Responsible investments need civil society participation

Chinese lenders must engage with Latin American civil society on the impacts of their projects

Chinese leader Deng Xiaoping said in 1988 that “the 21st century will be the era of Latin America” for China, and his successors created the policy instruments to make the region a fundamental economic and geopolitical reference point. In an unprecedented public courting of the region, China announced in 2008 that connecting with Latin America was to become part of state policy, and went on to agree the 2015-2019 cooperation plan at the inaugural China-CELAC summit in Beijing in 2015.

Chinese president Xi Jinping declared 2016 the year of cultural exchange with Latin America and the Caribbean, perhaps the most significant exchange between peoples since the People’s Republic of China was founded in 1949.

Despite declarations in the Chinese government’s 2008 policies that it encourages exchanges with non-government organisations and stating that: “China is prepared to strengthen exchanges with Latin American and Caribbean countries with respect to laws, legal provisions and environmental protection policies”, it’s clear that this hasn’t happened. Neither China nor host governments in receipt of Chinese funds have attempted to deal with the environmental and social challenges posed by the projects they support in a participative way.

In some cases, Chinese contractors have even failed to abide by host country laws. For example, at the El Mirador mining project in Ecuador, Ecuacorriente (a consortium consisting of Tongling Nonferrous Metals and China Railway Construction Company) began operating in 2012 without an approved environmental impact assessment. At the end of 2015, local communities presented an action alleging the forced and illegal displacement by the Chinese company and Ecuadorean government agencies.

With these cases in mind, 35 representatives from Latin American and international NGOs met in Bogotá, Colombia, last month to analyse Chinese social and environmental guidelines for overseas operations. Somewhat surprisingly, it was dscovered that over 300 rules and guidelines apply to Chinese banks and companies operating outside the country, and more than 30 of those are underpinned by social and environmental protection policies.

The meeting also analysed China’s bilateral accords with Colombia, Argentina, Brazil and Bolivia, case studies of Chinese investments in the mining, water and other extractive industries as well as the Nicaragua canal and the interoceanic Brazil-Peru railway. Co-organised by the China-Latin America Sustainable Investment Initiative (American University), the Association for the Environment and Society (Colombia) and the Brazilian Institute of Economic and Social Analysis, this was the first event of its kind in the region.

Among the regulations most scrutinised was the Green Credit Directive, which applies to all of China’s banking institutions and which requires Chinese lenders to adhere to international best practices in the projects they support. The directive was developed by the China Banking Regulatory Commission (CBRC). Another standout theme was the Social Responsibility Guidelines for Chinese Mining Investments, which although voluntary, apply to all member companies of the Chinese Chamber of Commerce for Mining, Metals and Chemicals (CCCMC), which comprises China’s biggest state and private mining companies.

These guidelines recognise the right to free, prior and informed consent for local communities, opens the possibility to establish exclusion zones around projects for environmental reasons and requires that Chinese mining companies publish all payments made to public institutions and employees in the host country.  Moreover, Chinese mining companies must update the CCCMC as to the implementation of the guidelines and Chinese financial institutions must also inform CRBC about the implementation of the Green Credit Directive.

It’s important to point out that no national mining association or banking regulator has compiled social and environmental guidelines in the way Chinese institutions have. But despite the existence of these principles, they are not reflected in practice. If the experience of the multilateral banks such as the World Bank and the Inter-American Development Bank is anything to go by, Chinese social and environmental guidelines will mean little if they are not accompanied by institutional mechanisms that ensure transparency, enable multi-actor dialogue and promote a culture of openness.

It would be ideal if in 2016, the year of China-Latin America cultural exchange, the possibility opened up for an exchange that went beyond the superficialities of the relationship  and generated opportunities for people-to-people exchanges, to open up the space for informed analysis about the less desirable impacts of Chinese investments in Latin America, and the search for solutions and alternatives.