China in Latin America: Exaggerating Medical Diplomacy

By Christopher Kambhu*

Peru’s Foreign Ministry greets Sinopharm staff/ Ministerio de Relaciones Exteriores/ Flickr/ Creative Commons License

China has garnered positive media coverage throughout Latin America for its COVID‑19 diplomacy, but it is far from clear if these efforts have altered the country’s regional standing. Coverage of its medical diplomacy has oversold its impact compared to the United States and obscured varying levels of support between countries.

  • Since the pandemic’s emergence across Latin America in early 2020, China has engaged in diplomatic efforts to send medical supplies – and later vaccines – throughout the region. Research by CLALS shows that, as of this month, China has donated $253 million worth of medical supplies, from masks to field hospitals. In addition, Beijing and its diplomatic corps have facilitated donations worth tens of millions of dollars from other Chinese entities, including foundations, businesses, and provincial and local governments. China has sold 409 million doses of domestically developed vaccines and further donated 1 million doses in Latin America and the Caribbean.

Deliveries of vaccines and medical supplies typically include photos ops at the airport, with Chinese flags conspicuously placed on packaging. Announcements of medical donations often include ceremonies at the Chinese embassy in the recipient country, even when the donation is from a non-state entity. These events obscure the line between state and non-state aid, and between vaccine sales and donations. By blurring these distinctions, some media have given unearned credit to Beijing by reporting “Chinese donations” without specifying the source.

  • This communication strategy has effectively created a narrative that China is gaining influence in Latin America through its medical diplomacy. The resulting media coverage – particularly think pieces analyzing geopolitical implications – has overshadowed the fact that Washington has provided more regional assistance than Beijing. As of this month, the United States has donated $310 million in medical supplies and cash assistance, significantly more than what China has donated. The same is true with vaccines: the U.S. has sold 427 million doses of domestically developed vaccines and donated 46 million more, outpacing Chinese efforts.
  • The narrative surrounding China’s medical diplomacy has also buried differences between individual countries. None of the countries that recognize Taiwan – Guatemala, Haiti, Honduras, Nicaragua, and Paraguay – have received any medical donations, nor have they been able to procure Chinese vaccines. In April 2020, Paraguay’s legislature debated switching recognition to China from Taiwan to appease Beijing and gain access to Chinese support.
  • The Chinese government has also used vaccines to quell criticism from regional leaders. In May 2021, Sinovac executives reportedly told Brazilian officials that vaccine shipping delays were due to Brazilian President Jair Bolsonaro’s continued ridicule of China as COVID-19’s country of origin. Acting under reported pressure from Beijing, the executives indicated that improved Sino-Brazilian relations would resolve the issue.

As the pandemic continues wreaking havoc on Latin American economies and societies, China’s medical diplomacy faces a changing landscape. The United States has increased its own vaccine diplomacy in recent months, including donations totaling 2.6 billion doses to COVAX, a UN-backed initiative distributing vaccines to low- and middle-income nations (China has only contributed 120 million doses). The Administration of President Joe Biden now is also promoting its medical diplomacy efforts with as much fanfare as Beijing.

  • While China’s efforts have generated a positive narrative, they have not fundamentally altered its standing in Latin America. Politicians, public health workers, and citizens appreciated the donations of masks and other medical supplies in the pandemic’s early days, but the response to China’s vaccines has been more muted. Access to Chinese-made vaccines is better than none, but they do not match the higher efficacy (real and perceived) of U.S. and European vaccines. Moreover, regional leaders are not rushing to embrace Beijing; Bolsonaro continues denigrating China even while its vaccines constitute more than one third of Brazil’s supply. Despite its successful communication strategies to date, China must look long-term to convert this generally positive narrative into improved public opinion.

November 23, 2021

* Christopher Kambhu is a Program Coordinator at CLALS. This research is part of a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State. 

Latin America: China’s Huawei Maintains its Foothold

By Luiza Duarte*

Brazilian President Jair Bolsonaro meets with Zou Zhilei, regional president of Huawei Latin America/ Palácio do Planalto/ Flickr/ Creative Commons License

Resisting U.S. pressure, Latin American countries are proceeding with Huawei as a potential or confirmed choice for their 5G wireless networks – while trying to attract other Chinese investments in their technology infrastructure.

  • Washington has been trying to shut out Huawei on security grounds since 2012, when U.S. companies were forbidden from using Huawei networking equipment. In May 2019, in the context of an escalating trade war, President Trump labeled the company a security threat and banned it from U.S. communications networks. The Biden Administration hasn’t reversed the sanctions.
  • These actions and the U.S. “Clean Network” campaign, emphasizing Huawei’s links to the Chinese government and alleged espionage activities, influenced Australia, Japan, Sweden, the United Kingdom, and others to institute similar bans. In 2018, at Washington’s request, Canada arrested Huawei’s Chief Financial Officer and Vice-Chairwoman, Meng Wanzhou, for alleged fraud, moving the issue into the international media spotlight.

