BRIC Loans to Developing Countries: Causes and Consequences

Session Submission Type: Author meet critics

Session Description

Over the last two decades Brazil, Russia, India, and especially China have become important lenders to the developing world. It is a striking change in the global economy with potential consequences for political and economic development, international economic cooperation, and security relations around the world. To understand this new phenomenon, we need to know what accounts for the variation that we observe in the creditors that developing countries choose. Specifically, we need to understand why governments accept Chinese over Western loan offers before we can predict their likely consequences.

In his book "Raise the Debt" (Oxford University Press, 2019), Jonas Bunte systematically explains how governments choose among competing loan offers. Using statistical analyses and extensive interview data, he shows that the strings attached to loans vary across creditors. Consequently, one domestic interest group may benefit from Chinese credit but not U.S. loans, while the opposite is the case for other groups. Bunte provides evidence that governments cater to whichever domestic interest group is politically dominant when deciding between competing loan offers.

This panel brings together experts on debt, democracy, and development to discuss the implications of these findings for three issue areas. First, the rise of BRIC lending might have implications for economic development. Conditions attached to western loans have required recipient countries to liberalize and privatize their economies. In contrast, BRICs offer funding for large infrastructure projects that may resolve growth bottlenecks. Therefore, the availability of Chiense loans may allow recipient governments to pursue East Asian Tiger-style development policies instead of following the Washington Consensus. Second, choosing BRIC loans might affect the prospects for democracy in developing countries. Chinese loans, in particular, might undermine movements toward democratization in poor countries. Third, Russia’s president, Vladimir Putin, claims that BRIC loans can provide developing countries with the means to avoid the “harassment” by the United States or Europe over foreign policy. This raises important questions concerning the impact of BRIC loans on security relations around the world.

Confirmed participants include Sarah Brooks (Ohio State University), Layna Mosley (University of North Carolina, Chapel Hill), Ken Scheve (Stanford University), and James Vreeland (Princeton University).

Sub Unit

• DIVISION 16: International Political Economy

Chair

• Kenneth F. Scheve Stanford University

Presenters

• Jonas Bunte University of Texas at Dallas

• James Raymond Vreeland Princeton University

• Sarah M. Brooks Ohio State University

• Layna Mosley University of North Carolina, Chapel Hill