Suriname, the smallest country in South America, has been going through serious financial predicament, as it is unable to pay the onerous interest rates on its loans from the Export-Import Bank of China (China Exim Bank).
Beijing’s intransigence prevents it from renegotiating its debt. As a consequence, the South American nation is experiencing an economic and social crisis, with outbreaks of street violence.
China is only interested in increasing its financial and geopolitical power. “For several years now Beijing has been the first or second trading partner of most countries in the American hemisphere,” Fabián Calle, political analyst and professor of International Relations at Argentina’s Austral University, told Diálogo on June 19. “Their goal is to promote a strategic agenda guided mainly by their economic and energy interests. This advance has to do with tying in often opaque financing.”
Overwhelmed, the government of Suriname turned to the International Monetary Fund (IMF) for financial assistance. As a show of good faith, it pledged to implement economic reforms and restructure its debt. But the $700 million that the IMF earmarked as a relief package to lighten the heavy burden remains undisbursed because the Chinese bank refuses to negotiate a debt restructuring, Argentine news site Infobae reported on May 13.
This is not the first time that Chinese loans have brought a country to the brink of bankruptcy; a dozen other countries have suffered the same fate due to China’s reluctance to renegotiate or forgive the debts that always come with hidden high interest rates and shady clauses. The extreme secrecy surrounding the amounts and conditions of the loans prevents other lenders from intervening with help, the Los Angeles Times reported on May 21, based on an investigation by the Associated Press(AP).
“A dozen poor countries face economic instability and even collapse under the weight of hundreds of billions of dollars in foreign loans, most of them from the world’s largest and most ruthless lender: the Chinese government,” AP reported.
Beijing has been deploying its economic power, seeking to position itself in regions of interest. A country’s inability to pay allows China to seize ports, mines, and other strategic assets with military motives.
“China’s advances in Latin America are in critical areas: strategic infrastructure, investments in sensitive technologies, control of logistics chains and locations, such as the search for cooperation in the military and defense fields,” Calle said.
Countries worldwide are falling into China’s debt trap under its Belt and Road initiative. China was already the world’s largest lender in 2017, surpassing the World Bank and the IMF, wrote in an opinion piece for Argentine daily El Cronista Comercial Diana Mondino, a professor of Finance at CEMA University in Argentina.
According to Mondino, “China’s crisis resolution system rarely reduces the nominal value, but extends the loan, so that the problems are not solved but only postponed, and the loans then become very expensive.”
In a June 7 appearance before a U.S. House of Representatives subcommittee, U.S. Assistant Secretary of State for Western Hemisphere Affairs Brian Nichols said that China’s trade forays into the region are characterized by a “lack of transparency” in agreements with “conditionalities.”
Nichols added that Latin American nations have grown tired of China’s investment tactics, and that the U.S. needs to provide a viable alternative through diplomacy, foreign aid, and private investment. “It is vital that we respond to their call,” he said.
Source: Dialogo Americas