China’s commercial forays into Latin America are billed as a win-win: Latin America needs investment and China has money. Yet its biggest investment to date has helped to underwrite Latin America’s most serious humanitarian disaster. This undeniable reality presents an important lesson for Latin American nations: Unless the terms are changed, some money is too expensive. China’s track record also means that as the region struggles to contain the fallout from Venezuela, the Asian giant needs to be part of the solution.
The Venezuelan tragedy is hard to overstate. Its economic collapse, seven-digit inflation, and the disintegration of even its most basic infrastructure have made life desperate for its citizens. Well over 2 million have fled in recent years, and the United Nations Refugee Agency (UNHCR) expects another nearly 2 million more in the coming year.
China’s biggest investment in the region by far has been Venezuela. Over the last decade it has poured in more than $60 billion dollars, half of all Chinese capital destined for Latin America. In return, it has been promised one million barrels of oil per day (only a portion of which has been regularly delivered).
As the South American nation turned increasingly authoritarian and kleptocratic, China kept lending. When international markets closed to the pariah nation, China rolled over debt and even offered new financing (in return for discounted assets), helping to keep aloft the regime of President Nicolas Maduro.