In the last two decades, the People’s Republic of China (PRC) has played a fundamental role in the economies of Latin America. Between 2005 and 2017, China lent several countries in the region close to $136 billion.
The amount exceeded what, for the same period, the World Bank, the Inter-American Development Bank, and the CAF-Development Bank of Latin America together granted to Latin America, data from U.S. think tank Inter-American Dialogue indicated.
According to experts, these loans were motivated by a new market penetration strategy to strengthen the economic growth and geopolitical interests of the PRC.
“Before 2000, Latin America was a foreign region for China and vice versa. It was almost impossible for China to enter these economies where its companies were not known either by the governments or by the consumers of the region, nor did they have the lobbying capacity to penetrate the different markets,” Margaret Myers, director of the Asia and Latin America Program of the Inter-American Dialogue, told Diálogo.
At the beginning of the 21st century, China entered the region with a strong foothold, through substantial government-to-government loans, and by getting recipient countries to commit on hiring Chinese companies for future projects and acquiring equipment made in China.
“By 2014, China had developed an offensive focused on three pillars: financing, trade, and investment,” Myers said.
Bilateral trade between China and Latin America soared, reaching historic levels in record time for both economies, from $12 billion in 2000 to $450 billion in 2021, according to data from the International Monetary Fund (IMF).
Investment also increased. “Last year [2022] China invested $8.4 billion in the European Union […] and between $7 billion and $10 billion in Latin America,” economist Pepe Zhang, associate director and senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center, told Diálogo. “The fact that Latin America and the Caribbean are attracting investments comparable to those it has with […] Europe is impressive, something unimaginable a decade ago,” Zhang added.
According to Zhang, this is due to a strategy of commercial influence, to obtain greater access to strategic products. “China looks to Latin America for opportunities to support its economic growth at the national level and that is why the commodities they export such as proteins, soybeans, copper or iron, among others, are the most important in their commercial relationship,” he said.
But experts on the subject go further. Carlos Augusto Chacón, director of the Hernán Echavarría Olózaga Institute of Political Science in Bogotá, says that “this explosive growth of trade relations between China and the region is the result of a more aggressive foreign policy of the Xi Jinping government, which reveals a more authoritarian image of the second largest economic power in the world. China has spent the last decade successfully leveraging diplomatic influence through its trade relations for the sole purpose of gaining political leverage.”
The “Chinese dream” across the seas
China seeks to keep expanding its economic footprint in Latin America and has set its sights on Colombia, a country that, until very recently, did not arouse much interest for Chinese strategists and capital.
“In the case of Colombia, China arrived late. Unlike other countries such as Venezuela and Ecuador, Colombia hasn’t needed loans from China. As a country with greater access to the international capital market, i.e. with other financing channels, it has lowered needs for Chinese capital in Colombia,” said Zhang of the Atlantic Council.
Also, Colombia’s strong ties with the United States have slowed China’s presence in the country. “Being the largest political, commercial, and military ally of the United States in the region has prevented greater commercial and economic relations between China and Colombia,” said Sergio Guzmán, director of the Colombia Risk Analysis think tank.
For experts and analysts China is betting big on Colombia. There is no doubt that China sees Colombia as a space with great growth opportunities. “It’s a mature economy with high technical and human resources capacity, which is able to put together highly complex public tenders, and this is of great appeal for Chinese investors,” says Zhang.
“In addition, Colombia has a prominent role within the region. It’s a country immensely rich in key natural resources to boost China’s industrial development, and it has two seas, which makes it even more attractive for China’s interest in increasing its network of seaports in the region,” Chacón says.
The dragon’s feet in Colombia
China’s interest in Colombia is already evident. “China went from being Colombia’s 37th largest trading partner in 2000 to being today the second largest trading partner after the United States,” said security and defense expert Chacón.
The numbers speak for themselves. Twenty years ago Colombia imported some $10 million from China. Today imports exceed $16 billion according to data from the National Department of Statistics of Colombia.
