The Global South Unites Through Lending

China lends more than $75bn to Latin America
Financial Times
February 15, 2012
By John Paul Rathbone
Citation: http://on.ft.com/yKyIpQ

Chinese state banks have lent more than $75bn to Latin America since 2005, and in 2010 gave more than the World Bank, Inter-American Development Bank and US Ex-Im Bank combined, according to a report which highlights China’s growing financial heft in the region.

“On the positive side, it is clear that China is a new and growing source of finance in Latin America,” notes the independent academic report, New Banks in Town: Chinese finance in Latin America.

“That said, and contrary to much commentary on the subject, by and large Latin American nations have to pay a higher premium for loans from China.”

China has overtaken the US to become Brazil and Chile’s largest trade partner. Many US policymakers fear that Beijing is using cheap rate loans to “buy” influence among left-leaning Latin American governments that are hostile to western interests, and that Beijing uses financing to secure long term commodity supplies.

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Latin America has borrowed more than $75bn from China since 2005. Since then China has transformed into Brazil and Chile’s leading trading partner, beating out the United States. Through financing China has been able to secure long term supplies of commodities. Many U.S. policy makers are voicing concern that the attractive loan rates are a tool to “buy” influence among left-leaning governments in Latin America. Chinese loans to Latin America now account for more than half of Beijing’s international lending. China’s growing presence has not gone unnoticed in the region.

This situation supports Jeannie’s previous post about global interconnectedness: “Venezuelan and Iranian Involvement in Nicaragua: Benevolence or Strategy?” Latin America is now financially tied to China and the implications of such ties are not yet clear.  This article also illustrates the notion within World Systems Theory that international power relations are constantly changing. Even though the money from China is not coming in the form of aid or “assistance”, it still has potential to create a certain level of dependency, especially considering the fact China focus is on commodities in Latin American markets, which critics say, will increase “dependency” exploitation. The article even points out that left-wing development economists denounced this type of dependency four decades ago.  That is not to say the past cannot repeat itself.  Left-leaning governments tired of Western ways may overlook such factors and continue relations with the Chinese in their quest for modernization and development. 

The United States is no longer ranked number one in regard to trade with countries like Brazil and Chile, but that is not their only concern.  Some believe China’s growing presence in the region is driven by an ideological desire to boost South-South ties according to the article. Besides the economic benefits tied to commodities and the influential power of money, it appears China’s strategy may consist of spreading and supporting ideologies of the Global South.  Venezuela and Iran are now supporting Nicaragua and isn’t Iran friends with China? The Global South seems to be uniting in the United State’s backyard. What will that mean for future the future of development and education in Latin America?