China Plays Major Role in Financing Latin America; Pockets Premiums
February 16th, 2012Meet the new boss…
Via: Financial Times:
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.
But in just one example, the China Development Bank, which accounts for the bulk of China’s Latin American lending, extended a $10bn credit to Argentina in 2010 at the London Interbank Offered Rate plus 600 basis points. In the same year, the World Bank lent Argentina $30m at Libor plus 85 basis points.
LIBOR + 6% !!!???
well, that’ll end happily, i’m sure.