Feeling the Stones: Chinese Development Finance to Latin America and the Caribbean, 2023

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 two new Chinese overseas finance commitments in 2023 worth a combined $1.3 billion.

Both loans were made to Brazil’s Banco Nacional de Desenvolvimento Econômico e Social (BNDES) by the China Development Bank (CDB) in separate $800 million and $500 million agreements for long-term and short-term investments, respectively, in infrastructure and green economy in Brazil.

The CLLAC Database tracks public and publicly guaranteed loans from China’s two development finance institutions (DFIs) – the CDB and the Export-Import Bank of China (Ex-Im Bank) to LAC governments and state-owned enterprises.

A new joint report discusses the trends and implications of the changing China-LAC financial relationship.

 Key findings:

• In 2023, the CLLAC Database recorded two loans to just one LAC country (Brazil) totaling $1.3 billion, representing a slight increase in lending from the $863 million issued by CDB and Ex-Im Bank to the region in 2022.
• Between 2019-2023, the LAC region received an average of just over $1.3 billion per year from CDB and Ex-Im Bank (see Figure 1), as compared to peak DFI lending in 2010, when CDB alone issued nearly $25 billion to the region.

Figure 1: China Development Bank and Ex-Im Bank Finance to LAC, 2005-2023 (US$ Billions)

• A decade ago, Chinese finance to LAC surpassed that of the World Bank and the Inter-American Development Bank (IDB). Now, lending from the World Bank and IDB has surpassed that of Chinese DFIs in the region, as seen in Figure 2.

Figure 2: Development Finance in LAC, 2005-2023 (US$ Billions)

• Despite the drop in DFI finance in the region, Brazil continues to feature as an occasional recipient of recent Chinese DFI loans, as seen in Figure 3. Between 2019-2022, Brazil received over $1.5 billion in financial support from China’s DFIs, including trade financing and a term loan for BNDES.

Figure 3: China Development Bank and Ex-Im Bank Finance to Brazil, 2005-2023 (US$ Billions)

• In general, Chinese DFI finance to Brazil has moved from a focus on energy loans to other forms of finance over time.
• Brazil’s Petrobras, a recipient of sizeable CDB loans—has nevertheless signaled an interest in doing more with Chinese DFIs in the coming years.
  • The company signed a 2023 memorandum of understanding (MOU) to expand cooperation with CDB on low-carbon initiatives and green finance, financing Petrobras’ domestic supply chain, and increasing commercial and financial exchanges between Petrobras and Chinese companies.
• Even as sovereign loans from China’s DFIs dwindle, CDB and Ex-Im Bank are known to provide direct finance to Chinese and Latin American companies, such as a $53 million CDB loan to Argentina Telecom in 2022.
• Chinese companies, now well established in much of the region and no longer dependent on DFI loans to generate opportunities for their involvement in infrastructure projects, are also accounting for more of China’s lending to LAC and other regions.
• China’s commercial banks have increasingly stepped into the fold, too, mainly through syndicated loans to Chinese or LAC companies.
• While the era of large-scale Chinese development finance in LAC may have passed, debt remains a concern for some countries. Figure 5 shows the most recently reported debt levels and debt service projections to China for the region. Only one country—Suriname—reported debt levels to Chinese creditors of over 5 percent of GDP, or projected debt service payments amounting to over 2 percent of projected exports over the next five years.

Figure 5: LAC Public and Publicly Guaranteed (PPG) Debt and Debt Service to Chinese Creditors

The next few years will be marked by debt negotiations between China and its debtors in the region, but also by continued recalibration, as China adjusts its domestic economic policy and as the Belt and Road Initiative and related finance and investment, follow suit.

As in previous years, there is little to indicate a resurrection of the multibillion-dollar, oil-backed lending that once characterized the bulk of China’s financial engagement with the region. However, if 2023 is any indication, CDB and Ex-Im Bank will remain committed to issuing smaller loans that are closely linked to Chinese and host country development objectives, whether they concern transport infrastructure development, or generating investment and trade in priority emerging industries.