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Analyzing the "Silk Road" in Latin America The Belt and Road Initiative: China-Panama Relations and Economic Implications

Apata, Olufemi

Most recent studies on the Belt and Road Initiative's (BRI) impacts have focused on beneficiary countries' political economies. This paper examines how the BRI - China's foreign and economic development policy for global interconnectivity- affects debt sustainability in signatory nations like Panama. Undoubtedly, many opportunities exist for BRI participants, yet, the initiative's specific impact remains debatable, complicated in part by a dearth of empirical evidence as well as assumptions about China's political and economic motives. Panama and 19 other Latin American and Caribbean (LAC) countries recently joined the BRI, aiming for economic growth from Chinese investment inflow. In these countries, the initiative can facilitate value-added foreign direct investments (FDI), enhance trade, improve infrastructure, and provide access to low-interest developmental loans. Conversely, it can contribute to a large-scale trade disturbance creating political and economic uncertainty while making participation in the initiative risky or otherwise problematic. Similarly, the BRI-led focus on partnership with America's regional allies can impact US-LAC relations, creating geostrategic security and economic risks in the region. This research analyzes BRI's economic impact in LAC using a mixed-method approach. The analyses rely on data retrieved from the debt sustainability reports from the World Bank and the International Monetary Fund (IMF). The project has two goals: First, it examines BRI's debt risks and their impacts on Panama without obscuring the economic benefits. Second, it assesses BRI's economic and security implications on the US-Panama relation. By evaluating the BRI and its impacts on Panama's economy within the LAC context, this research concludes that Panama stands to benefit from the BRI. However, without Panama enacting sound fiscal and economic policies, the BRI poses substantive consequences of debt distress to its economy. Although this research suggests linkages between BRI roles on debt sustainability, understanding these roles' micro-level dynamics in Panama and LAC will require empirical evidence and further investigation.

Keywords: Belt and Road Initiative, debt, Latin America, geostrategic, Panama, IMF, infrastructure, foreign policy, risks, diplomatic, foreign direct investment, World Bank

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More About This Work

Academic Units
Regional Studies: Latin America and the Caribbean
Thesis Advisors
Azenha, Gustavo S.
Moya, Jose C.
Degree
M.A., Columbia University
Published Here
September 7, 2021