By Rebecca Ray
In 2023, China’s two most active development finance institutions (DFIs) – the China Development Bank (CDB) and the Export-Import Bank of China – committed just $1.3 billion in new sovereign finance to Latin American and Caribbean (LAC) nations.
Notably, this finance was entirely committed in two loans to Brazil’s national development bank, Banco Nacional de Desenvolvimento Econômico e Social (BNDES).
These are the findings of the latest update to the Chinese Loans to Latin America and the Caribbean Database, an interactive data project maintained by the Inter-American Dialogue and the Boston University Global Development Policy Center that tracks loans Chinese development finance to LAC governments and state-owned enterprises
While this amount is the largest annual sum in China-LAC development lending since 2019, it remains well below the levels seen in previous years. From 2009-2016, China’s sovereign finance in LAC was on par with lending by the World Bank and the Inter-American Development Bank, but it has fallen dramatically since, as seen in the chart below. Indeed, over the last five years, Chinese development finance has remained well below $5 billion per year.
However, the decline in Chinese DFI financing does not indicate that Chinese infrastructure in LAC is no longer being developed. Instead, as Chinese firms have become more experienced in the region, they have begun operating independently of DFIs.
As recent reports by the Inter-American Dialogue and the Red Académica China-ALC (China-LAC Academic Network) have found, Chinese firms in the traditional infrastructure sectors of transportation, telecommunications, and power distribution are becoming more important within direct equity investment in LAC. For example, the new multi-billion-dollar port in Chancay, Peru, has been developed and is directly owned by Chinese logistics giant COSCO Shipping.
Chinese infrastructure firms are branching out into countries like Peru and Chile, which have traditions of developing infrastructure through commercial investment rather than public finance. As Western private investors have lost interest and sold their stakes in regional power distribution networks, Chinese investors have bought directly into the sector. State Grid’s purchases of Enel Perú and Chile’s Compañía General de Electricidad (CGE) are recent examples of this phenomenon.
In LAC countries that prefer to maintain national ownership over public infrastructure, Chinese firms are increasingly providing their own financing. Nicaragua has provided several examples of this approach recently, receiving commitments of commercial finance from CAMC Engineering for the Tres Esferas (Three Spheres) gas storage project, the renovation and expansion of the Punta Huete Airport, and China Communications Construction for a solar park.
While the heyday of close to $25 billion in annual loans has come and gone, China’s DFIs are still showing some interest in the region, albeit with an eye toward furthering their development finance mission in partnership with peer DFIs. Already in 2024, CDB has indicated interest in new financing with BNDES of approximately the same amount as in 2023, earmarked for their joint goals of infrastructure and industrial development.
As Chinese firms diversify in their approaches to doing business in the region, development finance is likely to remain at low levels in the future. But rather than signaling an end to the relationship, observers would be wise to interpret it as a maturing and broadening beyond the traditional intermediation of DFIs.
Rebecca Ray, PhD is a Senior Academic Researcher with the Global China Initiative at the Boston University Global Development Policy Center. Follow her on X: @BUBeckyRay.
