Three years after establishing relations with China, in 2025 that country will become the second-largest external financier of the Ortega-Murillo dictatorship. The contribution will be made through two companies and will only be surpassed by that of the Central American Bank for Economic Integration (BCIE), which remains in first place, with its disbursements combined with those of China representing 80 percent of the total external financing the country will receive. According to the draft budget currently under approval in the National Assembly, the Chinese will disburse 6,389.5 million córdobas (173 million dollars).
The 2025 Budget draft includes plans to execute 26,525 million córdobas (about 724 million dollars) next year in loans tied to specific projects. The primary source of these funds will be the Central American Bank for Economic Integration (BCIE), which will disburse 14,869 million córdobas for road, water, sanitation, and housing projects that are already underway.
Central American Bank for Economic Integration (BCIE), as outlined in the Budget draft, is disbursing 405 million dollars, representing more than half of the total external financing the regime expects to receive throughout 2025.
As the second-largest external financier, the Budget draft identifies the Chinese companies CAMC Engineering Co. Ltd (CAMCE) and China Communications Construction Company Limited (CCCC), which together will disburse 6,398 million córdobas, equivalent to 173 million dollars at the official exchange rate. This figure is low compared to the nearly one billion dollars in loans that the regime signed with the Chinese government in credit agreements this year. Additionally, the amount is much lower than that of traditional financiers, including the BCIE.
Financing under onerous conditions
According to exiled economist and former political prisoner Juan Sebastián Chamorro, this reflects a strong dependency on Chinese financing. “We see in this General Budget of the Republic that the second financier has emerged despite the fact that it’s been less than a year since the dictatorship signed the agreement with China, and it has already become the second-largest financier, with the BCIE still remaining the primary one,” Chamorro points out.
In addition to the rapid growth of debt, Chamorro is concerned about the onerous conditions of Chinese financing, as these differ significantly from those of multilateral organizations like the World Bank (WB), the Inter-American Development Bank (IDB), and the International Monetary Fund (IMF), which offered extended grace periods and lower interest rates.
However, due to severe human rights violations and crimes against humanity committed by the Ortega-Murillo regime in the context of the ongoing socio-political crisis in the country, these organizations have suspended approval of new loans. This has forced the regime to turn to the BCIE, which lends at higher rates, and now to China, whose terms are even stricter.
Funding for an airport and a photovoltaic plant
“The interest rate with the Chinese, which is also variable, stands at 6.5 percent—an unthinkable rate a decade ago when 3 percent was considered high. Furthermore, the Chinese add a series of fees that international organizations do not charge: disbursement fees, opening fees, management fees, and others they create to disguise the effective interest rate, which could increase from the agreed 6.5 percent to nearly 9.5 percent. Additionally, they have reduced grace periods from eleven years to just two, meaning the regime has to start repaying these loans much sooner,” Chamorro explains.
In the first months of 2024, the Ortega-Murillo regime signed a loan with CAMC Engineering Co. Ltd (CAMCE) for around 400 million dollars to construct a new international airport in Punta Huete, Managua.
According to the loan agreements, CAMCE required Nicaragua to provide an upfront counterpart contribution of 20 percent of the project’s value, that is 80 million dollars. Although the loan is for 400 million dollars, the Budget draft indicates that CAMCE will disburse only about 146 million dollars in 2025.
In 2025, China will only fund the El Hato plant
According to Chamorro, a 20 percent contribution for a counterpart falls within the standard parameters for this type of financing. However, he notes that what is entirely unusual is the demand for the entire counterpart payment to be made upfront.
“This is unprecedented. A project like Punta Huete could take four years to complete, that 20 percent should be disbursed gradually,” Chamorro asserts.
The second Chinese company listed as an external financier in the 2025 Budget draft is the state-owned Communications Construction Company Limited (CCCC). This year, Nicaragua has signed at least three loans with this company totaling 253 million dollars to build an equal number of photovoltaic plants. However, the 2025 Budget draft only includes a disbursement of around 27 million dollars.
The loans agreed upon with the state-owned company CCCC are for the El Hato plant in Ciudad Darío, Matagalpa, with a generating capacity of 67 megawatts and an investment of 80 million dollars; another loan for 83 million dollars to build a plant in Masaya with a capacity of 70 megawatts; and a third loan for constructing another plant in San Isidro, Matagalpa, with a capacity of 61 megawatts and an investment of 90 million dollars.
BCIE and China will provide 80 percent of the financing
Although several projects have been agreed upon with this company, the Budget draft only includes a disbursement of 1,017 million córdobas (equivalent to 27 million dollars) for the construction of the El Hato photovoltaic solar power plant in Ciudad Darío, Matagalpa.
With this disbursement for the El Hato plant, along with the funds CAMCE would provide for the Punta Huete airport, the 173 million dollars anticipated from China in the Budget draft is met. Additionally, this amount, combined with the 405 million dollars expected from BCIE, totals 578 million dollars, representing 80 percent of the total external financing budgeted for 2025.
The remaining 20 percent is expected to come from the World Bank (WB), the Inter-American Development Bank (IDB), the Japan International Cooperation Agency, Kreditanstalt für Wiederaufbau, the Organization of the Petroleum Exporting Countries (OPEC) Fund for International Development, the Export-Import Bank of Korea, and the Agricultural Development Fund.