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China Emerges as Latin America's Lender of Last Resort

China Emerges as Latin America's Lender of Last Resort

Posted by Juan Gavasa on February 05, 2015

As soon as she landed in Beijing this week, Argentine President Cristina Fernandez de Kirchner began lauding new deals with what she called the world's "No. 1 economy," ranging from two proposed nuclear power plants to joint space exploration.

With her country's economy contracting and its supply of dollars dwindling, the South American president had arrived Monday looking for help from China, which has already lent Argentina $14 billion since 2007. By the end of her trip Thursday, she announced a raft of new business deals, including selling more Argentine beef.

"Long day, but very fruitful," her Twitter account read Tuesday night. "Argentina confirms its presence and importance in the No. 1 economy of the world. The reception couldn't be better."

The trip — and Fernandez's enthusiasm — highlights China's growing role as a kind of lender of last resort for Latin America. Beijing has become a frequent destination for the region's presidents, especially populist ones who have spent freely over the past decade but are now grappling with a collapse in the prices of oil and other commodities that their economies produce and export.

While American and European lenders have stayed away from such risky countries, or demand economic and political reforms in exchange for loans, the more than $100 billion China has lent Latin America come with fewer human rights or good governance strings. They do, however, often require countries work with Chinese companies on housing, rail and other infrastructure projects, or pay the loans back with millions of barrels of oil for years to come.

China has helped sustain Latin America by buying hundreds of billions of dollars of soybeans, iron ore, oil and other commodities, in the process lifting millions in the region into the middle class and helping shield governments from economic woes in the United States and Europe. Now, as China's economy slows, and sends commodity prices to record lows, the Asian giant is moving even closer to its partner countries, especially in Latin America.

In early January, Ecuadorean President Rafael Correa and Venezuelan leader Nicolas Maduro joined other regional heads of state in Beijing for a meeting of the Community of Latin American and Caribbean States, a bloc designed in part to weaken U.S.-led organizations in the Americas.

Correa left Beijing with $7.5 billion in new financing, adding to the $10 billion China is estimated to have already lent Ecuador, according to a report by the U.S.-based think tank, the Inter-American Dialogue. Maduro touted what he said were Chinese pledges to invest another $20 billion in his country, a figure analysts said may include formerly announced deals. China had already loaned Venezuela $50 billion since 2007, the report found.

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