The Development Assistance Committee (DAC) is an official body of the Organization for Economic Cooperation and Development (OECD). As such, the DAC is in charge of distributing official aid to developing nations and supporting the United Nations’ development goals. Furthermore, the DAC is in charge of determining the definition and parameters of what constitutes Official Development Assistance (ODA), which excludes, for example, all military equipment and services. However, during the 21st century, with the emergence of revisionist powers, an increase in South-South cooperation, and ever-deepening globalization, some are questioning the OECD’s narrow definition for ODA and looking for new ways to empower developing regions. Currently, the DAC has an official membership of 29 mainly western and developed nations, plus the European Union as an institutional member. Therefore, international observers and analysts have identified three new types of international donors: western and developed countries not part of the Development Assistance Committee (DAC), wealthy Arab donor states, and developing nations engaging in South-South cooperation. Not surprisingly, the key nation when it comes to South-South cooperation and development assistance is China.
International Financing and Latin American Development
China has been a provider of development assistance for decades. Nevertheless, it has been during the last decade that China’s potential as an international lender and assistance provider has been truly felt, becoming the developing nation that most invests in development assistance. However, China’s own calculation of its total development assistance does not follow the definition parameters determined by the OECD and it does include, at times, defense related expenditures as well as low-interest loans. Therefore, in China’s case, the line between development aid and financing becomes blurred because most of its financing comes in the form of loans or securities issued at very low interest rates.
Without being able to distinguish what would be considered development assistance and what would be considered loans, the Inter-American Dialogue’s China-Latin America Finance Database calculates that, between 2005 and 2016, Beijing issued some 77 loans to the region for a grand total of approximately US$141.3 billion. Of most note in the database, Colombia appears as not having received any type of Chinese financing during the abovementioned period. This stands in stark contrast with neighboring Venezuela, which received about 17 loans for a total value of US$62.2 billion.
Within China, there are two main financial institutions in charge of issuing and administering the loans in question, the Chinese Development Bank (CDB) and the China Export-Import Bank (EXIM). In the case of Latin America, the vast majority of loans to date, over 80%, have come from the CDB. This is particularly important because, when the CDB issues a loan to an oil-exporting nation, such as Venezuela, Brazil or Ecuador, the state-owned petroleum company commits to sending oil to China. These type of loans have become of common issuance by China and are known as commodity-backed securities or loans because they require the shipping of crude oil towards China as a collateral or form of payment throughout the duration of the loan.