Chinese investment in Colombia has also skyrocketed. In just one year, its direct investment tripled from $84 million in 2021 to $266 million by the end of 2022, according to data the Bank of the Republic of Colombia provided to Diálogo.
Although the United States continues to be the largest investor with a very high advantage — while flows from direct U.S. investment represented 29.19 percent of the total in 2022, China represented only 1.56 percent of the total — Chinese money is increasingly influencing the Colombian economy, even in spite of the political and security risks that the country currently experiences.
Colombia Risk Analysis in collaboration with Cifras y Conceptos, a consulting and research company, in its analysis of the relations and commercial opportunities of both countries, concludes that despite the security risks, which today represent an obstacle for any country seeking operations in Colombia, China will surely persevere and try to “buy assets of underprivileged companies,” and thus favor its interests.
In the words of Guzmán, director of Colombia Risk Analysis, “the Chinese market is today the fastest growing market in the Colombian economy in size and scope; proof of this is that the most ambitious and fundamental infrastructure projects in the country have been awarded to Chinese companies.”
Among the most important projects that have already been awarded, the following stand out:
- the construction of the first line of the Bogotá subway, awarded to a consortium made up of two Chinese state-owned companies, China Harbour Engineering Company (CHEC) and Xi’an Rail Transit Group, for some $5.3 billion;
- the RegioTram, valued at about $1 billion, which would connect Bogotá with neighboring towns, awarded to China Civil Engineering Construction Corporation (CCECC);
- the construction of the fourth generation Mar 2 highway, which today amounts to an investment of some $426 million, which was initially under a consortium in which China only had a 30 percent share; however, it ended up buying out its Colombian partners and was left with a 65 percent share.
Added to this are other megaprojects, such as the Buriticá gold mine in the department of Antioquia bought in 2020 by Zijin Mining for $1.3 billion. “With these large and emblematic projects, we are going to see a huge, important upturn in Chinese investment in Colombia in the coming years, and this is just the beginning,” Guzmán said.
An investment that is already becoming more noticeable when compared to other major powers in the region. According to the China Global Investment Tracker, which monitors China’s construction activities and global investments, investments and contracts awarded to China in Colombia between 2005 and 2022 reached $7.4 billion, an amount higher than the Chinese capital destined to Mexico, which was $6.6 billion.
Although all this has gone almost unnoticed, many wonder how convenient this is for Colombia and what are the opportunities and risks for the country in view of China’s growing presence.
Chinese investment boom catches Colombia off guard
Although the PRC’s appetite for Colombia could be seen as a great opportunity by some for progress in the country’s economic development, there are risks due to the evident lack of knowledge and lack of preparation on the part of private and official entities to receive large and diverse investments from China, and it is feared that problems including construction failures, environmental impact, and human rights violations that have already been evidenced in Chinese infrastructure projects worldwide will be repeated.
In the coffee-growing country, there seems to be no interest in the increase in Chinese presence, although China has made important investments in different corners of Colombia. “The growing Chinese influence has not sparked a debate among academics, the press, business leaders or political decision-makers in Colombia,” Guzmán of Risk Analysis said.
A view other experts share. “Many believe that China arrived with the Bogotá metro and that’s not true; the Chinese have been consolidating their presence in different sectors for more than 10 years with specific companies or with companies that have investments in strategic sectors, but nobody talks about it and much less is it followed up,” Chacón, director of the Echavarría Olózaga Institute, said.
The absence of debate and information are among the greatest risks that Colombia faces, because they do not allow for the challenges and complexity of relations with China to be seen in full. “We are not talking about just any country. We are talking about money and state-controlled companies and China has already shown that it uses these things to generate influence and penetrate countries,” Chacón said.
Chacón insists that part of China’s strategy seems to linked to relations with Taiwan. “How many countries in Latin America had relations with Taiwan and how many are left in Latin America?” he asked. For him, this demonstrates a strong pressure on countries that have economic and political ties with China to be silent or take positions in its favor.
Also surprising to experts is the little coverage and derisory media analysis of the relationship with China and what is happening in Colombia. “There is no media information outreach of our own, the information we receive is through the Chinese news agency Xinhua, which has agreements to share content on China with major newspapers in Colombia, so the narrative of what is happening in China is being given by the Chinese Communist Party news agency,” Guzmán said.
