{"id":50008875,"date":"2017-04-10T11:00:38","date_gmt":"2017-04-10T10:00:38","guid":{"rendered":"https:\/\/stage.dialogochino.net\/?p=8875"},"modified":"2023-01-25T11:14:55","modified_gmt":"2023-01-25T11:14:55","slug":"8875-corruption-and-crisis-in-latin-america-open-door-for-more-chinese-investment","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/8875-corruption-and-crisis-in-latin-america-open-door-for-more-chinese-investment\/","title":{"rendered":"Corruption and crisis in Latin America open door for more Chinese investment"},"content":{"rendered":"<p>The wave of <a href=\"https:\/\/lavajato.ojo-publico.com\/\">corruption<\/a> that has swept across Latin America \u2013 combined with its economic crises \u2013 has created an opportunity for Chinese companies with long-held designs on major projects in the region to take a more aggressive stance towards acquiring them.<\/p>\n<p>Chinese companies will invest US$500 billion in Latin America over the next 10 years, according to President Xi Jinping<strong>.<\/strong> These interests encompass areas such as agriculture and livestock, as well as the energy sector and major infrastructure projects.<\/p>\n<p>However, investors are focusing on some countries in particular because they have large-scale projects in development. One of these is Brazil, which will receive US$20 billion of Chinese investment over the next year, according to Charles Tang, president of the Brazil-China Chamber of Commerce and Industry (BCCCI).<\/p>\n<p>&#8220;The interest has always existed, but now it is even greater because Brazil is for sale,\u201d said Tang, referring to the <a href=\"http:\/\/epoca.globo.com\/economia\/noticia\/2017\/03\/pior-recessao-da-historia-complica-retomada-da-economia-brasileira.html\">economic recession<\/a> that has plagued Brazil since 2014 and from which it shows little sign of emerging.<\/p>\n<p>However, the <a href=\"http:\/\/amazonwatch.org\/news\/2016\/0215-which-chinese-corporations-have-their-eyes-on-the-amazon\">reputation<\/a> of Chinese investments in the region, many of which have been plagued by disputes over environmental impacts, has some observers worried. Infrastructure projects are of particular concern.<\/p>\n<p>&#8220;When the World Bank or the Inter-American Development Bank (IDB) are involved there are more stringent parameters and safeguards. In the case of Chinese investments, there is great concern because their standards are not known. It&#8217;s anybody&#8217;s guess,\u201d says Ailton Dias dos Santos, a consultant with the International Institute of Education in Brazil (IEB), an NGO that works on environmental governance.<\/p>\n<p>According to Santos, at the very least environmental legislation in host countries should be respected. Environmental protections are being <a href=\"http:\/\/politica.estadao.com.br\/noticias\/geral,comissao-do-senado-aprova-pec-que-derruba-licenciamento-ambiental-para-obras,10000028489\">reviewed<\/a> in Brazil, with a tendency toward deregulation. He fears the worst.<\/p>\n<p>&#8220;In terms of governance, I am not optimistic. Dialogue between [civil] society and the businesses carrying out these projects is worsening,\u201d says Santos, warning of a trend towards \u201caggressive and reckless <a href=\"https:\/\/www.cartacapital.com.br\/politica\/meio-ambiente-sob-ameaca-no-congresso\">liberalism<\/a>.\u201d<strong>\u00a0<\/strong><\/p>\n<h2>Politics<\/h2>\n<p>Ricardo Verdum, a researcher at the Universidade Federal do Rio Grande do Sul (UFRS), says there is a political component in decision making for major projects throughout the region. This involves a number of <a href=\"http:\/\/g1.globo.com\/profissao-reporter\/noticia\/2016\/07\/usina-de-belo-monte-causa-impactos-ambientais-e-sociais-em-altamira-pa.html\">controversies<\/a> ranging from loan facilities \u2013 as most of these investments receive some subsidy from the government \u2013 to the process of how these projects receive government assent approval \u2014 which can lead to suspect licensing processes and <a href=\"http:\/\/stage.dialogochino.net\/transmissao-de-energia-de-belo-monte-retira-vegetacao-nativa-no-brasil\/?lang=pt-pt\">environmental damage<\/a>.<\/p>\n<p>This of course is in addition to the effects of the projects themselves, which bring a large flow of workers, often to remote regions. Land conflicts, violence, and even sexual exploitation can follow if a proper analysis of the impacts is not conducted.<\/p>\n<p>&#8220;It will greatly depend on how the licensing and inspection sectors act. If there is no firm policy, there is a major risk that an even faster process of degradation will continue,\u201d warns Verdum.