: What is neocolonialism and Predatory Lending?
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Neocolonialism and predatory lending is, rather than in the past when a powerful country actually colonized a developing country and controlled it politically, to control a developing country through economics.
Say Wealthy Country A would like secure access to Developing Country B’s coffee exports. They might suggest Country B really needs to build a massive hydroelectric dam to create sufficient power for their country. The developing country will need to borrow $10B from the wealthy country, but “the economic growth will easily allow dam to pay for itself!”
but the project takes longer, and costs more than expected, and the developing country’s currency weakens in the meantime making it even more expensive… they cannot possibly pay back the loans and don’t see the economic gains they were sold on. The government has to cut back on services to its citizens just to make debt payments to the wealthy country.
But then the wealthy country comes in and basically offers to forgive or reduce the debt if the developing country will exclusively trade coffee exports with them, on the terms they set. So the country, facing the spector of reducing spending on education and healthcare, or giving up control of its coffee sector chooses to agree to the coffee deal. This may have negative consequences on the coffee growers, coffee traders, etc.
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