Difficulties in information and lack of elements for a clear and open analysis and discussion on the relationship with China are risks that sound the alarm and worry another group of experts, such as Myers. “The information only comes from China and that is really problematic, especially when countries debate internally about what shape they are going to give their relationship with China and what will be the commitments to which China has to adhere, such as transparency in its projects and free access to information about what China is doing in the region or in this case Colombia specifically,” she said.
Clandestine investment from tax havens?
The lack of transparency and clarity in the relationship with China extend to the management of resources and investments that the country has.
Colombian university professors, experts in business with Asia, have been warning that the official figures of investment in the country may not be taking into account those coming from tax havens and whose real origin could be from countries such as China. It is presumed that the largest destinations of Chinese capital are the British Virgin Islands, Cayman, Mauritius or the Seychelles Islands, and it is still necessary to consider the investments of large multinational companies acquired by China, although they keep their corporate name and tax headquarters in the country of origin.
“There is no clarity in the projects that China has in Colombia,” said Guzmán, director of Risk Analysis. “Much of Chinese investment is not registered as their investment because it comes from tax havens or because they outsource their projects and open a headquarters in Colombia, which ceases to count as Chinese investment and is reflected as local investment. So tracking it is very difficult and there is no entity dedicated to this. Nobody knows that Chinese companies are there,” he added.
A risk that is not unfounded, as demonstrated by one of the most important investigations carried out by Risk Analysis, on local perceptions of Chinese investment in Colombia. “When we asked local governments, they responded that there was no Chinese investment. This is the case of Antioquia and the investment with the Buriticá mining company; but how can we say that there is no Chinese investment if everyone knows that the Chinese are there?” Guzmán said.
For political scientist Chacón, the seriousness lies in the fact that China is implementing a low profile strategy with the objective of growing without generating noise and increasing its influence. “China does not want all the investment it is making in the country or anywhere else to be known,” he says. “This has been a characteristic of China throughout Latin America; from the Nestor Kirchner Dam in southern Argentina to the Caribbean in different sectors, mining, oil, infrastructure, in everything, even in retail sales, there is opacity in contracting, nobody knows what is there.”
The lack of knowledge is so great that not even state entities have official data on Chinese companies in Colombia. Diálogo consulted with Colombia’s trade office in China, Procolombia, to find out how many Chinese companies have a presence in Colombia, but it does not have that information and instead suggested checking with the Chinese Embassy in Colombia.
Urabá Port, the great Chinese warehouse?
The project of the Port of Urabá in the so-called Ruta del Sol, in Colombia, is a case in point.
In 2019, the newspaper El Colombiano reported that Colombian and Chinese investors would be promoting a huge infrastructure project in Urabá, called the Sol de Oriente. According to the newspaper, which had privileged access to the development of the project, China’s Association of Small and Medium Enterprises and the company Sol de Oriente signed an agreement seeking to generate a new exit to the Caribbean Sea for the dispatch and reception of goods. According to the newspaper, the plan is to expand the Colombian-Chinese commercial offer and turn Urabá into a large warehouse for China in Latin America, since a free trade zone would be developed in parallel to the project. The ambitious project already has a website.
Diálogo attempted to find out details about the project through the contact information that appears on the project’s web page and through various other sources, with no luck.
All that is known is that so far the project has not broken ground. In conversations with Diálogo, former Colombian Ambassador to China Luis Diego Monsalve said that “it wasn’t clear as to who would be behind the investment, but we know that due to lack of backing the project is at a standstill.”
If it becomes a reality, this project would be added to the 20 seaport projects that China already has in the region, according to a map published by the Inter-American Dialogue, which shows infrastructure projects of Chinese companies in Latin America. It is worth nothing that this map already shows a Chinese port in Colombia, which most probably refers to the Ruta del Sol port.
The truth is that there is secrecy, there is no talk about the project, and yet, the mere intention is worrisome.
