Hard times in China could lead to even harder times in Ecuador.
Earlier in the year, the Chinese government had promised to loan Ecuador $7.5 billion with $4 billion coming in 2015. Although exact figures are not available, Ecuador’s Minister of Finance Fausto Herrera says much of the money has yet to be delivered.
Herrera and Ecuador Vice President Jorge Glas head a delegation visiting China this week that hopes to convince the Chinese to reopen the financial faucet. “We are in talks about he delays in disbursements that have been caused by operational problems in both China and Ecuador and hope to have a resolution before we leave Beijing,” he said.
Herrera acknowledges that China is facing financial difficulties, especially in its banking system, and this is one reason for the delay of loan backed by future deliveries of oil.
The hold-back of Chinese funds comes at a particularly bad time for Ecuador as oil prices, which make up about 20% of the government’s revenue, are at a seven-year low.
Quito economic analyst Alberto Acosta Burneo says that the Ecuadorian delegation faces a challenge. “China is the not the credit option for Ecuador that it was at the beginning of the year,” he said. “It’s economy is growing at a slower rate and their need for natural resources has declined. The government in Beijing has undertaken a review of its investments based on a slowing economy and Ecaudor may not get the funding it was promised.”
Burneo says that the release of more funds could be tied to negotiations with the Chinese government and private investors over Ecuador mining rights. “Despite the general economic slow down, China remains very interested in pursing gold and silver mining in the sierra region,” he adds.
Mining is a sensitive political issue and rurual communities have announced that they will fight Chinese mining concessions, particularly those that involve open pit mining which they say will poison water supplies.