Selling Sovereignty - International Coercion, Debt Relief, and Land Transfers

US National Science Foundation

Over the last decade, developing countries increased their sovereign borrowing from new creditors, such as China, Brazil, Russia, Saudi Arabia, and other emerging economies. However, developing countries now struggle to repay these loans and consider alternative strategies for dealing with mounting debt problems. Besides commonly known strategies such as defaulting on debt, seeking debt relief, or implementing austerity policies to manage debt repayment, a new phenomenon has recently made headlines: Borrowing governments giving land to creditor countries to repay loans. Examples include Sri Lanka, where a Chinese state-owned firm obtained a 99-year lease for Hambantota port in 2018. Yet, other governments make different choices. In 2020, Tanzania defaulted on a loan for a Bagayomo Port, rejecting the contract's terms which gave Chinese investors a 99-year lease on the port and a 30-year guarantee on the loan. What explains different debt management strategies by developing countries? We currently cannot answer this question as we lack data on land transactions. Anecdotal evidence suggests that land transactions are common, but no systematic dataset exists that would allow researchers to analyze the causes and consequences of land transactions between sovereign governments. To address these limitations, our project has two goals: 1) to develop theoretical expectations for governments' responses to indebtedness, and 2) to systematically collect data on land transactions which would allow us to study the determinants of governments' debt management decisions. Overall, this project will provide a theoretical framework and new data to examine land transactions in the context of debt diplomacy.