Ecuador confirmed on Monday that it had received $1.3 billion from the China Development Bank (CDB), the first installment of a $2 billion loan signed in Beijing in June. The Ecuadorian Ministry of Finance is free to use the loan for whatever purposes it deems  appropriate.  The remaining $700 million that is included in the loan will be delivered in the next months and will be used to finance priority projects in areas such as infrastructure, energy and agriculture. Chinese companies are active in Ecuador in these sectors. 

The $2 billion loan—with an eight-year term and a 6.9 percent fixed annual interest rate—was signed by William Vasconez, Ecuador’s undersecretary of public credit. The loan helps the Ecuadorian government in its quest to come up with alternative financing sources after the country was shut out of international credit markets in 2008.

The receipt of the $1.3 billion adds to a growing financial relationship between the two countries. Since 2009, when Ecuador defaulted on $3.2 billion of bonds, the Andean country has received $6.68 billion from China to finance various projects. In June 2010, for example, the Export-Import Bank of China agreed to finance a $1.68 billion, 1,500-megawatt hydropower plant to be built by China’s state-owned Sinohydro Corporation in the Amazon region. This adds to the $1 billion-loan PetroChina Co., China’s largest oil producer, released in February 2011 in exchange for future oil sales.