Huawei has been present in Latin America for about two decades; it’s a key provider for the 4G network and associated infrastructure used by major telecom operators. Research for the CLALS China’s Messaging Project shows that 10 countries are likely to use Huawei technology despite U.S. concerns. Eight or so others are avoiding taking a position on the issue, but none have come forward to declare a ban on the company. 

  • At least 30 5G tests have been recorded in a dozen Latin American countries, more than one third of them with Huawei as the provider. The company secured an agreement with Uruguay to deepen cooperation on 5G and donated a telecommunications tower to Guatemala for training technicians on 4G and 5G networks. Colombia announced it won’t ban the company and Argentina has enabled five connection points for the new system in Buenos Aires using Huawei’s technology. Costa Rica and Venezuela’s 4G network relies heavily on Huawei’s infrastructure. In 2008, the Chinese company opened an office in Honduras, and it’s now the main provider for telecommunications companies in the country. It supplied nearly all of Cuba’s internet infrastructure.
  • Other countries are also unwilling to cut all ties to Huawei. French Guiana will comply with the French cybersecurity agency’s decision to grant time-limited waivers on 5G for wireless operators that use Huawei. This year, the United States has struck a deal with Ecuador – helping it reduce its debt – conditioned on the exclusion of Chinese companies from its telecom networks, according to the Financial Times. Two months later, the country’s National Telecommunications Corporation (CNT) and Nokia announced that they will begin to deploy 5G in the country, even though its pre-commercial tests were done with Huawei.
  • The COVID‑19 pandemic and the political battle around Huawei have delayed 5G-specific spectrum auctions in many Latin American and Caribbean countries. About one third of them don’t have concrete plans yet to adopt the next generation of mobile technology, and only Chile and Brazil have completed the tender to assign the 5G spectrum. Operators in ArgentinaUruguayPeruTrinidad and Tobago, and Suriname have launched the network in limited areas. Others are in different phases of the technological transition. 

The region’s two biggest markets have spoken of restrictions on Huawei, but continued reliance on the company suggests major collaboration will continue in one form or another.

  • Brazil’s main wireless firms already use Huawei for more than half of their networks and argue that banning Huawei would add billions of dollars in additional costs that would be passed on to consumers. The country’s auction was delayed several times and finally established a compromise involving a dual network – one (non-Huawei) for the government and all federal agencies, and one that did not block Huawei from servicing more than 242 million active mobile connections, according to the National Telecommunications Agency (ANATEL).
  • In Mexico, Huawei is excluded from the system’s “core” and areas near the U.S. border, but it’s present in other parts of the country. The company claims to be building the largest public Wi-Fi network in Latin America, with more than 30,000 hotspots in the México Conectado project. 

Huawei is undertaking robust lobbying campaigns to circumvent U.S. pressure and security concerns surrounding the firm’s hardware and software. Competitive pricing for its mobile, network, and cloud-based services has been key to establishing itself as “affordable, reliable and ultramodern.” Chinese diplomats are mobilized in the press and in social media to defend the company. But Huawei is also deploying a mix of traditional and controversial public relations strategies: large advertisement campaigns with local stars, events, partnership with universities and institutions, donations of equipment to governmental branches and businesses. It has donated 5G network kits to test agribusiness “Internet of Things” (IoT) services. It is also directly engaging decision makers, such as by hiring former Brazilian President Michel Temer to do its 5G lobbying in Brazil. 

  • Economic dependency on China made local governments fear retaliation and substantial financial consequences of a Huawei ban – a scenario that’s been even more sensitive during the pandemic. China holds a strategic position as a supplier of pharmaceutical items and COVID‑19 vaccines, while the region faces a public health and economic crisis.

November 19, 2021

Luiza Duarte is a research fellow at the Wilson Center, Brazil Institute, and CLALS. Her work focuses on Latin America-China relations. This research is part of a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State. 

Confucius Institutes: Building a Capacity for Business with China

By Madeline Elminowski*

Confucius Institute at the Universidade Federal do Ceará in Brazil/ Universidade Federal do Ceará/ Flickr/ Creative Commons License

China’s Confucius Institutes (CIs) in Latin America and the Caribbean form a cornerstone of its global public diplomacy efforts – with an increasingly clear emphasis on laying the groundwork for deeper business relations. As the U.S.-China rivalry has heated up, these educational and cultural promotion centers, which are partially financed by China’s Ministry of Education, have come under greater scrutiny in the United States, Canada, Australia, the UK, and elsewhere in Europe. Questions about Chinese propaganda and free speech have led to the closure of a growing number of CIs in those countries.

  • Since the first CI was established in Latin America and the Caribbean in 2006 in Mexico, the number has expanded to 44 in 21 countries, and Chinese government statements indicate plans to create more. According to Beijing media, more than one million students across the region have so far engaged with CIs. While concerns about the CIs’ operations have also been raised in these countries, debate has been more muted and at least so far has not led to the closure of any.

