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China's investment in Central America

China's economic activity in Latin America has skyrocketed in recent years, increasing 25-fold in the last decade. China is the leading commodity importer from many Latin American countries as well importing soybeans, copper, and iron ore. In 2015, China made approximately $30 billion in loans to Latin American countries far exceeding banks from the west. Chinese banks loaned Latin America more money than traditional lenders, the World Bank and the Inter-American Development Bank (IDB) combined.

China has proven to be a loyal economic partner with all Latin American countries regardless of the country's political persuasion. China, with more than 1,350 million people, has a huge demand for natural resources from Latin America, and imports oil, copper, gold and other primary resources. China is Latin America's second biggest trading partner behind only the United States.

Having already invested billions in Latin America, China's focus may have now turned to Central America.

In Nicaragua, a Chinese company is building a 278-kilometer canal that will connect the Caribbean Sea to the Pacific Ocean. The Nicaraguan Canal and Development Project -a planned shipping route through Nicaragua to connect the Caribbean Sea (and therefore the Atlantic Ocean) with the Pacific Ocean.

In Honduras, the Bank of China has provided a $295 million loan to fund the second stage of the Patuca 3 hydroelectric project located in Olancho Province. The Patuca 3 is a conventional hydropower project involving a reservoir and a 55 m high concrete gravitational dam.

The China Development Bank’s has recently loaned Costa Rica $395 million to renovate and expand the highway between the capital of San José and the city of Limón on the Carribean. Costa Rica has gotten added consideration from China in the form of a $300 million loan, for being the only Central American country to formally recognize China over Taiwan.

Lending to Central America countries for infrastructure projects marks a welcome addition to China's history of lending primarily in Argentina, Brazil, Ecuador and Venezuela and signals a new era of economic growth in Central America and cooperation with Chinese lending institutions.

CENTRAL LAW team of lawyers in foreign investment provide legal advice to international companies wishing to enter the Central American region.

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