Kevin P. Gallagher, Amos Irwin, and Katherine Koleski, guest bloggers
Lending by the Chinese Development Bank (CDB) and Export-Import Bank of China (China Ex-Im) to Latin America is larger, newer, and growing faster than its Western counterparts. According to our research, since 2005, China has provided $75 billion in loans and credit lines to Latin American countries. In 2010, Chinese funding exceeded the region’s combined financing from the World Bank, Inter-American Development Bank (IDB), and U.S. Export-Import Bank. In fact, China overtook the World Bank and IDB even as those banks doubled lending to the region from 2006 to 2010.
China’s emerging role as a major lender to Latin America has raised concerns regarding the competitiveness of loans from World Bank and Western export credit agencies and implications on governance and environmental initiatives. In an article for The Washington Post, journalist John Pomfret further outlined these concerns stating that “China is a master at low-ball financing, fashioning loans of billions of dollars at tiny interest rates that can stretch beyond 20 years… This has become a headache for Western competitors, especially members of the 32-nation Organization for Economic Cooperation and Development (OECD), which long ago agreed not to use financing as a competitive tool.” Others argue that Chinese financing provides an alternative source of financing without the restrictive policy conditionalities imposed by the World Bank. Deborah Bräutigam, a professor at American University, believes that in Africa, China is filling an unmet need for energy, mining, infrastructure, transportation, and housing lending, which was all but abandoned by the World Bank decades ago.
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