CIs worldwide feature curricula focused on teaching Mandarin and Chinese government-approved courses on Chinese civilization and history. In Latin America and the Caribbean, they aggressively tie these courses to training in Chinese business practices. In 2012, for example, a “Business Confucius Institute” was established at the Fundação Armando Alvares Penteado in São Paulo, Brazil. Courses on China’s business lexicon, how to interact with Chinese business partners, and how to leverage business opportunities with Chinese companies are now common in other Confucius programs.

  • In welcome ceremonies for students, CIs highlight these themes, promote study-abroad programs and business courses, and present themselves as places to develop specific business skills directly transferrable to the job market. They often offer classes of varying lengths, up to eight weeks, to help students acquire the interpersonal skills and practical knowledge for business transactions with Chinese companies.
  • Language classes in the CI at Chile’s Universidad Santo Tomás, for example, are pitched as a way to become fluent in the language of Chile’s “main commercial partner.” The CI at the Pontifícia Universidade Católica do Rio de Janeiro (one of 11 CIs in Brazil) offers a business-oriented program of study designed for employment for Chinese companies in Rio and for Brazilian national companies seeking to develop a Chinese partnership. CIs serve as channels for interested Chinese companies to recruit employees and interns from the region. The Universidade Estadual Paulista’s CI routinely posts job opportunities on its website. It also offers an annual job fair to connect Chinese companies located in Brazil with local Brazilians interested in working in China-Brazil business relations.

The CIs are increasingly functioning as conduits to promote Chinese business relations with the region, often incorporating events to discuss Chinese business projects and showcasing potential professional avenues of advancement for students.

  • China’s Belt and Road Initiative (BRI) was the main topic of a World Forum of Chinese Studies at the Universidad National La Plata in Argentina in 2018. Speakers from both Latin America and China discussed inclusion of Latin America in the BRI and its potential to generate opportunities for Chinese tourism in the region.

The Confucius Institutes are a major element of China’s long-term strategy for promoting trade and economic relations with countries across Latin America and the Caribbean. While the Biden Administration is now slowly rolling out its “Build Back Better” initiative, China’s expanding Belt and Road Initiative has momentum – 18 countries in the region have signed on to the BRI since 2017. CIs support this effort by helping to train a generation of Latin American professionals to work more closely with Chinese partners. The potential long-term implications for the United States of a Latin American workforce and business class better positioned to leverage attractive opportunities in and with China are clear.

November 11, 2021

*Madeline Elminowski is a master’s student in International Affairs, with a focus on Comparative and Regional Studies. This post reflects work carried out for a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State.

U.S.-Latin America: Lack of Vision from Washington Didn’t Start with Trump

By Thomas Andrew O’Keefe*

A group of representatives from Latin America and China stand in a group

The Community of Latin American and Caribbean States (CELAC) hosted representatives from China in late January 2018. / Cancillería del Ecuador / Flickr / Creative Commons

U.S. leadership in the hemisphere has declined significantly over the past two decades – manifested in Washington’s inability to implement a comprehensive environmental and energy strategy for the Americas; conclude a hemispheric trade accord; revitalize the inter-American system; and stem the rising tide of Chinese influence.  In a recently published book, I argue that Washington under Presidents George W. Bush (2001-2009), Barack Obama (2009-2017), and now Donald Trump has lacked vision in Latin America and the Caribbean, and has allowed a narrow security agenda to dominate.  The most noteworthy accomplishment – the assertion of central government control in Colombia – was largely bankrolled by the Colombians themselves who also devised most of the strategy to achieve that goal.

  • President Obama’s rhetoric was the loftiest, and his opening to Cuba in 2014 changed regional perceptions of Washington. But he got off to a slow start, entering office when the United States was engulfed in the worst economic crisis since the Great Depression.  His ability to devise a bold new policy for the Western Hemisphere was further stymied by an intransigent Republican majority in both the Senate and House of Representatives after the 2010 mid-term legislative elections.

Washington’s inability or unwillingness to act is most obvious in four key areas.

