Denisse Linares Suárez
Derecho, Ambiente y Recursos Naturales (DAR)
(dlinares@dar.org.pe)
The evident dispute, or trade war between China and the United States, is not only commercial, it transcends into strategic multilateral spaces for Latin America such as the Inter-American Development Bank (IDB), the now most important bank for Latin America and the Caribbean. China’s progress has been through the financing of several strategic projects by the IDB, which would even represent historical debts, where the United States has not assumed its leadership through its financing.
The accentuation of this struggle could generate more risks and threats in Latin America and the Caribbean. This region is already experiencing an economic and social crisis due to the pandemic, the violation of human rights, and the exploitation of natural resources with low environmental standards. Aspects that should be taken into account by the IDB Group and that have not been discussed during the modernization of its environmental and social policies. Issues that need to be clarified at once to minimize the uncertainty of these times.
China at the IDB
Since 2009, China began its participation in the IDB with a contribution of $350 million, distributed to all the institutions of the IDB Group -IDB Invest and IDB Lab- (Portfolio, 2008). In the following years, it continued to strengthen its interest in banking through agreements, such as the financial agreement to promote the relationship between the bank and China Exim Bank, as well as the Chinese Containment Fund for Latin America and the Caribbean in 2013.
Regarding China’s participation in the IDB, the Regional Infrastructure and Financing Group (GREFI), in its publication «The Role of Latin America and the Caribbean on the Belt and Road Initiative«, presents an analysis of this relationship, as part of the evidence on China’s geopolitical strategy in the region. The report notes that Asian funds have been designated to 17 Latin American countries and three regional-scale projects to provide financial support to projects in education, waterworks, energy, infrastructure, and other areas.
In turn, among the main projects that this fund has financed are the Lima Metro (lines 2 and 4) and the largest energy project under construction in Colombia (Cruz y Flores 2018). This project has been denounced for human rights violations and for affecting natural resources. This money represents 5.7% of China’s funding arrangements for Latin America and the Caribbean (Cruz, 2020).
This being so, the participation of Chinese capital in the region, through the IDB Group, has a long-term projection with projects that have been relegated for many years, such as the Lima Metro, one of the most expensive works in Peru[1] and with a delay of almost half a century, where China assumes leadership in its construction. Therefore, its presence has become strategic for the governments of the region.
The war between the US and China is not only commercial
The presence of the People’s Republic of China (PRC) is not limited to financing through banks, because unlike other countries, the Asian country accompanies its investments with bilateral political agreements with the aim of showing its commitment and interest[2], covering different sectors, being its commercial strategy its strongest feature.
Sergio Guzmán, points out that «China has taken advantage of the vacuum left by other countries, an example of this is that the bidding process for one of Colombia’s most emblematic works, the Bogotá Metro -whose construction began to be planned more than seventy years ago and which always remained in frustrated attempts-, was granted to two Chinese companies, while the United States did not present any investors«[3] so it can be said that China is advancing in the region due to its great financial and commercial capacity, in the face of the loss of USA leadership in the region.
The pandemic has made this trade war or cold war as defined by other authors, more evident. Throughout the year 2020, both governments have demonstrated their differences. The position of the United States in relation to China would seem to have no turning point after its elections. Biden has included fair trade[4] as part of his proposals for trade policy, as well as protection for domestic companies. In this regard, Alicia Gonzales notes that «this trend already existed, but it has been exacerbated by COVID-19 and the intention of many governments is to repatriate the manufacture of basic necessities, especially medical and health products, to reduce their dependence on China in the face of a possible repetition of global emergency episodes”.
No room for discussion: Human rights and environmental standards
The underlying issues in the differences between the two countries have not reached environmental or human rights commitments. So far they have not been an agenda item that has been placed on the international public sphere, despite the fact that both countries are the largest polluters on the planet, and have investments outside their borders in environmentally vulnerable territories.
Even with the renewal of the IDB and IDB Invest’s Socio-Environmental Policy Framework, the group has not demonstrated the need to observe those projects that have generated irreversible impacts such as Hidroituango (Colombia), where Chinese capital and IDB Invest’s social and environmental impact assessment converge. It is urgent that the IDB Group review these cases for a change in the performance of the projects it finances, even more so if it already has a record, denounced even to the Inter-American Commission on Human Rights (IACHR).
It is worth mentioning that the modernization of the IDB’s environmental and social policies has included the principles of key agreements for environmental justice in the region such as the Escazú Agreement, as well as a list of prohibited activities, due to their polluting nature contrary to the objectives of the Paris Agreement; as well as the framework of Indigenous rights, which although it is still a lax mention, the new IDB management has the commitment and responsibility to make them happen. In light of this, the question arises as to how the oppositions on issues such as climate change, where the Trump government, of which Clever Clarone, current president of the IDB, is a part of, will be resolved. The challenge for civil society in the region is to remain vigilant in the face of progress and changes in Clarone’s administration.
This struggle for leadership extends to multilateral spaces of defense and respect for human rights (United Nations), the environment, or health. For example, China has assumed greater commitments within the framework of the Paris Agreement from which the United States withdrew, and even provides greater financial support to the World Health Organization.
Latin America and the Caribbean, especially poor or emerging economy regions, are in the midst of this obvious competition, limited by their weak bargaining power, because of their economic deficit to narrow inequality gaps. This deficit is increasingly critical because of COVID-19, which will require increased loans to overcome it, where the IDB is a key player in leveraging strategic sectors in the countries of the region.
Finally, how will the dispute between the two countries affect multilateral spaces such as the IDB? It is still an unpredictable scenario, the truth is that for economic and trade issues the Chinese Government has taken pragmatic decisions, in turn, it is now the economy that has best responded to the economic crisis, being even more strategic for Latin America and the Caribbean.
[1] Lima is the fifth most populated city in Latin America and is still far from completing its basic subway train network. See: Lima es la quinta ciudad más poblada de América Latina está aún lejos de concluir su red básica de tren subterráneo.
[2] “El Rol de América Latina y el Caribe en la Iniciativa la Franja y la Ruta”. p. 61.
[4] Fair Trade is a trading system of solidarity and an alternative to the conventional one that pursues the development of the people and the fight against poverty. It is based on:
- Adequate working conditions and salaries for producers in the South, allowing them to live with dignity.
- No child labor exploitation
- Equality between men and women: Both are treated and paid equally.
- Respect for the environment: The articles are manufactured through practices that respect the environment in which they are produced.