Dear Editor,
Just as China regards East Asia as its economic backyard, the United States had traditionally, since the Monroe Doctrine in 1823, maintained a similar approach to Latin America, and the two present day economic powers had silently respected each others’ hegemonic claims to their respective spheres.
However, taking advantage of the US military distractions in the past two decades, and growing anti-American sentiment, especially in Venezuela, Cuba, Bolivia, Ecuador, etc, in addition to political and/or economic instability in Guatemala, Honduras, El Salvador and even Mexico, China has been sneakily spreading its hegemonic tentacles into the economies of almost all Latin American and Caribbean countries, and alarmingly in many cases, on the jugular veins of poorer economies. The same situation holds for many countries in Africa.
Unlike the USSR which had sought to infiltrate Latin America during the Cold War era by confrontational means, China is treading lightly to avoid antagonizing the US, especially after its experience with Taiwan.
Like the proverbial Greeks bearing gifts, or a computer virus, China initially comes into these economies as a benefactor: (1) the exporter to these countries of the cheapest manufactured goods; (2) an insatiable consumer of African, Latin American and Caribbean raw materials; and (3) generous lender/investor to their economies.
And they are welcomed with open arms. Poor consumers in Latin America and the Caribbean scarcely concern themselves that the cheap goods they buy are, according to widespread allegations, sub-standard, sometimes produced under inhuman conditions, or in violation of copyright laws. Nor are they concerned that their national and natural patrimonies are being bartered off, in many cases, by corrupt politicians struggling to hold on to power; or that the conditions attached to Chinese loans and investments are strongly tied to the purchase of Chinese equipment, the hiring of Chinese workers, and the lack of stringent environmental, labour or social requirements. Neither they nor their political leaders are concerned that the long-term economic risks are resource dependency, currency overvaluation and the possibility that other sectors of their primary economies will become uncompetitive and render them highly vulnerable to price and demand fluctuations (since the sales are contractually agreed, but the price paid follows the market) thus tying them down to unsustainable commodity-led growth, largely without development, and strongly associated with negative environmental impacts.
Nevertheless, given the high demand for its cheap goods, China has currently moved to become Latin America’s second largest trading partner after the United States. Its trade with Latin America skyrocketed from $10 billion in 2000 to $140 billion in 2008. China recently surpassed the United States as the main trading partner of Brazil, the largest economy in South America. Sadly, however, only three or four countries in the whole Latin American and Caribbean have a favourable balance of trade with China.
Also, given the above conditions, it is not surprising that Chinese foreign domestic investments in Latin America and the Caribbean increased from $226 million in 2003 to $22.7 billion in 2011. But Chinese loans to Latin America have increased more dramatically than their investments in recent years. Given the advantage of their undervalued currency and huge trade surpluses with almost every country on earth, they can afford to be generous lenders. Even the United States may resort to borrowing from China to finance its proposed high speed rail across the country.
Prior to 2008, Chinese loans to Latin American and Caribbean countries never exceeded $1 billion. However, from 2005 to 2011, the Chinese loaned about $75 billion to Latin American and Caribbean countries (more than half of this going to Venezuela under a commodity sale programme). This is more than either the World Bank or Inter-American Development Bank loaned to Latin America/Caribbean in the same period. Chinese loans to Latin American and Caribbean countries account for more than half of total loans to all nations. Chinese loans, which are subject to strict Chinese government objectives, do not require policy changes from borrower governments, but do require equipment purchases and sometimes raw commodity sale agreements.
For instance, China’s $1 billion loan to Ecuador in 2010 required 20% spending on Chinese goods; a $10 billion loan to Petrobras in Brazil required the purchase of $3 billion of drilling equipment; a loan of the same amount – $10 billion – to Argentina in 2010 for railway improvement, demanded the purchase of trains from China. In terms of commodity sales agreements, since 2008, Argentina, Ecuador, Venezuela and Brazil have all negotiated loans totalling $46 billion for oil exploration and railway construction (Argentina). The sales of the oil are contractually agreed, but the price paid must follow the market.
In the Caribbean, Jamaica received, in 2009, a loan of $138 million. Last year Portia Simpson negotiated a loan of $353 million, while her predecessor received $340 million.
China also gives loans that go entirely to Chinese companies; a $1.7 billion loan to Ecuador to build the Coca-Codo Sinclair hydroelectric dam in 2010 went directly to a Chinese company.
Strangely enough, unlike other international financial institutions whose loans cover a wide range of governmental, social and environmental projects, the greater portion (87%) of Chinese loans focus on the energy, mining, infrastructure and housing/hotel sectors. This is very glittering to politicians trying to hoodwink the population. But, the benefits to China are that better infrastructure can facilitate the exports of resources for which China has an insatiable appetite, as well as providing contracts for Chinese companies.
But perhaps the most attractive features about Chinese loans are that they come with few strings attached, attractively low interest rates, lack stringent environmental, social and labour requirements, and require little or no lender supervision or auditing and transparency of accounts on the part of the borrower. And understandingly so, since the general objective of the Peoples’ Republic of China is manifestly both economic and politically hegemonic as they seek to undermine the economic liberalism of the US and allied Western financial institutions, while courting economies having varying degrees of ideological differences with the US.
It is therefore easy to understand how so many projects in Guyana have been funded by China (Guyana opportunistically flirts with all ideologies) – The Sanata Textile Mill, Bel-Lu Clay Brick Factory, Timehri Glass Factory, Moco-Moco Hydro-electric Plant, The Parika-Supenaam Ferry. Many of these are now history, but we still had to pay for them. We should therefore be very wary of their kind offers to fund future projects – the Guyana-Suriname Bridge, and revival of the Amaila Hydroelectric Project.
Concerning the enormous sums disbursed to Jamaica, like their Guyanese counterparts, the Jamaicans are greatly concerned that much of these loans will evaporate without accountability. One Jamaican publication wrote: “Here is where I hope the Chinese are more diligent in terms of accountability that our local guys, because this $1.6b grant could evaporate and no one can give account for where the money went. In China people are sentenced to death for corruption. In Haiti people are jailed for corruption; while over in Jamaica where we have our own flair, people are handsomely rewarded for corruption. I hope as part of the conditions underpinning the grant, is if it is found out that the money was used in a corrupt way, the person or persons involved will be extradited to China to face its tough anti-corruption laws.”
Under the present administration the Chinese influence in Guyana will get stronger, and some people will get richer. The police force will expand considerably in order to prevent the kind of social unrest resulting from industrial disputes, pollution of waterways, destruction of environment, destruction of hinterland communities, fatalities caused by the collapse of bridges and other infrastructure, and general political protests, all so common in Latin American countries noted for their resistance against all colonial and post-colonial hegemonic practices. Sino-Latin American conflicts have already erupted in 2007 in Buenos Aires and 2011 in Suriname.
But, generally speaking, the sustainability of every Sino-Latin American/Caribbean relationship has always been questionable, not only for their huge trade deficits with China, but for China’s total disregard for the economies, people and environment of these countries.
Yours faithfully,
Gokarran Sukhdeo
