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China  Extends Its Predatory Loans Tactic to the Caribbean

China  Extends Its Predatory Loans Tactic to the Caribbean

By Gustavo Arias Retana/Diálogo
January 14, 2021

China offers predatory loans that lead countries to become over-indebted, makes seemingly disinterested donations, and its companies make large infrastructure investments. This tactic is not new, and the Asian nation uses it to expand its influence in strategic areas around the world.

The goal is always the same: to create economic and political dependence, while gaining a presence in vital economic and military spaces.

“The Caribbean is a cog in the wheel of China’s global hegemonic project. If you check the motives that Beijing has in each region, you can identify the strategic reasons,” Carlos Murillo, a specialist in international relations at the University of Costa Rica, told Diálogo. “In the mid-term, China needs to have support ports around the world to supply its military fleet,” Murillo said.

“The Caribbean is a cog in the wheel of China’s global hegemonic project. If you check the motives that Beijing has in each region, you can identify the strategic reasons,” Carlos Murillo, a specialist in international relations at the University of Costa Rica.

The tactic mainly linked to loans for infrastructure, which China offers at low interest rates. In the last 15 years, Jamaica signed 11 loans for about $2.1 billion with China, according to the nongovernmental organization Inter-American Dialogue, which promotes democracy and equality in the hemisphere.

“It’s part of a penetration scheme, where commercial and economic actions are combined with political and logistical interests. In this sense, the situation with Jamaica is similar to that of El Salvador. For China, both markets are insignificant in commercial terms, but that’s not the purpose,” Murillo added.

In the Caribbean, Inter-American Dialogue has  identified Chinese loans in eight countries.

Controversial financing

Chinese loans are not as beneficial as they are made out to be. They are used to subdue nations and take over the management of logistics infrastructure, such as ports and railways.

This strategy is used in countries that are part of the project known as “The New Silk Road,” a Chinese government initiative to connect Asia, Oceania, Europe, and Africa, through roads, railways, and oil and gas pipelines.

For example, countries that are part of the new route, such as Pakistan, Ukraine, Laos, and Sri Lanka, among others, are over-indebted with China to develop projects and now face serious financial problems, or have ceded the management of key infrastructure to China, CNBC reported on its website. In addition, Sri Lanka was forced to lease its strategic port of Hambantota for 99 years, due to its inability to repay a $1.4 billion loan.

“The [Hambantota] transfer gave China control of territory just a few hundred miles off the shores of a rival, India, and a strategic foothold along a critical commercial and military waterway,” The New York Times reported in May 2020.

Another risky situation is the way China manages its “economic aid,” with practices that may lead to a perfect breeding ground for corruption.

For example, authorities in Costa Rica are investigating alleged irregularities in the contract the country signed to build an oil refinery with Chinese funds. Some of the inconsistencies include how the environmental feasibility study was carried out, the salary bonuses granted to 26 Chinese executives, as well as expenses from travel, meetings, work lunches, and house rentals to Chinese employees, the University of Costa Rica’s Semanario Universidad news portal reported.

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