<\/p>\n<p>The Chinese Chambers of Commerce in Brazil and Colombia recognise the difficulty Chinese enterprises face in dealing with strict environmental requirements, but guarantee that the companies have specialised advisory staff to fulfil all the requirements.<\/p>\n<h2>Closed circle<\/h2>\n<p>Until recently in Brazil, Chinese companies had been barred from infrastructure projects because the market was dominated by an elite group of large domestic construction companies that won most of the bids. But the situation has changed since explosive revelations from the country\u2019s largest corruption scandal.<\/p>\n<p>A major police investigation known as <a href=\"http:\/\/arte.folha.uol.com.br\/poder\/operacao-lava-jato\/\">Operation Car Wash<\/a> implicated representatives from state oil company Petrobras \u2013 one of the largest energy companies in the world \u2013 other state enterprises, the government, and the country\u2019s largest construction companies in the submission of falsified bids that inflated the value of major projects.<\/p>\n<p>By paying kickbacks to government representatives, Brazil\u2019s largest construction companies negotiated and conspired among themselves prior to bidding. The scheme also involved agreements for the winners of bids to hire the losers to carry out some construction work.<\/p>\n<p>&#8220;Here in Brazil, large infrastructure projects had always been closed to foreign participation, with rare exceptions. With the collapse of the big construction companies in Brazil because of [indictments resulting from] Car Wash, many projects are stuck,\u201d says Tang.<\/p>\n<p>As a result, the country&#8217;s largest construction company, Odebrecht, <a href=\"http:\/\/www.odebrecht.com\/pt-br\/comunicacao\/releases\/odebrecht-foca-em-liquidez-com-venda-de-ativos-e-reestruturacao-de-dividas\">has put most of its business in Brazil and Latin America up for sale<\/a>, in part to cover huge legal costs, and many Chinese companies are <a href=\"http:\/\/www.asmetro.org.br\/portal\/21-clipping\/6567-revista-exame-o-risco-odebrecht-o-susto-da-china\">interested<\/a> in these assets. For example, Chinese companies and other groups are negotiating Odebrecht&#8217;s share in the <a href=\"http:\/\/oglobo.globo.com\/economia\/negocios\/santo-antonio-deve-atrair-duas-chinesas-brookfield-20032846\">Santo Ant\u00f4nio hydroelectric power plant<\/a>, the company itself confirmed in a letter to <em>Di\u00e1logo Chino<\/em>.<\/p>\n<p>According to reports by local press, the infrastructure arm of Chinese group <a href=\"http:\/\/www.hnagroup.com\/en\/business\/hna-holding\/holdings-introduction\/HNA-Infrastructure.html\">HNA<\/a> is <a href=\"http:\/\/oglobo.globo.com\/economia\/2017\/03\/28\/2270-grupo-chines-negocia-compra-de-fatia-da-odebrecht-no-galeao\">negotiating<\/a> the purchase of Odebrecht&#8217;s share in the consortium that operates Tom Jobim International Airport (Gale\u00e3o) in Rio de Janeiro, through a payment of about US$1.3 billion for licences. These are just a few examples.<\/p>\n<p>Tang confirms general interest among Chinese companies in acquiring Odebrecht\u2019s holdings in various endeavours. However, there will be no action until the negotiation of a <a href=\"http:\/\/g1.globo.com\/politica\/operacao-lava-jato\/noticia\/acordo-de-leniencia-da-odebrecht-e-braskem-nos-eua-lista-politicos-e-executivos.ghtml\">leniency agreement<\/a> with Odebrecht is finalised. This is a plea bargain in which the construction company agreed to assist in the investigations in exchange for a reduced sentence for its executives<strong>.<\/strong> \u201cNo one will buy anything from a company involved in Operation Car Wash without a leniency agreement,\u201d said Tang.<\/p>\n<h2>Car wash outside Brazil<\/h2>\n<p>Odebrecht also confessed it had acquired shares in projects obtained through the payment of kickbacks to governments in other Latin American countries. Argentina, Colombia, the Dominican Republic, Ecuador, Guatemala, Panama, Peru, and Venezuela have all been mentioned.<\/p>\n<p>In Peru, China National Petroleum Corporation (CNPC) is in the running to acquire Odebrecht\u2019s majority share in the <a href=\"http:\/\/proactivo.com.pe\/cnpc-de-china-compite-con-brookfield-por-acciones-de-odebrecht-en-gasoducto-sur\/\">South Peruvian gas pipeline<\/a> project. In Colombia, Power China is negotiating the acquisition of the company\u2019s role in the project to improve the navigability of the <a href=\"http:\/\/sostenibilidad.semana.com\/opinion\/articulo\/powerchina-y-el-rio-magdalena-un-remedio-peor-que-la-enfermedad\/37270\">Magdalena River<\/a> through its subsidiary Sinohydro, according to local media.