Reserve Bank of Zimbabwe Governor Gideon Gono suggested one possible remedy: Adopt the Chinese yuan as the official currency. (Zimbabwe eventually overcame the crisis by switching to a mix of Western and African currencies.)
Argentina is fighting off an economic reckoning, despite receiving more than US$12 billion in Chinese loans, according to the Gallagher report.
In 2001, the country defaulted on US$100 billion in loans. It struck a deal with most of its lenders, but over the past year a group of creditors is insisting on payment in full.
“It’s extremely concerning,” said Margaret Meyers, a China expert at the US think tank Inter-American Dialogue. “Chinese financing won’t be able to sustain these economies unless they go through substantial macroeconomic reforms. For Argentina, that means open markets, reforming institutions, reforming the banking system, fiscal accountability, ending lots of misspending.”
Some in the borrowing countries have watched with worry as the Chinese bets play out.
Opposition politicians in Venezuela have slammed the deals for locking in contracts for everything from Chinese-made refrigerators to Chinese construction workers, while giving Chavez free rein to spend billions of dollars.
“There’s no doubt we’re going to need China, they are an economic powerhouse, but many of the agreements the government has signed involve political loyalties that don’t interest us,” Venezuelan opposition leader Henrique Capriles said last year.
On the beaches of New Providence in the Bahamas, hundreds of Chinese construction workers are toiling around the clock to ready the Baha Mar project for a phased opening scheduled to start late next year.
The project will add thousands of hotel rooms not far from the islands’ biggest resort, the Atlantis.
“Going forward, we have to achieve a sustainable tourism product,” former Bahamian finance minister James Smith said. “If we don’t, Baha Mar could be cannibalizing Atlantis.”
Baha Mar has opened sales offices all over Asia to promote and pre-sell hundreds of pricey condos, hoping to imprint new travel habits on a continent that has traditionally spent beach vacations in Southeast Asia. It is also working with the Bahamian government to open more consular offices in China to issue visas.
“In general, you would assume that a project of that size is generating its own demand and the idea would probably also be with Chinese money comes an influx of Chinese travelers,” said Jan Freitag, senior vice president of hospitality industry research firm STR. “The Chinese would argue that we can maybe attract a clientele that has not been with you before.”
When completed, the complex is set to boast brands such as the Grand Hyatt, Rosewood and Mondrian, and 313 million dollar condos being marketed to the international elite.
Business leaders have openly questioned the investment as Baha Mar rises just blocks from storefronts left empty during the latest downturn. The Wyndham hotel was closed for all of September and most of October last year due to low occupancy levels and on Feb. 8 it announced the need for “substantial cutbacks,” including layoffs.
“In a vibrant economy, we wouldn’t be having any concerns. The reason it comes into question is whether it’s right at this time,” Bahamas Chamber of Commerce chief executive Winston Rolle said.