Moreno
China will join the Inter-American Development Bank (IDB) as its 22nd donor member, building on its growing links with Latin America and the Caribbean, the bank said Friday following discussions with the emerging powerhouse a day earlier.
China has made a funding commitment of US$350 million, putting it on top of the donor-country list as the "single largest source of long-term lending" for the region.
It also gives it a seat on the IDB board of governors, the top decision-making body, whose seats are normally held by finance ministers and central bankers.
Other donors
But China will also be represented at the level of the executive directors with other donors, whose job includes daily oversight of bank operations, loan approvals, setting policy and interest rates.
The Asian giant, as the IDB described China, has in the past two years been reaching out to LAC economies and spreading its influence through loan agreements, cooperation programmes and enhanced trade now valued at around US$110 billion.
Joining the IDB as its 48th donor member adds a new dimension to that outreach.
But its acceptance in the IDB donor club also serves to lift the Asian country's profile as one of the world's most influential economies.
The bank hands out about US$10 billion of assistance and plans to increase that to US$12 billion in 2009.
China's entrance was approved after a month-long voting process that ended October 15.
"It is a historic decision that takes China's thriving commercial relationship with our region into the development sphere," said IDB President Luis Alberto Moreno.
China has called it a win-win situation, saying it offers a new platform and opportunity for increased two-way trade and investment and greater technological cooperation.
"This is a win-win decision that will serve everyone's interest," said Zhou Wenzhong, China's ambassador to the United States.
"China will, after officially joining IDB, cooperate closely with the bank, support the IDB in reducing poverty and promoting development, and share our experience with the countries of Latin America and the Caribbean for the purpose of mutual benefit and common development."
The IDB is essentially owned by its members. The 26 LAC borrowing nations own 50.01 per cent, the United States holds just over 30 per cent, and China will own 0.004 per cent on the purchase of 184 shares.
It will also buy 110 shares, or 0.16 per cent, in the Inter-American Investment Corporation (IIC), an IDB affiliate.
Its US$350 million donor pledge will, the IDB group said, bolster key programmes at a time when the world economy is under duress.
Some of the funds are targeted at five countries, including storm-pummelled Haiti and Guyana.
Since 1995, China-LAC trade has grown 13-fold from US$8.4 billion to US$110 billion in 2007, positioning China as the region's second-largest trading partner behind the United States, up from 12th spot.
"The flow of ideas, resources and technology between China and Latin America has grown exponentially in recent years," said Moreno. "China is an increasingly important commercial partner and investor for the region and a vast new market for our exports."
The level of trade between China and the region is 11-fold the level of funding assistance provided by the IDB, whose programmes this year are valued at around US$10 billion, but reach US$12 billion in 2009.
business@gleanerjm.com.
China and LAC
China's US$3.3 trillion gross domestic product is similar to Latin America and the Caribbean's US$3.4 trillion GDP. At 1.3 billion people, China has more than double the population of this region. China's total exports were US$1.2 trillion last year compared with US$753 billion from the region. In terms of growth, the Chinese economy has long grown at rates of over 10 per cent, while over the past five years, Latin America and the Caribbean averaged 5.5 per cent annual increases. Trade between China and Latin America has grown exponentially over the past decade, albeit from a low base. In 1995 it was $8.4 billion; last year it totalled $110 billion. China is now the second- largest destination for Latin American exports, after the United States. The region's top exports to China are iron ore, oil seeds, metals, copper and crude and other petroleum-based products. China's top exports to Latin America and the Caribbean are telecommunications equipment, computers, motorcycles and scooters and textile products. Agricultural exports are likely to continue growing as China still has relatively low levels of per capita consumption of staples such as sugar, soy oil, poultry and beef. China signed a free-trade agreement with Chile in 2005 and is currently in talks with Costa Rica and Peru on reaching new pacts. Chinese investments in Latin America and the Caribbean are still small, compared with US and European investments. In 2006, this region received an estimated US$3 billion in foreign direct investment (FDI) from China, less than four per cent of the total FDI flows into Latin America and the Caribbean.
Putting up US$350m to finance Caribbean, Lat Am projects - Distribution of US$350m
US$125 million to the IDB's und for Special Operations, which provides soft loans to Bolivia, Guyana, Haiti, Honduras and Nicaragua. US$75 million to multiple IDB grant funds to strengthen the institutional capacity of the state, including municipal governments and private-sector institutions. US$75 million for an equity fund to be administered by the IIC, a lender to small and mid-size private businesses. $75 million to be administered by the Multilateral Investment Fund - the IDB arm that focuses on microenterprises.