  • The Energy and Climate Partnership of the Americas (ECPA) represented an opportunity for leadership on environmental issues. The United States proposed many ECPA initiatives but did not fund them, expecting the private sector or other governments to step up to the plate – which failed to happen in any significant manner.  Failure to ratify the Kyoto Protocol or enact meaningful national climate change legislation also undermined its moral authority on the issue.  Carbon offset programs would have provided an important boost to ECPA.
  • Although the United States played a predominant role in devising the parameters for a Free Trade Area of the Americas, its own positions caused it to fail. It refused to give up the options to re-impose tariffs in response to alleged dumping even if there were alternative means (such as competition policy) to redress the impact of unfair trade practices.  Washington kept discussion of the highly distortive impact of its agricultural subsidies out of the talks.  As a result, the United States was unable to offer meaningful concessions.
  • The Organization of American States (OAS) has also been a victim of U.S. neglect. Washington has pulled back from exerting leadership and, on occasion, has delayed payments of its dues.  The most effective component of the inter-American system relates to the promotion and protection of human rights, but the U.S. Senate has never ratified the American Convention on Human Rights.  The United States also rejects the binding character of decisions from the Inter-American Commission on Human Rights, opening the way for governments with deplorable human rights records to question its work.  Latin American and Caribbean governments have also shown enthusiasm for forming alternative institutions to the OAS, such as the Community of Latin American and Caribbean States (CELAC), which purposefully exclude the United States.
  • China is now the largest trading partner for many South American nations, and it could conceivably replace Washington’s influence and leadership in at least some areas, including models for economic and political reform. The boom in South American commodity exports to China allowed governments to build up their reserves, pay off debts, and liberate themselves from dependence on multilateral lending agencies centered on Washington.  Chinese banks now contribute more money, on an annual basis, to economic development projects in Latin America and the Caribbean than do traditional lenders such as the World Bank and the Inter-American Development Bank.  Moreover, this lending comes free of the conditionalities often attached to capital provided by Washington based multilateral institutions.  China’s role in building ports and telecommunication systems gives it an intelligence advantage, and arms sales have given China military influence as well.

While broad policies and political commitment behind them have been lacking, Washington has run a number of security programs in the region.  This focus, however, has often turned out to be problematic.  The Mérida Initiative, the Central American Regional Security Initiative (CARSI), and the Caribbean Basin Security Initiative (CBSI) did not resolve the myriad root causes of the drug trade and escalating violence in the beneficiary countries.  They were myopically fixated on a narrow, short-term security agenda with precarious and uncertain funding streams.  While Pathways to Prosperity and 100,000 Strong in the Americas exemplify American liberal idealism at its best, the lack of an overarching sense of purpose and political consensus behind them have led to both being woefully underfunded.  A vision for the Americas doesn’t guarantee Washington will have positive influence, but the lack of one will indeed prolong its decline.

March 16, 2018

*Thomas Andrew O’Keefe is the President of Mercosur Consulting Group, Ltd.  This article is based on his new book, Bush II, Obama, and the Decline of U.S. Hegemony in the Western Hemisphere (Routledge, 2018).

China, Latin America, and the New Globalization

By Andrés Serbin*

31128355276_da6ad8d3a0_k

Chinese President Xi Jinping received a medal of honor from the Peruvian Congress during his tour of South America last month, which included the Asian-Pacific Economic Cooperation summit in Lima. / Ministerio de Relaciones Exteriores, Peru / Flickr / Creative Commons

In Latin America and elsewhere, the world is undergoing tectonic movements that indicate the birth of a new world order with new rules of play.  For much of the past decade, dynamism in world commerce and finance has been shifting from the Atlantic basin to the Pacific.  While the international economy has shown fragility and the developed economies – particularly the European Union and the United States – have shown slow growth since the crisis of 2008, China and the emerging economies of the Asian-Pacific region have experienced sustained growth.  China, now the second biggest economy in the world, has been the driver of that growth and, according to most projections, is poised to overtake the United States as the biggest.  After several centuries in which power has been concentrated in the West, the emergence of new powers in a multi-polar world will naturally bring about changes in the norms and rules governing the international agenda.

In Latin America and other regions, there is growing awareness of this process – with China and its own version of globalization at its center.  The region has witnessed the paralysis of the Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States as well as U.S. President-elect Donald Trump’s declaration that he will withdraw the United States from the Trans-Pacific Partnership (TPP) as part of a broader anti-globalization policy.  Trump’s announcement drew two different reactions from participants from TPP country leaders at the Asian-Pacific Economic Cooperation summit in Lima late last month.  One was the express decision to proceed with TPP even without the United States, and the other was a clear receptivity to Chinese President Xi Jinping’s invitation that they join regional economic groups that he is pushing – the Regional Comprehensive Economic Partnership (RCEP) and the Free Trade Area of the Asia-Pacific (FTAAP).

  • Both agreements explicitly exclude the United States and abandon norms customarily pushed in free trade by the West. They emphasize reducing tariffs and give no consideration to labor and environmental regulations and non-tariff measures.
  • They complement China’s “one belt, one road” initiative, a modern-day revitalization of the Silk Road creating trade links between China’s western regions with Russia, Central Asia, and eventually to Europe, developing land and maritime routes along the way. The Shanghai Cooperation Organization (SCO) – an economic and security pact linking China, Russia, four Central Asian nations, and now welcoming India and Pakistan – is explicitly linked to RCEP.

