Delayed project completion dates, cost overruns, and encumbered raw material sourcing are some of the direct impacts that senior economists and government officials expect to see on China-led public works in the Caribbean, due to the COVID-19 pandemic.
China’s Opaque Caribbean Trail: Dreams, Deals and Debt
A hotel. A highway. A port. The prime minister’s house. For Caribbean countries, one of the most visible, expansive, and expensive forms of Beijing’s engagement with the region is its financing of large-scale infrastructure projects.
How China Makes Things Possible
In general, there are two types of funding offered by China. The first is in the form of Chinese government grants. Recipient countries do not foot the bill of these projects.
The second frequently tends to come in the form of Chinese-set market-rate loans from Chinese banks. In particular, the China Export-Import Bank (China EXIM) and the China Development Bank (CDB) – two Chinese state-owned banks, have pledged, disbursed or partially disbursed a large proportion of Chinese loans to Caribbean projects and countries.
The banks administer foreign aid loans using subsidies from the foreign aid budget to soften the loan terms. These loans usually have fixed interest rates of 2-3%, maturity of 15-20 years with grace periods, and 2 payments per year. The majority of past and on-going projects in the Caribbean are funded by concessional loans from the China Export & Import Bank.
These loans are often framed as resource-secured loans.