Drive along the long and straight Avenida del Libertadores in Buenos Aires and you'll see them. Billboards of the world's biggest bank, the Industrial and Commercial
About 10 years ago, global economists postulated that a new trade flow was emerging. No longer was everything flowing to the north. There was a new south to south bound trade, whereas emerging markets would increasing trade goods and services with each other. Some would even lend to each other.
That vision has become clearer of late, with last year's creation of the New Development Bank by the governments of Brazil, Russia, India, China and South Africa. And most recently,
Argentina's president Cristina Kirchner with executives of ICBC in Buenos Aires. ICBC's expanding... [+]
Chinese banks continue to finance countries left behind by the World Bank, Inter-American Development Bank (IADB) and by traditional U.S. and European lenders, according to a study by Boston University's Global Economic Governance Initiative (GEGI) and the Inter-American Dialogue, a Washington DC based think tank.
Argentina, Brazil, Ecuador and Venezuela, which are not able to borrow as easily in global capital markets, focused on Chinese lending in 2014 as a source for foreign loans. The China lending trend in Latin America is firmly in place, says GEGI researcher and BU professor Kevin Gallagher.
GEGI data released on Thursday shows a 70% increase in China bank loans to Latin America and the Caribbean in 2014.
It's actually a conservative estimate, because uncovering the true numbers is not easy. ICBC and other Chinese lenders are not known for transparency.
"There is no easy way to measure Chinese bank loans to Latin America," Gallagher and two colleagues wrote in a report titled "New Banks in Town: Chinese Finance in Latin America". Unlike the World Bank and IADB, Chinese banks do not regularly publish detailed figures regarding their loan activities.
Chinese banks loan money for different purposes than the World Bank. The Chinese loans focus on infrastructure and heavy industry, while the World Bank and IADB loans span a range of governmental, social, and environmental purposes.
According to the study, Chinese banks channel 87% of their loans into the energy, mining, infrastructure, transportation, and housing sectors while only 29% of IADB loans and 34% of World Bank loans do so.
There's not much overlap between China and the old developing banks. China's not interested in health, social and environmental sectors of the economy.
The report points out that unlike the western lenders, Chinese state-run banks do not have the same guidelines for labor and the environment. For instance, IADB loans to meat packing companies in Brazil's Amazon region require the borrower to only use cattle that are legally registered and tracked. It also requires that the ranchers the meat packing company is buying from reduces deforestation, and in some cases the loans come with a zero-deforestation tolerance. Chinese banks, on the other hand, do not come with those restrictions.
China banks are busy in LatAm.
Since 2005, China has provided more than $119 billion in loans to Latin America and the Caribbean.
Brazil was the largest recipient of Chinese loans last year with a total of $8.6 billion, most of it to mining partner
Argentina came in second last year with a total of $6.8 billion in loans, all of it in energy and infrastructure. ICBC was part of a $2.1 billion lending package to Belgrano Cargas, an Argentina railroad company.
ICBC became a banking force in Argentina in 2011 when it acquired 80% of Standard Bank in 2011.
See: China's Lending Map -- Inter-American Dialogue
