China’s Policy Banks Account for 77% of Resource-backed Lending to Latin America and Africa

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Data from Washington-based non-governmental organisation the Natural Resource Governance Institute (NRGI) indicates that China’s policy banks accounted for the vast majority of resource-backed lending to African and Latin American countries a period of more than decade.

A NRGI reported entitled Resource-Backed Loans: Pitfalls and Potential, looked at 52 loans backed by natural resource revenues that were made to Latin American and sub-Saharan African borrowers during the period from 2004 and 2018.

The study found that two Chinese policy banks – the China Development Bank and China Eximbank, accounted for 77% of these loans, whose total value was more than $164 billion.

Only one of the 52 contracts was made public, with basic information for two-thirds of the loans unavailable.

NRGI said that the loans could lead to “crippling” debt levels for many countries, and called for greater transparency.

“While these loans have often provided much-needed infrastructure, such as roads and hydro-dams, in many cases they have led to crippling levels of debt and the risk of losing collateral that is itself worth more than the value of the loan,” said report co-author David Mihalyi, a senior economic analyst with NRGI

 “Urgent changes are needed and that starts with transparency. Borrowers and lenders must allow for greater scrutiny of lending terms to ensure that these loans are sustainable and serve the interests of the people and the countries they are supposed to benefit.”

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