The China Development Bank (CDB) has extended a loan of 5 billion yuan (approximately $690 million) to Brazil’s National Bank for Economic and Social Development (BNDES).
Signed on Wednesday, this deal not only marks BNDES’s first foreign exchange transaction but also represents a significant step in the broader economic collaboration between the two nations.
This three-year loan agreement is expected to serve as a key funding source for important development projects across Brazil, with a particular focus on infrastructure, energy, and transportation.
For BNDES, the loan is a crucial part of its broader strategy to diversify its funding sources and expand its role in global financial markets.
Aloizio Mercadante, BNDES president, said the loan could help Brazilian exporters navigate fluctuating exchange rates by using Chinese currency, thereby reducing Brazil’s reliance on the US dollar.
The loan is part of Brazil’s broader economic strategy to strengthen its financial independence while reducing its dependence on traditional global currencies.
Brazil is looking for alternative ways to engage in international trade and investment, particularly through currency diversification.
This strategy is in line with ongoing discussions within the BRICS group—Brazil, Russia, India, China, and South Africa—which have increasingly focused on the idea of using non-US dollar currencies for trade.
Brazilian President Luiz Inácio Lula da Silva has been a vocal advocate for creating alternative payment systems to facilitate smoother transactions between developing nations.
Similar deals among BRICS countries?
The recent loan agreement with CDB could be a precursor to similar deals among BRICS countries, promoting deeper economic collaboration and reducing vulnerability to global financial shocks.
The deal also comes at a time when global geopolitical tensions are prompting many nations to reassess their financial dependencies.
For Brazil, this loan represents an opportunity to assert its position in the global economy and reduce its exposure to external shocks, such as currency fluctuations or trade disruptions.
As the nation continues to embrace alternative financial instruments, it will need to balance its growing relationships with China and other BRICS members while safeguarding its interests in a rapidly evolving global financial environment.
The coming months will be crucial in determining how Brazil capitalizes on its new role as BRICS president and how it leverages these financial partnerships to boost its international stature.
Chinese loans in Latin America
The China Development Bank and Export-Import Bank of China have together extended $138 billion in loans across 117 deals in Latin America and the Caribbean.
This lending surge began after the 2008 global financial crisis, which limited financing options for developing nations like Argentina, Ecuador, and Venezuela.
However, starting in 2020, China scaled back its state-to-state lending, though by then it had already established itself as a major creditor in the region.
For instance, Ecuador, which restructured its debt with China last year, still owes nearly $5 billion, accounting for 11 percent of its total external debt.
The situation is even more dire in Venezuela, where the government reportedly owes China $19 billion. Since 2005, the country—rich in oil but struggling economically—has been the largest recipient of Chinese loans in the region, accounting for 40 percent of China’s lending.
Due to its inability to produce enough oil to meet its debt obligations, Venezuela has had to repeatedly renegotiate the terms of its loans.
China’s lending practices differ from traditional Western approaches. It often bypasses the usual conditionalities, offering loans without demanding sustainable borrowing practices or fiscal discipline from borrowing countries.
Instead, China secures its loans by requiring governments to guarantee repayment through exports of commodities like oil.
However, as these arrangements begin to falter, Beijing has been unwilling to forgive debts unilaterally or collaborate with other international lenders—whether public or private—to address the mounting financial challenges.
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