Chinese Investment in Latin America by Mateo Hernandez (A’23)

by cpinkerton
Nov 20
The Latin American Committee (LAC) started its weekly discussion with images of the protests that have happened for seven days in a row in Ecuador. The relatively high proportion of Ecuadorians in the room was helpful to inform other students about the current situation in their home country. Lenin Moreno, Ecuador’s President, had just moved the seat of government of the country from Quito to Guayaquil, turning the port city into the state’s capital for a couple of hours. This rushed decision to move the capital was caused by the rising violence in Quito in response to a governmental decree that eliminated diesel subsidies across the country. 
The decree was a measure taken by the current Ecuadorian government after years of mismanagement of funds led to an all-time high record of external debt. The measurement was part of a set of recommendations set by the International Monetary Fund (IMF), a future loan maker to the country. Most people were not happy about the elimination of gasoline subsidies and turned the capital into a war zone, causing clashes with the police and military, school and university shutdowns, and a shortage of foods in markets. 
The IMF was a good transition to Chinese investment in Latin America. The sudden increase of Chinese investment in Latin American countries, in some countries now the greatest loan maker and investor, is worthy of inspection. 
The points argued here were that China is coming clean and fast. Being the fastest growing economy in the last thirty years, China has no previous trading experience with Latin America, which makes it an attractive candidate and a new market. Even though most Chinese credit rates are much higher than other countries, their offers include no political ties. The only conditions that China imposes are to stop acknowledging Taiwan as an independent state and to keep on trading with China for the coming years. These are simple guidelines to follow, especially considering the adverse economic recessions happening in many Latin American countries. 
China has come out as opportunist and has secured a powerful spot as a Latin American trade partner, promising fast economic growth and setting their economic model and history as the basis of this promise. This will be confirmed or rejected in the years to come. Latin America has a long history of dirty trading deals with international banks and western governments. Have they made a good choice letting another investor into their house?