Washington’s pending rejection of TPP eliminates a central part of President Obama’s “pivot” strategy to counter China’s rapidly expanding influence in Southeast Asia and the South China Sea, but it also has implications for Latin America and the Caribbean as China moves in rapidly to fill the void left by U.S. withdrawal.  While President-elect Trump has pledged to “renegotiate” NAFTA – which he called “probably the worst trade deal ever agreed to in the history of the world” – China last month presented to Latin America a detailed document proposing a new era in relations with “comprehensive cooperation” in all areas and reaffirming a “strategic association” with the region.  In sharp contrast with the new U.S. President’s views of Latin America, Beijing calls Latin America and the Caribbean “a land full of vitality and hope,” praises the region’s “major role in safeguarding world peace and development,” and calls it “a rising force in the global landscape.”  While some analysts suggest that globalization is slowing if not ending, these developments more strongly indicate that it is rather taking on a new form within a new world order that clashes with the visions and values of the West.  We appear to be transitioning into a world that is genuinely multi-polar with globalization under new rules.

December 13, 2016

* Andrés Serbin is the president of the Coordinadora Regional de Investigaciones Económicas y Sociales (CRIES), a Latin American think tank.  This article is adapted from an essay in Perfil, based in Buenos Aires.

What Comes After TPP?

By Fulton Armstrong and Eric Hershberg

31117865785_a3bb9a557a_k

President Barack Obama and President Pedro Pablo Kuczynsky at the APEC 2016 summit / Ministerio de Relaciones Exteriores – Peru / Flickr / Creative Commons

The Obama administration’s failure to win U.S. approval for the Trans-Pacific Partnership is a disappointment for Latin American countries on the Pacific Rim – and such a big opportunity for China to expand its influence that President-elect Donald Trump, despite his theatrical pledge to withdraw from it, might eventually consider rescuing the accord. The Asia-Pacific Economic Cooperation (APEC) summit in Lima last weekend was the last chance for Latin American leaders to say goodbye in person to President Obama and to mourn the passing – for at least the short term – of his TPP-centered vision for trans-Pacific trade.  In a meeting with leaders of the 11 other TPP countries, Obama tried hard to convince them of “the United States’ continued strong support for trade” despite growing evidence to the contrary.  Both U.S. President-elect Donald Trump and Hillary Clinton, who was Obama’s Secretary of State for four years, firmly and repeatedly stated opposition to TPP.  The White House continued efforts all the way up to election day (November 8) to persuade the U.S. Senate to approve the deal in a lame-duck session, but the Republican leaders – like Clinton champions of free trade until it became a 2016 campaign issue — slammed the door on it.

With the collapse of TPP, several Asian countries have already signaled a willingness to sign on with China’s own free trade initiative, the Regional Comprehensive Economic Partnership (RCEP) – which Latin America is not yet part of. Malaysian Prime Minister Najib Razak, angry with the United States over trade and other issues, threw his lot with China during a visit to Beijing last month.  (The Philippines, which has also moved aggressively to ally itself with China in recent months, is not in TPP.)  Japanese Prime Minister Shinzo Abe met with Trump last week and said his country “could have great confidence” in the President-elect, but he has nonetheless warned his parliament that RCEP will prevail.

  • Latin Americans are also slowly but surely gravitating toward China as trans-Pacific leader in trade. Just days before the Lima summit, Peruvian Foreign Minister Eduardo Ferreyros announced that, while Lima still hoped TPP would become reality, his government has begun talks with China over accession to RCEP. His Chilean counterpart, Heraldo Muñoz, last Friday also expressed preference for TPP but told the Wall Street Journal that his country was leaning toward joining RCEP. Chinese President Xi Jinping, in Lima for the summit, was also making stops in Ecuador and Chile. (He’s visited Mexico, Argentina, Brazil and Venezuela on previous trips.) In an op-ed in Peru’s El Comercio just before the summit, Xi said, “United by the same dream, there isn’t a more timely moment for the deepening of our multidimensional cooperation.”

The APEC forum may have been trying to counter Trump and others’ criticism of the lopsided impact of global trade by issuing a statement – titled “Quality Growth and Human Development” – emphasizing the benefit of global trade to all citizens in all countries. It was certainly in this spirit that the host of summit, Peruvian President Pedro Pablo Kuczynski, warned that proponents of trade barriers would do well to revisit the history of the 1930s, singling out for unusually sharp criticism the stance taken by the U.S. President-elect.  On its face, Trump’s campaign rhetoric suggests TPP is totally dead; he’s many times called it a “disaster” being “pushed by special interests who want to rape our country.”  Free-traders found a glimmer of hope in an organizational chart reportedly leaked by the Trump transition team last week that listed a former lobbyist from the U.S. Chamber of Commerce, which has strongly supported TPP, as head of his “trade reform” team.   Yet if the new U.S. Administration is going to reengage on TPP, the primary reason would probably be to undercut China’s RCEP initiative.  Much of the U.S. foreign policy establishment of both parties believes fervently that the impact of U.S. disengagement with the Pacific Rim would be harmful to U.S. global and hemispheric leadership.  Should those concerns sway the incoming President, he could opt to set aside his caustic rhetoric on TPP, negotiate face-saving adjustments to the accord, and instead focus his tough talk on China. TPP’s flaws may ultimately appear minor and manageable compared to the competing scenario of Latin American governments seeking commercial prosperity through a Chinese-led Pacific economic bloc. That is certainly the hope of most Pacific Rim governments across Latin America, whose alarm at developments in the U.S. already has them eying alternatives across the pond.

