Is China reducing its loans in Latin America?


Last year, a grace period extended to Venezuela by the CBD expired, meaning the petro-state must start repaying its main debt to China, not just interest. Much of the debt is secured by oil sales, which it has struggle pumping with supply lines and deliveries of machinery hit by the crisis and oil workers fleeing the country.

Observers also Noted China’s reluctance to publicly acknowledge that it has helped support Venezuela, an economy heavily dependent on international oil prices.

In addition to the high sovereign risk in places like Venezuela, many Chinese-backed projects in Latin America carry enormous environmental risks. In the past, Chinese investors have embarked on riskier ventures than Western financial institutions could. Large energy and infrastructure projects still attract the majority of funding from Chinese political banks in Latin America.

Hydroelectric projects supported by China Coca Codo Sinclair in Ecuador and Rositas in Bolivia were proposed years ago, but multilateral development banks have missed the investment opportunity due to their environmental and social risks, according to the report.

Communities affected by the proposed Rositas project say they have not been consulted on its likely impacts, including flooding of pastures and hindering access to markets. President Evo Morales has suggested holding a nationwide referendum on the project in an apparent attempt to curb resistance from the local community.

Splash the money?

While Chinese companies have shown themselves sensitive Under community pressure in some Latin American projects, China has also worried about its overseas spending.

Some foreign companies have been described by critics as “face projects” at a loss, which lack due diligence and only serve to strengthen Beijing’s international position as a development partner.

One might expect more caution from all of these entities as they grapple with problematic loan deals in the region.

A 2018 article published by Brief China, suggested that China come to terms with the tens of billions of dollars it has tied up in problematic overseas investments. Loans from major banks as part of the signing Belt and road The infrastructure initiative, which accounts for most of China’s overseas lending, has plummeted since 2015 amid sometimes censored calls to cut.

It remains to be seen whether the decline in lending to Latin America over the past two years reflects new mistrust.

“One would expect more caution from all of these entities, however, as they grapple with problematic lending arrangements in the region, try to mitigate reputational risk and navigate an environment regulatory changes at home, ”report Inter-American Dialogue and Boston University. noted.

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