region has halted in recent years, such as the effects of the global pandemic, CDB's commitment to meeting development goals at home, and a sometimes-problematic portfolio in LAC, including the prospect of continued losses in Venezuela.
Although they aren’t providing sizable sovereign loans in LAC at present, China’s policy banks, in addition to an increasingly wide range of Chinese creditors, are still actively supporting China’s broader economic activity in the region, whether by issuing finance directly to Chinese and LAC companies, which then invest in regional projects, through policy coordination with regional development banks, or else by partially backing regional private equity funds, such as the China-LAC Cooperation Fund.
There is also some possibility that CDB and Eximbank will again lend relatively small amounts to LAC governments and SOEs in 2022. Eximbank will reportedly back the expansion (phases IV and V) of Argentina’s Cauchari solar project, for instance, as it did Cauchari I, II, and III,13 and may also play a role in some of the other agreements struck between Presidents Alberto Fernández and Xi Jinping during their meeting in February 2022.
The combined effect of limited Chinese policy bank activity, co-financing initiatives, commercial bank finance, private equity investment, and other forms of engagement will ensure a sizable Chinese financial presence in the region for years to come. Total combined Chinese finance to the region is unlikely to ever approximate the previous peaks of policy bank lending, however.
Although LAC economies were hit harder by the pandemic-related global recession than any other region, driving several nations into debt distress, China has not taken draconian action against countries unable to repay their Chinese debt.