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China Development Bank Loans Argentina $10 Billion for New Metro and Rail Construction


China Development Bank recently agreed to loan the Argentinian government $10 billion for new railway and metro construction.

China has become a major source of funds for countries around the world, acting essentially as an alternative or competitor to the World Bank. It has been increasing its spending in Africa (much more than other countries). And it is looking to fund much of an intercontinental high-speed rail network it and others are planning, “the largest infrastructure project in history.”

China seems to have a direct interest in Argentinian farmland, a good reason for it to help improve transportation to and from this farmland in a very cost-efficient way (through better rail lines).

“Thanks to talks between Presidents Cristina Fernández de Kirchner and Hu Jintao, Argentina will receive $4.35 billion to renovate three freight railroad lines, including $1.85 billion to improve conditions on the Belgrano Line, which links the country to Bolivia and is an important link for the nation’s agricultural producers,” Yonah Freemark of the TransportPolitic writes.

But $4 billion for improvement of the Buenos Aires Subway and creation of a 4-corridor Metro in Cordoba don’t seem to offer any direct economic benefit to China. Yonah conjectures that Argentina must have agreed to give China some preferential trade treatment for this.

The Argentinian government has also committed to give a 15% match to the loans they receive.

China to Fund High-Speed Rail in the United States?

It is clear that China is willing to invest good money in high-speed rail and transit projects in its own country and abroad. It must see such transportation as an important solution to 21st century challenges.

While the US has committed several billion dollars for high-speed rail across the nation, it is still far behind China and Europe in this field. And many wonder if private and public entities in the US will even be able to fund the projects President Obama put $8 billion towards earlier this year. One solution, if that is the case, might be to borrow money from China.

“If U.S. companies aren’t able to provide adequate private sector support for construction programs, and if neither the federal government nor states themselves are able to develop infrastructure banks to advance such funding, foreign aid could be a realistic possibility,” Yonah writes.

“This could be seen as a significant let-down for Americans used to thinking that we should be able to fund our infrastructure using our own funds. But the opportunity for expanded global trade could be an excellent opportunity for improvements in the U.S.; there’s no reason to be worried about direct investment from abroad if it makes possible the construction of resources that we couldn’t otherwise build.”

I think this is excellent commentary. It would be great if we could fund high-speed rail projects in the US with US money, but if US companies and government can’t get the job done, getting money for these critical infrastructure projects elsewhere is better than not. High-speed rail is a good public investment and I think it is very important for future economic vitality in the US.

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Photo Credit: Jess J via flickr

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