November 22, 2016

Nicaragua: Where’s the Canal?

By Fulton Armstrong

Canal Nicaragua

Coming soon to Nicaragua? Photo Credit: tryangulation / Flickr / Creative Commons

The Nicaraguan government and Chinese investment group leading the Nicaragua Grand Canal project continue to claim enthusiasm for their dream, but enough fundamental problems remain unresolved to suggest that prospects for its eventual construction are dimming – and the principals are maneuvering to avoid picking up the tab for the expenditures made so far.  In a year-end statement last December, President Ortega’s office said the canal project would be one of his government’s top 25 priorities this year and emphasized its benefits to the Nicaraguan people.  Hong Kong-based HKND Group had announced in November that it was “fine-tuning” the canal design to address problems raised in an environmental impact study, which would delay the beginning of major excavations and lock-building until the end of 2016.  Company officials have since said, however, that construction of a fuel terminal and wharf on the Pacific coast –necessary to bring in the massive equipment the project requires – could start as early as this August.  The company still claims that it will complete the canal in 2020 – a prediction that few, if any, outside experts see as feasible.

The project faces massive obstacles, with no solutions in sight.

  • The estimated US$50 billion in financing is nowhere to be seen. Chinese investor Wang Jing, who has already spent US$500 million of his own money on the project, lost some 85 percent of his US$10 billion personal fortune in last year’s Chinese stock market correction.  (Bloomberg named him the worst performing billionaire of 2015.)  Observers believe his losses as well as the problematic environmental impact study have cooled his and other private investors’ support.  An initial public offering of shares has been postponed indefinitely.
  • Project managers have yet to demonstrate the need for the canal and propose solutions to significant engineering challenges, such the need for construction able to withstand earthquakes made likely because of seismic faults along the route. HKND says the canal will handle 3,500 cargo ships a year, including ones bigger than those transiting the Panama Canal, but industry experts say there’s no demand for more than will be accommodated by the expansion of the existing canal – and that the United States has no ports capable of receiving the larger vessels.  Global warming, moreover, could soon open a faster and cheaper route north of Canada.
  • Public protests have diminished during the hiatus in canal-related news and activities, but opponents remain strident and are gaining international support. Detractors’ resolve to fight has been strengthened by the environmental report, by a credible UK firm, determining that the project will “have significant environmental and social impacts,” including dislocation of at least 30,000 Nicaraguans.  Indigenous and Afro-Nicaraguan groups on the Atlantic Coast are upset about disruptions to traditional territories, including cemeteries and holy places.  Amnesty International has condemned the treatment of affected persons as “outrageous” and “reckless.”

The “biggest earth-moving project in history” is still looking like one of the biggest boondoggles in history – yet another in a long series of chimera canals in Nicaragua since early last century.  The government says that popular support for the project remains about 81 percent, but a survey by Cid Gallup, published in the Nicaraguan newspaper Confidencial in January, showed that 34 percent of 1,000-plus respondents consider the canal to be “pure propaganda.”  One quarter believe technical studies have been inadequate and that funding will not materialize.  Those sentiments could be reversed somewhat by the appearance of massive excavation equipment and creation of related construction jobs, but support will still be tempered by concerns about persons whose lives are disrupted by the project – and by perennial and profound suspicions that corruption will take the lion’s share of benefits.  Some opposition leaders believe HKND’s big push to appear optimistic is to build a case for collapse of the project to be Nicaragua’s fault, so that the company can demand that Managua repay the $500 million that Wang has reportedly spent.  The lack of transparency surrounding the project only fuels such speculation. 

April 4, 2016

Trans-Pacific Partnership: A Political Step Forward

By Fulton Armstrong

In more than 10 cities across the U.S. activists will use guerrilla light projection to illuminate monuments and building facades with slogans like “Don't Let Comcast Choke Your Freedom,” “No Slow Lanes, Open & Equal Internet For All,” and “TPP Dismantles Democracy.

