At a Crossroads: Chinese Development Finance to Latin America and the Caribbean, 2022

The China Development Bank (CDB) and the Export-Import Bank of China (CHEXIM), China’s two most active development finance institutions (DFIs), have historically accounted for the bulk of China’s overall lending to the Latin America and the Caribbean (LAC) region, though lending has declined significantly in recent years. Between 2015-2020, the LAC region saw a precipitous decline in loans from CDB and CHEXIM when lending ceased altogether, amid pandemic-related challenges and as China reconsidered development bank functions and areas of focus. 

The latest update of the Chinese Loans to Latin America and the Caribbean (CLLAC) Database, jointly managed by the Inter-American Dialogue and the Boston University Global Development Policy Center, recorded three new overseas finance commitments from China to Latin American and the Caribbean (LAC) governments or state-owned enterprises (SOEs) in 2022 through CDB and CHEXIM. The three loans are worth a total of $813 million and were made to Brazil, Barbados and Guyana.

A new joint report by Margaret Myers and Rebecca Ray explores the trends and implications in the changing China-LAC economic relationship. The CLLAC Database, expanded this year to include the Caribbean, is an interactive data project tracking loans from CDB and CHEXIM to Latin American and Caribbean governments and state-owned enterprises. 

Figure 1: CDB and CHEXIM Loans to Latin America and the Caribbean, 2005-2022 (US$ billions)

Main findings:

• In 2022, CDB and CHEXIM issued $813 million in new loans to LAC, focusing on Brazil and parts of the Caribbean.
  •  In Brazil, CDB issued a $500 million term loan to the Banco do Brasil, which the latter will reportedly use to finance social projects.
  • In Barbados, CHEXIM issued a $121 million concessional loan for the Scotland District Road Rehabilitation Project.
  • In Guyana, CHEXIM issued a $192 million concessional loan for Phase II of the East Coast Road Project, which is part of the Irfaan Ali government’s expansive infrastructure proposal, including road projects and the construction of 48 bridges.
• Chinese DFI lending to LAC from 2005-2022 totals $136 billion, with most of the loans directed toward Argentina, Brazil, Ecuador and Venezuela.
• In addition to these new loans, CDB and CHEXIM also expressed interest in supporting several more, sometimes sizable infrastructure projects in other parts of the region, though none have become more formalized.
• China’s DFIs have also spent considerable time in recent years renegotiating the terms of existing agreements with the region, including in Venezuela, Suriname and Ecuador.
  • Venezuela, which has accounted for the largest share (44 percent) of China’s total development finance in the region since 2005, was among the first in the region to work with China to adjust the terms of certain loans.
• There are indications CDB and CHEXIM will be engaged in even more negotiations on the terms of public and publicly guaranteed debt in the coming months and years, for Costa Rica, Argentina and Guyana.
• Despite the slight uptick in Chinese DFI activity in LAC, and indications of more to come, future China-LAC financial deal-making is at something of a crossroads. Future activity will be contingent on both China’s ability to issue new sovereign loans to the region and also interest among LAC nations to take on additional Chinese debt, when public debt to GDP ratios are at historic highs in many countries.

At this juncture, and despite new lending in 2022, Chinese DFI engagement with LAC sovereigns and state-owned enterprises is likely to remain relatively subdued, especially on the part of CDB. Despite lending at lower rates, Chinese lending in its various forms continues to engage the region and features prominently in the China-LAC relationship, shaping China’s investments in the region and underpinning bilateral ties in a number of LAC countries.