Latin America and the AIIB: Interests and Viewpoints
| Date | 01 November 2019 |
| DOI | http://doi.org/10.1111/1758-5899.12733 |
| Published date | 01 November 2019 |
Latin America and the AIIB: Interests and
Viewpoints
Alvaro Mendez
ESIC Business & Marketing School, and
London School of Economics
Abstract
This essay gives insight into the interaction of the Asian Infrastructure Investment Bank (AIIB) with Latin America and the Car-
ibbean (LAC). The AIIB has expressed a clear interest in LAC, accepting eight countries as ‘prospective’members pending pay-
ing-in their capital, but LAC shows almost no stamina. It is the world’s only region lacking even one paid-in member. So long
as Beijing backs the request, prospective membership only requires writing a few letters. But LAC’s inertia in officially joining,
by passing legislation and making their capital contribution, is puzzling, given the benefits that lie untapped. The likeliest
cause is their own culture of sheer negligent short-sightedness (‘let’sdoitma~
nana’). This tendency to adjourn the acid test of
action could be mitigated if countries in the region adopt long-term non-partisan National Development Plans to strengthen
their institutional policy-making capacity. For their part, the AIIB’s Governors and Beijing, despite their initial keen interest in
LAC, have had to give up nudging and adapt themselves to the Latin Americans’labile perception of time in order to con-
serve their public image. They must remind LAC that only paid-in members receive financial benefits.
The Asian Infrastructure Investment Bank (AIIB) is not con-
fined to its eponymous region, but accepts members from
across the world, as its ‘Charter does not specify that the
investment itself must be located in Asia’(Lichtenstein,
2018, p. 51). The AIIB has expressed a clear interest in Latin
America and the Caribbean (LAC), and has accepted eight
LAC countries as ‘prospective’members pending receipt of
their capital contributions. In chronological order of
approval, they are Brazil, Peru, Venezuela, Bolivia, Chile,
Argentina, Ecuador and Uruguay (AIIB, 2019a).
The AIIB vets infrastructure projects against three the-
matic priorities which LAC sorely needs: (1) Sustainable
Infrastructure: green projects to help countries reach both
environmental and development goals; (2) Cross-border Con-
nectivity: infrastructure from roads and railways to ports,
energy pipelines and telecommunication links in and
between countries; and (3) Private Capital Mobilization: pub-
lic-private partnerships of governments, MDBs, private finan-
ciers, and others to catalyse infrastructure development
(SEC, 2019). The AIIB seems bespoke-fit for LAC’s needs. It is
particularly noteworthy that private investors in infrastruc-
ture are more involved in LAC than in other developing
regions: only 10 per cent of infrastructure is privately funded
in Asia, but over 50 per cent in Latin America. Likewise, for
the AIIB, LAC showcases the relevance of its themes. The
region urgently needs deliverance from four development
traps that sustainable infrastructure development could
ameliorate, which ‘stand in the way of further inclusive and
sustainable growth’(OECD, 2018b, p. 28): low productivity,
social vulnerability, institutional inadequacy, and environ-
mental deterioration.
Notwithstanding the benefits of full membership (i.e.
access to infrastructure loans), the eight prospects have
neglected to pay-in their respective capital contributions,
which are very petty amounts. Most have not even begun
the legislative process to appropriate the money, let alone
to adjust their laws to the AIIB Articles of Agreement. What
is worse is that five of these eight are putting gassy
endorsements of China’s Belt and Road Initiative (BRI) over
paying their dues to the AIIB (see Table 1). Indeed, 19 of the
24 countries that recognize the People’s Republic of China
(PRC) are now bandwagoning on the BRI, which merely pro-
mises infrastructure. If the BRI would realise its promises, the
AIIB must play a pivotal role, together with other multilateral
development banks (MDBs). The negligence of LAC, then, is
a puzzle in search of an explanation, which this policy
insight paper aims to provide.
Inadequate infrastructure and insufficient lending
capacity in LAC
Experts disagree over many things about LAC, but they do
agree that it has some of the world’s worst infrastructure.
LAC’s elites are obsessed with free trade deals, but they
mean nothing without the connectivity that can move pro-
duction factors and consumer products efficiently, especially
across borders. Indispensable works are needed for purposes
besides resource extraction for China. National and regional
infrastructure must be fit for the purpose; yet in Argentina,
to move sugar by rail from Jujuy in the far northwest to the
port of Buenos Aires, a journey of 1,675km (1000 miles),
takes 22 days –the same time to transport it from Buenos
Global Policy (2019) 10:4 doi: 10.1111/1758-5899.12733 ©2019 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 10 . Issue 4 . November 2019 639
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