How China Took Latin America
by Mary Anastasia O’Grady, July 31, 2022, WSJ
Sri Lanka learned about Chinese development assistance the hard way. It borrowed nearly $12 billion from Beijing in the first two decades of this century. As the Washington Post’s Ishaan Tharoor reported in July, that money went “largely for a slate
of major infrastructure projects that turned into white elephants—including a costly port facility” in Hambantota, hometown of the powerful Rajapaksa family, “which was effectively ceded to Chinese control half a decade ago after Sri Lankan
authorities recognized they could no longer pay off the loans.”
Beijing is using the same kind of bait-and-switch all over Latin America. In Venezuela, China lent Hugo Chávez some $50 billion backed by oil. Judging from the train wreck that the country has become, it’s pretty clear that money wasn’t used for
development. Venezuelan oil production has collapsed but the state-owned petroleum company still dutifully sends regular shipments to China to repay the loan.
Ecuador is working to restructure $5 billion in Chinese debt due in the next three years. The country is also coming to terms with the substandard Chinese construction of a hydroelectric plant in the north of the country that cost some $2 billion.
Argentina is especially notable for its open-arms policy toward China. Writing in February 2021, U.S. Army War College Latin America research professor Evan Ellis observed that “Argentina offers [China] a combination of benefits and access that no
other populist (or non-populist for that matter) regime in the hemisphere can match.”
The appeal of Chinese financing for bankrupt Buenos Aires is obvious. As Mr. Evans pointed out, “Chinese resources and other support decrease the degree” to which the country has to pay attention to the demands of “Western investors, banks,
multilateral institutions and governments, as it consolidates power in increasingly undemocratic ways, and undermines the U.S. agenda in the region—to China’s commercial and strategic benefit.”
The Inter-American Development Bank, which is 30% owned by the U.S. and made China a member in 2009, has the most to answer for when it comes to explaining how China made deep inroads into the region in the last decade.
For the most part, China didn’t know how to do business in Latin America prior to its hookup with the bank. Desperate for capital in the aftermath of the 2008 financial crisis, the IDB escorted Beijing around, opening doors, teaching it how to
structure deals and helping it establish itself as a major lender. Annual business summits, hosted by the bank, were designed to introduce Chinese state-owned companies to the locals. The IDB became a conduit for Chinese money, serving a bilateral
function between members in the hemisphere and Beijing.
According to IDB data, between 2013 and May 2022 the bank put up $6.1 billion in co-financing for 91 projects with China. Beijing is only a 0.004% IDB shareholder but on top of that co-financing, according to an IDB official, “Chinese state-owned
companies got $1.7bn worth of IDB-funded procurement contracts between 2010 and 2020, making it the top non-borrower recipient of such contracts. American companies won contracts worth $249 million.”
China is not a good development partner. Sure, it brings financing to poor countries. But it doesn’t hire or train a local workforce; it imports Chinese labor. Its workmanship and materials are often shoddy. It encourages overborrowing and overbuilding
and it leaves a trail of tears as large debt burdens cannot be serviced. Its motives in the region are about gaining greater influence and not about development.
This is why the bank is trying to cultivate new partners, including Taiwan. China, predictably, is outraged. In a May email to the bank’s president and several IDB staff members, after a press release announced a project in Belize with Taiwanese
backing, the Chinese representative to the IDB wrote: “My authorities see this as a very severe situation and reserve all the rights of further action.”
Those who care about development can only hope that action might be for China to quit the bank and leave Latin America.
https://www.wsj.com/articles/how-china-took-latin-america-beijing-nancy-pelosi-expansionism-taiwan-regimes-south-america-11659289457
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