China's Infrastructure Projects in Latin America and the Caribbean

BUILDING DEVELOPMENT FOR A NEW ERA CHINA’S INFRASTRUCTURE PROJECTS IN LATIN AMERICA AND THE CARIBBEAN EDITED BY ENRIQUE DUSSEL PETERS | ARIEL C. ARMONY SHOUJUN CUI BUILDING DEVELOPMENT FOR A NEW ERA BUILDING DEVELOPMENT FOR A NEW ERA CHINA’S INFRASTRUCTURE PROJECTS IN LATIN AMERICA AND THE CARIBBEAN Edited by ENRIQUE DUSSEL PETERS, ARIEL C. ARMONY, AND SHOUJUN CUI Published by Asian Studies Center, Center for International Studies, University of Pittsburgh, and Red Académica de América Latina y el Caribe sobre China Copyright © 2018 All rights reserved Manufactured in Mexico CONTENTS ABOUT THIS PROJECT vii INTRODUCTION ix Ariel C. Armony, Enrique Dussel Peters, and Shoujun Cui 1. CHINA-COSTA RICA INFRASTRUCTURE PROJECTS: Laying the Groundwork for Development? 3 Monica DeHart 2. CHINA-ECUADOR RELATIONS AND THE DEVELOPMENT OF THE HYDRO SECTOR: A Look at the Coca Codo Sinclair and Sopladora Hydroelectric Projects 24 Paulina Garzón and Diana Castro 3. CHINESE INFRASTRUCTURE PROJECTS IN MEXICO: General Context and Two Case Studies 58 Enrique Dussel Peters 4. ARGENTINA’S INFRASTRUCTURE GAP AND FINANCIAL NEEDS: The Role of China 77 Leonardo Stanley 5. CHINESE INFRASTRUCTURE PROJECTS IN ADVANCED INDUSTRIES: The Atucha III Nuclear Power Reactor in Argentina 102 Ravi Madhavan, Thomas G. Rawski, and Qingfeng Tian 6. CHINESE INFRASTRUCTURE PROJECTS IN BRAZIL: Two Case Studies 122 Celio Hiratuka 7. THE CHINESE-BACKED NICARAGUA CANAL: Domestic Rationale, Multiple Risks, and Geopolitical Implications 144 Shoujun Cui 8. CHINESE INFRASTRUCTURE PROJECTS IN LATIN AMERICA AND THE CARIBBEAN: The Experience of the Inter-American Development Bank 164 Sven-Uwe Mueller and Fan Li 9. A STRATEGIC ANALYSIS OF CHINESE INFRASTRUCTURE PROJECTS IN LATIN AMERICA AND THE CARIBBEAN 180 Haibin Niu ABOUT THE AUTHORS 195 INDEX 201 ABOUT THIS PROJECT his book is the result of a truly global partnership between three insti- tutions: the University of Pittsburgh, the Universidad Nacional Autóno- T ma de México (UNAM), and the Renmin University of China. The book grows out of an international conference—“China, the United States, and Latin America: New Actors and Changing Relations”—held in October 2016 at the School of International Studies at Renmin University in Beijing. Multiple actors at each institution supported this publication financially and intellectually. At UNAM, the Centro de Estudios China-México, School of Economics (Cechimex) played a crucial role in supporting the research associated with several of these papers. In particular, professor Enrique Dussel Peters played a key role as both an editor and as an intellectual contributor in shaping its focus and argument. At Renmin University, both the Center for Latin American Studies (CLAS) and the School of International Studies provided funding for the initial conference. CLAS director Shoujun Cui worked to identify key authors with- in China and to secure funding. Together with his staff, he hosted a well- organized and thought-provoking conference on their campus. Additional financial support for the Beijing conference was provided by the Institute of Latin American Studies, Chinese Academy of Social Sciences, and the Chi- nese Association for Latin American Studies. Finally, at the University of Pittsburgh, two centers associated with the University Center for International Studies (UCIS)—the Asian Studies Center (ASC) and the Center for Latin American Studies (CLAS)—organized the US participants and supported the publication of this volume. At the University of Pittsburgh, special thanks are owed to Ariel Armony, vice provost for Glob- al Affairs, for his ongoing sponsorship of this project and his role as a coeditor with professors Dussel Peters and Cui. James Cook, ASC acting director, and viii ABOUT THIS PROJECT Scott Morgenstern, CLAS director, worked to support the organization of the conference and the production of this volume. We would also like to acknowl- edge the support of the University of Pittsburgh’s Confucius Institute. Special thanks to Ignacio Mamone, Yu Xiao, Leo Schwartz, and Rafael Khachaturi- an for their extraordinary assistance and insights at different stages of this project. This project is conceived as part of a larger initiative to examine the evolv- ing ties between China and Latin America and the Caribbean. The collabora- tion between the University of Pittsburgh and UNAM is focused on address- ing the need for rigorous, systematic, and innovative studies that shed light on the new dimensions of China–Latin America relations. A previous publication, Beyond Raw Materials: Who Are the Actors in the Latin America and Caribbean-China Relationship? (Friedrich-Ebert-Stiftung 2015), coedited by Armony and Dussel Peters, examined the features and