In more than 10 cities across the U.S. activists used guerrilla light projection to illuminate monuments and building facades with slogans like “Don’t Let Comcast Choke Your Freedom,” “No Slow Lanes, Open & Equal Internet For All,” and “TPP Dismantles Democracy.” Photo Credit: Backbone Campaign / Flickr / Creative Commons

The chairmen of key U.S. Congressional committees agreed on legislation allowing President Obama to negotiate a Trans-Pacific Partnership (TPP) trade accord, but major political and substantive obstacles to an agreement remain. The leaders of the Senate and House tax-writing committees announced the move, with the key Democratic senator involved claiming that the Obama Administration had addressed his deep concerns about the secrecy of the talks. If passed, their bill would give the President “fast-track” trade authority – power to negotiate an accord that the Senate would eventually vote on but without the power to amend it, which would significantly increase chances of passage. Obama’s advisors have called TPP the “cornerstone” of his Asia policy, and the President said last week that it would help “make sure that we, and not countries like China, are writing the rules for the global economy.” Supporters estimate that TPP would stimulate growth by eliminating tariffs and non-tariff barriers affecting $2 trillion of goods and services (about one-third of global trade) each year among its 12 members.*

Opposition in the U.S. Congress and elsewhere remains intense, however. The Senate Democratic whip, charged with tallying support and opposition, stated that only one-quarter of Senate Democrats support the measure – and those opponents have made clear their concerns about the implications for U.S. workers and consumers. Although tariffs are on the table, most observers say the focus of the negotiations is on “harmonizing” regulations, which big multinational corporations – which have access to the talks that citizens’ groups lack – systematically seek to eliminate. Pharmaceutical companies, for example, are pushing hard for extending patents and trademarks so that cheaper generic medications cannot be sold. Critics say revisions to copyright and trademark provisions would also have implications for public information and the internet. Industry is seeking to roll back environmental protections in place since the early 1970s. The negotiations have been secret, but a leaked chapter of the draft agreement revealed that companies were gaining the right to sue governments if any regulatory action ever caused their profits to fall short of target – a massive burden on budgets.

The lack of transparency, which the leading Senate Democrat claims has been addressed, may have stoked opponents’ concerns. But the differences between U.S. backers and opponents appear significant and unlikely to fade without some serious political horse-trading, which the Obama Administration has been unwilling to do. In his statement last week, Obama admitted that “it’s no secret that past trade deals haven’t always lived up to their promise” – particularly regarding job creation – but neither he nor the Congressional chairmen have provided hard data showing that dismantling a host of regulations to accommodate corporate agendas will help consumers and un- or under-employed U.S. workers. If history is any guide, the Latin American signatories – Mexico, Chile and Peru – may see a favorable impact regarding employment in certain sectors, and others may see it as the only game in trade right now and thus worth trying to join, but Washington’s vision of TPP as primarily an Asia policy – to counter Chinese influence – suggests that they too see the advantages of participation accruing across the Pacific rather than to the north.

* Currently envisioned as members are the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam: Korea last week expressed interest in joining the talks, but the United States told it to wait. Colombia is interested, and Panama and Costa Rica seek membership in the “Pacific Alliance,” which is related to TPP.

April 20, 2015

Nicaragua’s “Great Canal” Draws Opposition

By Fulton Armstrong

9036608152_a199acb183_z

Protestors opposing the Chinese-Nicaraguan canal confront police / Jorge Mejía Peralta / Flickr / Creative Commons

Although questions continue to swirl around whether the Chinese-Nicaraguan canal – which its main investor called the “most important [project] in the history of humanity” – will be built or not, its opponents are taking it all very seriously.  A CID-Gallup poll in January showed that 41 percent of Nicaraguans interviewed strongly support the project, while another 21 percent and 17 percent back it somewhat and a little, respectively.  But another poll by the same firm suggested ambivalence:  asked if they supported the National Assembly vote giving the Chinese firm leading the project, HKND, a concession for the 278-km right of way for up to 100 years, some 39 percent of respondents said no.  Some political voices are growing more sharply opposed as well.  The powerful business group COSEP, for example, has gone from agnosticism about the project to a position of open disapproval.

Groups concerned about the project’s impact on the environment and rural residents have already held protests involving up to several thousand participants, and – despite the government’s promise that the canal will bring prosperity throughout the country – organizing efforts appear unlikely to fade.  Skepticism about HKND and the government’s commitment to protecting the environment, fueled by their off-the-cuff dismissal of concerns, is so deep that even a balanced comprehensive impact study by the British Environmental Resources Management, due next month, may fail to calm nerves.  Environmentalists cite studies warning that dredging Lake Nicaragua from its current depth of nine meters to the 27 meters necessary for cargo ships will stir up many layers of toxic materials, with catastrophic consequences for marine life and surrounding agricultural areas.  Other groups are rallying behind the 29,000 residents who are to be evicted from properties along the canal route.  Demonstrations have turned violent, with protestors injured by tear gas and rubber bullets.  Graffiti and banners demanding “fuera chinos” are common.

