As Jamaica signs onto China's Belt and Road Initiative, the US Congress takes a closer look

BY ALEXIS MONTEITH
Observer writer

Sunday, April 21, 2019

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As Jamaica signed on to the Chinese Belt and Road Initiative (BRI) on April 11, a report to the American Congress entitled 'China's Engagement with Latin America and the Caribbean' sought to examine the implications of growing Chinese influence in the region.

The BRI is an initiative that advances international development cooperation between China and its partners to build up connectivity and ensure benefits to all parties linked within its framework. By signing a memorandum of understanding for the BRI, Jamaica joins several other countries in the region including Barbados, Venezuela, Costa Rica, Panama, Trinidad and Tobago, Dominica, Guyana, the Dominican Republic and others — who have already done so.

The report to the American Congress on Chinese influence was put together by the Congressional Research Service, and it suggests that China's regional objectives over the past several years have been aimed towards securing access to raw materials and agricultural goods while opening up new markets for Chinese products. China, it reveals, is partnering with Latin American firms to access and advance technology, and has “sought to secure investment opportunities in Latin America for its infrastructure firms and to reduce excess capacity in steel, cement, and other related commodities”.

The report notes that in the period 2005 to 2018 accumulated loans to the region from the China Development Bank and China Eximbank have amounted to more than US$140 billion. Of that amount, Jamaica has received US$2.1 billion.

Six countries have received more financing than Jamaica and they include Venezuela, Brazil, Ecuador, Argentina, Trinidad and Tobago and Bolivia.

Venezuela tops the list with US$67.2 billion, mostly from loans-for-oil deals.

Jamaica's Caricom partner, Trinidad and Tobago, received US$2.6 billion during the same period.

The report sourced these figures from the Inter-American Dialogue, a network of global thought leaders who attempt to address social, economic and governance issues in the Caribbean and Latin America.

The China-Latin America Finance Database, from the Inter-American Dialogue, also lists eight countries from the region that have received less Chinese financing than Jamaica. They are Mexico, Dominican Republic, Costa Rica, Cuba, Guyana, Barbados, The Bahamas and Peru.

Mexico and Dominican Republic fall directly below Jamaica, with Mexico having received US$1 billion while the Dominican Republic received US$600 million. Peru was at the bottom of the list with US$50 million.

Some of the recent findings of the Inter-American Dialogue show that Chinese lending to the region, which comes through the China Development Bank and the China Eximbank surpasses that of other banks since 2005, and the vast majority of this lending was for infrastructure development.

This focus on infrastructure development has been the case in Jamaica where financing has been directed towards a variety of projects from 2005 to 2018. Some of these infrastructure initiatives included Trelawny's Greenfield Stadium in 2005 which received US$30 million, as well as US$45 million for Montego Bay Convention Centre in 2007.

In 2010 US$400 million went to road construction while US$300 million went to road and bridge rehabilitation in 2013.

Also in 2013, US$457 million went to the north-south toll road construction. US$327 million was designated for the road network in 2016 and the Southern Coastal Highway Improvement Project received US$326 million in 2017.

Projects not listed as infrastructure development include US$100 million for short-term trade financing in 2009 and a further US$20 million for unspecified initiatives in the same year.

US$58 million was used for shoreline reconstruction in 2010 and US$71 million was appropriated to the Jamaica Economic Housing Project in 2011.

The Congressional Research Service Insight report suggests that the economic involvement of China in the region goes hand in hand with its diplomatic objectives, which are to garner support in the global arena, reduce US dominance, and isolate Taiwan by trying to “lure away Latin American and Caribbean countries that still maintain diplomatic relations with Taiwan, also known as the Republic of China”.

It notes that in 2017 and 2018, El Salvador, the Dominican Republic and Panama switched recognition to China.

The report reveals that under the Trump Administration, the official United States view of Chinese influence in the region has gone from positive to suspicious, citing concern expressed by the National Security Strategy that “China seeks to pull the region into its orbit through State-led investments and loans”.

The Administration further identified China's support for Venezuela, investment in regional ports that can be of strategic value, infrastructure investments involving the Panama Canal, and growing arms sales to the region — particularly Venezuela as other areas of concern.

 

UNSUSTAINABLE DEBT

According to the report, some analysts are suggesting that the debt amassed by some countries is unsustainable and this could lead to their economies “becoming less competitive in manufacturing and agricultural technologies, and more dependent upon commodities exports to China and elsewhere”.

It also reveals that many Chinese companies in the region still do not conform to international labour, safety and environmental requirements.

The report acknowledges, however, that a number of analysts and regional leaders are doubtful of the US administration's speculations and concerns.

Indeed, last year Panamanian President Juan Carlos Varela showed some defiance when his country's relations with the United States were questioned ahead of Panama's participation in the Shanghai trade fair.

“We are a neutral country —sovereign, dignified,” the president stated.

Chinese Foreign Ministry spokesman Lu Kang recently responded to American Secretary of State Mike Pompeo's criticism of Chinese involvement in Venezuela, saying, “for a long time the United States has regarded Latin America as its own backyard to pressure, threaten and even subvert political power in other countries at every turn. Some American politicians have been harping on one string” to “smear China across the world”.

Following on Jamaica's signing onto the Chinese BRI earlier this month, an article published on April 15 by the South China Morning Post notes that while China and the United States are close to a trade deal, “squabbles over China's growing influence in Latin America and the Caribbean broke out again after Beijing last week secured Jamaica's official endorsement of its vast 'Belt and Road Initiative'”.

As these “squabbles” continue and as analysts and reports give varying opinions on Chinese influence in the region, one thing appears clear. The level of Chinese involvement in Latin America and the Caribbean over recent years has firmly established its economic footprint in this part of the world.

The report Cautious Capital: Chinese Development Finance in LAC, 2018 from the Inter-American Dialogue states, “even if Chinese policy banks continue to lend to LAC [Latin America and the Caribbean] at relatively low levels, as they did in 2017 and 2018, the combined effect of Chinese policy bank, commercial bank, and other forms of lending will ensure a sizeable Chinese financial presence in the region for years to come, potentially in a wider variety of projects”.


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