The China Boom in Latin America: An End to Austerity?

Stephen B. Kaplan
2014 Social Science Research Network  
Globalization scholars have long-debated to what extent economic integration, and speci_cally, mobile private capital constrains national policymaking. With Western capital reeling from the 2008 _nancial crisis, state-owned capital made inroads globally. China, as the world's largest saver, expanded its cross-border lending, funneling almost US$300 billion to developing countries since the crisis. What are the implications for debtor governments' room to maneuver? I argue that China's rapid
more » ... t China's rapid _nancial expansion globally has helped increase national-level policy [exibility by removing the budget constraint traditionally imposed by the IMF and global markets. Unlike their stringent borrower conditionality, Chinese investors tend not to impose onerous policy conditions. Given the recent emergence of Chinese _nancing, I employ a comparative case study analysis of two of China's largest debtors ñ Brazil and Venezuela ñ before and after the introduction of Chinese credit. I _nd that government budget de_cits increase as Chinese state-to-state _nancing accounts for a larger share of total external public _nancing. These _ndings offer important new insights for the study of globalization, the Latin American left, and China-Latin American relations, by helping explain the structural conditions that enable nations to veer from Western governance models.
doi:10.2139/ssrn.2552280 fatcat:lqhlthjyjrgxpp6m33i462sbke