In the hemisphere’s second poorest country, the promise of growth spurred by the $40-50 billion project is still a powerful card in the government’s hand.  Many skeptics still wonder, however, if the whole scheme is a ruse to fleece the Chinese investors, who’ll bring in a couple billion dollars before realizing that the project will get bogged down in Nicaraguan political quicksand.  But opposition to the canal goes far beyond the usual Managua political game of fighting over corruption dollars and obstructing each other’s priorities.  President Ortega’s endorsement of the canal contradicts his own statements years ago that he wouldn’t compromise the lake’s eco-system “for all the gold in the world.”  According to The Guardian newspaper, the dredging will move enough silt to bury the entire island of Manhattan up to the 21st floor of the Empire State Building – which no one is prepared to deny will have serious environmental implications.  China’s Three Gorges Dam, completed five years ago, displaced 1.2 million inhabitants – proportionally twice as many Nicaraguans displaced by the canal – but Nicaragua’s ability to resettle them, give them jobs, and suppress their dissent is small compared to China’s.  The project may not be the greatest in the history of mankind as HKND claims, but it may provoke a crisis as great as any in Nicaragua.  For starters, if COSEP’s opposition persists, it threatens to unravel the modus vivendi under which Daniel Ortega has stayed in power, and could portend much deeper tensions.

March 5, 2015

Click here to see our previous article about the canal.

Panama: A Central American Singapore?

By Tom Long*

Singapore (left) and Panama City (right) / William Cho and Jim Nix / Flickr / Creative Commons

Singapore (left) and Panama City (right) / William Cho and Jim Nix / Flickr / Creative Commons

As a transportation hub, logistics center, and regional financial player, Panama has long been painted by investment bankers and Panamanian politicians as a potential “Singapore of Latin America,” but that vision still seems a way off.  In some respects, Panama’s story has been quite impressive.  For a decade, it has boasted GDP growth far beyond the regional average, even surpassing 10 percent in some recent years.  Unlike many of its neighbors, its dollar-based economy relies on services, not exports of commodities or low-value-added light manufacturing.  Since the 1989-1990 U.S. invasion to unseat General Manuel Noriega, the total size of the Panamanian economy has quadrupled in constant dollars.  It is also different from Singapore in important ways.  Singapore’s approach to planning and public housing might be helpful in Panama City, which has suffered traffic, environmental degradation, and inadequate housing for the poor as a consequence of poorly planned growth.

In other important ways, however, the Panama-Singapore comparison is less apt.

  • Singapore is a city, with nearly two million more people than Panama has spread across 100 times the landmass. Urban-rural divides are wide in Panama, with poor delivery of health and education services outside the cities, exacerbating inequality.  A Singapore-style strategy in Panama would leave the countryside behind – and indigenous and Afro-Caribbean populations would benefit much less.
  • Differences between the two countries in governance – for better and worse – are profound. The Panamanian people are much freer under the country’s democracy than they would be under a single-party-dominated system like Singapore’s.  In other ways, though, Panama’s governance leaves much to be desired.  Corruption is a massive problem, and watchdog groups highlight weakness in the rule of law, judicial independence, and press freedom.  Projects to expand the Panama Canal and build a capital city subway are over budget and behind schedule, and have suffered from strikes, contract disputes, and questionable bidding practices.  While it may seem easy to blame the corruption on former President Martinelli, who faces criminal charges, the problem has much deeper roots.
  • The two countries have very different policies toward education. Singapore invested, and continues to invest, heavily in world-class universities.  Panama lacks these, weakening its ability to compete globally in industries where innovation is key.  While Panama’s primary education has improved, its research and development lags.
  • A final difference is where the countries find themselves in their political and economic evolution. Singapore became independent 50 years ago, but it has been only a quarter century since Panama ended its kleptocratic, military rule.  It has been just 15 since the United States officially turned control of the canal over to Panamanian authorities.  The roots of its problems cannot be easily or quickly extirpated.

Panama’s boosters often use the comparison to highlight the areas in which Panama excels – economic growth, unique geography, and infrastructure crucial to global shipping and air transit.  The comparison might be more helpful in highlighting areas where Panama needs to improve.  These include dedicating resources to higher education and R&D, addressing inequality, rooting out corruption, and enhancing political and bureaucratic accountability.  Singaporean scholar Alan Chong argues that Singapore’s attempt to present itself as a model, global city is in part a foreign policy strategy of “virtual enlargement.”  The city-state’s wealth, reputation, and active role in international organizations allow it to “punch above its weight” in Southeast Asia and beyond.  Some chapters of Panama’s recent economic story might be the envy of neighbors with their own canal dreams, but the country will need to focus on governance and accountability if even its logistics-hub strategy is in fact going to deliver shared welfare at home and enhanced influence abroad – let alone become a Latin American equivalent of an Asian Tiger.

March 2, 2015

* Dr. Long is a visiting professor in International Relations at the Centro de Investigación y Docencia Económicas in Mexico City.  He is the author of Latin America Confronts the United States: Asymmetry and Influence, which is forthcoming with Cambridge University Press.