<\/p>\n<p>Green groups and local farmers <a href=\"http:\/\/stage.dialogochino.net\/green-groups-resist-chinas-river-highway-plans-for-the-magdalena\/\">expressed concern<\/a> at the lack of consultation with the project\u2019s former owners on the potential impacts of turning the Magdalena into a fluvial logistics highway. Its expansion could threaten flood defences and aquatic ecosystems, they say.<\/p>\n<p>There are 70 Chinese companies in Colombia, says Jaime Su\u00e1rez, executive director of the Colombia-China Chamber of Commerce and Investment. He says he does not have information on the negotiations pertaining to the Magdalena River project, but says any deal would represent a major breakthrough.<\/p>\n<p>&#8220;China\u2019s interest in Colombia has increased, despite its strong relationship with <a href=\"http:\/\/www.eluniversal.com\/noticias\/economia\/venezuela-china-suscriben-nuevos-acuerdos-por-2700-millones_639601\">Venezuela<\/a>. If Power China can participate in this project, China would have the advantage of an increased presence for its companies in Colombia. They have knowledge, capital, and technology,\u201d says Su\u00e1rez.<\/p>\n<p>Chinese investors have various strategies in Latin America. These range from simply financing the venture, supplying equipment and services, acquiring shares or even taking control of the project, which is the main focus of negotiations following Operation Car Wash, according to Tang.<\/p>\n<p>Chinese have also tried to expand in Latin America through a need to export surplus capacity and advance international geopolitical interests.<\/p>\n<p>As in Brazil, the purchase of Odebrecht&#8217;s holdings in other countries also depends on approving respective leniency agreements. &#8220;No one will buy anything until everything is absolutely legal again,&#8221; says Tang.<\/p>\n<p>Chinese interests, however, go beyond Odebrecht&#8217;s shares. <em>Di\u00e1logo Chino <\/em>learned through a source close to negotiations that Zhejian Electric Power Construction Co. (ZEPC) is close to a deal to enter the <a href=\"http:\/\/www.correiobraziliense.com.br\/app\/noticia\/economia\/2017\/01\/31\/internas_economia,569460\/chineses-querem-comprar-a-usina-eletrica-de-belo-monte-no-para.shtml\">Belo Monte<\/a> hydropower project, which for US$10 billion could culminate in control of the enterprise.<\/p>\n<p>Eletrobras, a major Brazilian power utility, is leading negotiations, but other shareholders such as Cemig, Neonergia, and pension funds are also interested in disposing of the asset, according to the source. In this case ZEPC is only interested in becoming a stakeholder or even acquiring control of the enterprise, without getting involved with environmental and operational aspects, at least for now. State Grid and China Three Gorges would also be in the running.<\/p>\n<p>China National Nuclear Corporation (NCC) is interested in the Angra 3 and Angra 4 <a href=\"http:\/\/br.reuters.com\/article\/businessNews\/idBRKBN14G1EI\">Brazilian nuclear power plants<\/a>, and Shanghai Electric is negotiating with Eletrosul, a subsidiary of Eletrobras, to acquire concessions to construct <a href=\"http:\/\/economia.estadao.com.br\/noticias\/negocios,shanghai-electric-fara-proposta-para-assumir-obras-de-r-3-3-bi-da-eletrosulraio-x,70001685008\">power transmission lines<\/a> in the southern part of the country.<\/p>\n<p>Tang stated he was not aware of ZEPC\u2019s negotiations involving the Belo Monte dam but many such negotiations take place in secret.<\/p>\n<p>&#8220;A lot of things are still to come. What we are seeing may be [just] the beginning,&#8221; says Tang.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Environmental concerns persist as Chinese companies eye space left by scandal-tainted contractor <\/p>\n","protected":false},"author":40000225,"featured_media":50026046,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758,50039900],"tags":[20000187,527,556],"hashtags":[],"country":[50000021,20000110],"class_list":["post-50008875","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-justice","tag-corruption","tag-crime","tag-infrastructure","country-brazil","country-china"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.0 (Yoast SEO v26.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Corruption and crisis in Latin America open door for more 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