18 Nov 2019
Posted in Construction
Latin America continues to strengthen its economic ties with China through infrastructure investment, says GlobalData
China’s growing infrastructure involvement in Latin America does not seem to be slowing down any time soon, despite criticisms from US officials and many international financial institutions, says GlobalData, a leading data and analytics company.
GlobalData’s latest report ‘China’s Involvement in Global Infrastructure’ reveals that Latin America is home to 59 large-scale infrastructure projects in which Chinese contractors are at least partially involved with a value of US$86.4bn.
Dariana Tani, Economist at GlobalData, comments: “With diplomatic and economic relations between Latin America and the US more uncertain than ever, many governments across the region see Chinese infrastructure investment as a great alternative to existing traditional financing, in particular, because it does not require the arduous social and time-consuming environmental procedures that usually accompany the World Bank and the Inter-American Development Bank projects.
“Also, with the recent incorporation of several Latin American countries into the Belt and Road Initiative (BRI), China’s influence in the region is further strengthening.”
Major corruption scandals in the region have also created opportunities for Chinese contractors, including taking over construction contracts originally awarded to firms implicated in scandals, such as Odebrecht, a Brazilian construction company. However, China’s increased involvement in infrastructure projects in Latin America has not come without issues.
Tani continues: “Local backlash against the lack of adequate environmental assessments and labor concerns are some of the main challenges facing Chinese-funded infrastructure projects in the region. For instance, China’s reluctance to require reasonable standards for its BRI-related projects and loans has encouraged more corruption and debt in the region, as well as led local governments to pursue economically and environmentally unsustainable or non-viable projects.”
In Brazil, while President Jair Bolsonaro has complained that China is ‘buying up’ Brazil, his administration has recently announced that it wants more Chinese investment in infrastructure projects as long as investors generate local jobs and abide by the country’s rules.
Tani adds: “A major project in Brazil that is being tracked by GlobalData is the US$2.3bn integrated mining (iron-ore) and logistics project in Bahia. The project, which is being developed by a number of Chinese state-owned companies (including a consortium compromising China Railways Group, China Communications Construction Company and Dalian Huarui Heavy Industry Group), entails the development of the Bahia Mineração’s (BAMIN) Pedra de Ferro iron-ore mine; the construction of the Porto Sul deep-water port, and the related FIOL railway that will become a key transportation corridor in Brazil’s northeast. The project is scheduled to start in 2020 and aims to boost Brazil’s exports of iron ore to China – another key commodity it sells to the Asian giant.”