characteristics of the most important actors in the bilateral relationship. A more recent publication, “Effects of China on the Quantity and Quality of Jobs in Latin America and the Caribbean” (International Labor Organization 2017), coauthored by Dus- sel Peters and Armony, is the first study of the impact of economic relations between China and Latin America on jobs in the region. All of the organizations involved in this project would like to offer their warm thanks to each of the authors who contributed to this book. Their pio- neering work drives the expansion of an emerging field of study, with signif- icant implications for the future of the relationship between China and Latin America. INTRODUCTION Ariel C. Armony, Enrique Dussel Peters, and Shoujun Cui hina’s increasing international presence in all imaginable fields contin- ues to impress experts and the general public; the differences between the CTrump administration and short-, medium-, and long-term policies of the Xi Jinping administration seem to further push China toward a more ac- tive global role. Latin America and the Caribbean (LAC) are not an exception: China’s role in the region has increased outstandingly, from language, culture, and economic exchange to bilateral, regional, and multilateral ties. It is in this context of China’s increasing global presence in LAC that this book makes a detailed contribution on its infrastructure projects in the region. Infrastructure projects—a topic that we have highlighted earlier (Dus- sel Peters and Armony 2017)—are the latest and most ambitious phase in the increasingly complex relationship between LAC and China; that is, the latest phase in a process that began with trade in the 1990s and continued with Chi- nese loans and outbound foreign direct investment (OFDI) since 2007–2008. Beginning in 2013, infrastructure projects have become a critical new phase. The recent Nineteenth National Congress of the Communist Party of China reiterated the importance of infrastructure projects, such as the One Belt One Road Initiative, for China’s global strategy. In what follows, infrastructure projects will be clearly differentiated from trade, financing, and OFDI, since they are mainly a service and the property of the respective infrastructure project belongs to the entity that initially requested the respective service. Contributions to this book present a specific understanding of infrastructure projects. Funding for these projects can be private or public, and includes sectors such as construction, telecommunication, transportation, and energy, among many others. In all cases, however, a service supplier transfers the infrastructure at the end of the specified time frame. Thus, substantial differences exist between infrastructure projects and foreign direct investment. In some cases, firms such as Huawei and Hutchinson Ports Holding might even invest in telecommunications and ports sectors, but their investment is still x Ariel C. Armony, Enrique Dussel Peters, and Shoujun Cui classified as an OFDI since these firms do not offer a service and keep the ownership of their product. Chinese infrastructure projects in LAC are of utmost relevance from several perspectives. First, Chinese firms in the second decade of the twenty-first century offer an increasing variety of services—from design to manufactur- ing, financing, technology, supplying firms, and additional postconstruction services—under the heading of turnkey projects. The One Belt One Road Ini- tiative launched in 2013 is, from this perspective, coherent with the effective potential of Chinese firms globally and specifically in LAC. The initiative also reflects China’s public-sector interest in leaving its own imprint on the current process of globalization, and specifically vis-à-vis other Western countries, particularly the United States. Second, LAC represents an important learning opportunity for Chinese firms, which do not usually seek the highest labor, safety, and environmental standards, while already competing with local, national, regional, and other firms globally. Third, and as discussed in several of the chapters in this book, there is a large “infrastructure gap” in most LAC countries. In other words, as a region LAC should be spending around 5 percent of its GDP in infrastructure, while effective spending has been well below 3 percent of GDP in the last two decades. Therefore, this is an area of utmost importance for the future of the region. This book attempts to facilitate an understanding of Chinese infrastructure projects in LAC in a systematic manner and based on case studies in the region. As contributions to ongoing research and discussions, the chapters allow for certain conclusions and invite future research. First, the differences

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