By Juan Carlos
RIO DE JANEIRO, BRAZIL – While there is growing discomfort among African and other developing states about Chinese loans, Argentina, one of Latin America’ largest economies, is also at risk of being trapped in debt by China.
Chinese investment differs totally from European and US investments. China has been infamous for its skewed economic policies and its debt-trap diplomacy. Despite giving developing countries huge loans under the Belt and Road Initiative (BRI); their condition of using country resources as collateral has come under scrutiny.
In the event of non-repayment, China targets natural resources with statistics showing that between 29 and 32 per cent of Chinese lending to developing countries since 2000 has been collateralised with natural resources.
It forces borrowing countries to repay the loans in oil, metals or agricultural commodities; with commodity prices at record lows because of the Covid-19 pandemic, the borrowers will probably struggle to produce enough to repay the loans
Djibouti, Tonga, Maldives, the Republic of the Congo, Kyrgyzstan, Cambodia, Niger, Laos, Zambia, Samoa, Vanuatu, and Mongolia emerge as examples of states in distress over China debts.
China’s modus operandi was the same in Sri Lanka, when Colombo needed to give up the port of Hambantota to China on a 99-year lease because of non-repayment of Chinese loans.
Argentina might become the largest country to join the Chinese Belt and Road Initiative in Latin America. In past years, China has shown immense interest in Latin America and the proposition of the BRI comes when Argentina is already heavily indebted to the US.
By joining the BRI, Argentina could open Chinese finance for crucial investment in infrastructure and transport, fossil and renewable power, mining, production, agriculture, innovation, and the IT sector which will empower it to connect and mend the infrastructure gaps and better incorporate with nations, for example, Chile, which appreciates solid business passages that associate it to foreign business sectors, subsequently bringing down coordination costs and upgrading competitiveness.
With China promising to help Argentina achieve its development quest, the country has upped hopes in restructuring its plummeting economy, but this might come at a price: Argentina runs a risk of severing its ties with the US.
The US and China are interested in dominating the global economy. US President Biden, for instance, promised to repair ties with the world during his inauguration, meaning there will be a scramble for domination.
China, however, has been accused of using unfair means to expand its economic influence through the BRI which is being seen as a plot to gain entry into the developing nations and colonise them economically.
Formally launched in 2013, the initiative initially tried to resuscitate the age-old Silk Road and maritime trade routes, but has since extended its aim to improve political and financial involvement with nations that endorse it.
Argentina has in the past decade seen a lot of ideological inconsistency from various regimes.
While the bilateral relations with China intensified during the government of leftist Cristina Fernández de Kirchner between 2007-15, rightist Mauricio Macri questioned several flagship Chinese projects when he came to power in 2015; however, that also changed when center-leftist Alberto Fernández took office in December 2019.
Fernández’s government is leaning towards China and is expected to renew the relationship and reactivate the controversial Chinese-funded dams in Santa Cruz province, and nuclear power plants.
The only snag they face is that China does not want to have dealings with a state that is running in debt. Latin America Centre for Chinese Political and Economic Studies executive director Diego Mazzoccone says, however, that Argentina is not in default and can successfully finish negotiating the foreign debt.
Dangers of BRI
BRI started as a significant infrastructure initiative, which by creating streets, railroads, and ocean courses would make the movement of goods and services between various nations simpler and less expensive, and subsequently advancing global trade, but there are fears that China is using it to dominate developing countries which could lead to negative political, monetary and geopolitical ramifications.
And now Argentina is at risk of falling prey to China’s ploy under the guise of “helping the nation develop”, for there will be absolutely no way for Argentina to get out of the quicksand once they step into it.
Although China’s intentions are slowly becoming clear to the world, it is still a known fact that the nations that need financial help would try to seek it in any way possible.
In this light, China enters as the Good Samaritan but could turn into a Trojan horse, given its interests and the dreams of global dominion.