Chacón’s warnings go further. “One of China’s biggest bets is to have seaports all over the world and having a port in Colombia, which also allows them access to both sides of the Atlantic and the Caribbean, is great news [for them]. Why isn’t this being talked about?” Chacón asks, adding that in Africa there are Chinese ports “where all the workers are Chinese and not even the military can enter. This is not a minor issue, we are not talking about any infrastructure project but about strategic infrastructure,” Chacón said.
Chinese companies and human rights in Latin America under the spotlight
As if that were not enough, other issues are of concern, such as the already well-known complaints of human rights and environmental violations.
In 2018, the International Federation for Human Rights (FIDH), which is made up of nearly 60 human rights organizations, published a report pointing to a pattern of human rights and environmental violations committed by Chinese companies in Latin America.
The report strongly criticized Chinese companies for failing to comply with international standards and for not being accountable for human rights violations and environmental impacts in the countries where they operate, including Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, and Venezuela.
Among them are cases such as the Coca Codo Sinclair hydroelectric project in Ecuador, which according to the report has caused accelerated regressive erosion of river flows; the Buriticá gold mine project in Colombia; the Mirador mining project in Ecuador and Las Bombas in Peru, which, the report indicates, also have greatly affected water, causing a significant environmental impact on the ecosystem and human life. The report also denounces major labor rights violations such as the case of the Santa Cruz River hydroelectric complex in Argentina, where workers “were threatened with dismissal and having their wages held back.”
Following the report China made several commitments accepting the FIDH’s recommendations to protect the environment and respect human rights in all its business operations on foreign soil.
However, four years later a new study published in March 2022 by the same federation concluded that Chinese companies had not made sufficient efforts and that the pattern of rights violations described in 2018 remained systematic.
In addition, the United Nations Committee on Economic, Social and Cultural Rights (CESCR) brought forth, between February and March 2023 in Geneva, another stage of the periodic review process — which China ratified in 2001 — of the human rights performance of Chinese companies. There, civil society institutions delivered the report on China’s Extraterritorial Human Rights Obligations in Relation to Business Activities in Latin America, which provides information and inputs to the CESCR on the behavior of Chinese companies in the region and their non-compliance with their extraterritorial obligations.
Bogotá subway construction halted, unforeseen or calculated?
For more than 70 years, the people of Bogotá have seen their expectations for the construction of a metro for the Colombian capital frustrated, and things are still not going as expected.
The Bogotá metro already started with delays. Empresa Metro de Bogotá (EMB) — the company in charge of the planning and operation of the metro — fined the Chinese consortium $195,000 for failure to deliver the engineering studies to start the construction of the project. Opposing voices say that the Colombian government’s lack of decision has prevented progress in the construction of the metro while it is being debated whether or not it should be underground.
But for experts this is just another of China’s strategies. “What we know is that the Chinese have postponed it,” Chacón said before asking, “Why haven’t the Chinese complied with the Bogotá metro? Are they waiting for pressure from the government to make the project underground, which is ultimately more expensive, or is this tied to a stronger diplomatic strategy?”
China has expressed interest in about 150 transportation infrastructure projects in Latin America and the Caribbean since 2002, “but by 2018 only half of them had entered any construction phase; others like the Bi-Oceanic Railway, which would span the continent from Peru to Brazil at a cost of more than $50 billion, have not moved beyond the conceptual phase,” added Myers of the Inter-American Dialogue.
China-Colombia, a cloudy future
China has Colombia in its sights and is expected to increase its investments and economic penetration in strategic infrastructure sectors such as energy and telecommunications.
The interest shown by the Colombian government in renewable energies, added to the Chinese experience in this field, predict that China will seek to expand its presence in this emerging market. “The Colombian government wants to develop projects such as solar panels where the Chinese have already expressed their interest through the company Trina — one of the largest suppliers globally — and which already have energy fields in Colombia,” political expert Chacón said.
Also in this sector, China will continue to bet on winning the bid for the completion of the Hidroituango Hydroelectric Plant in the department of Antioquia. This is one of China’s failures after being denied the concession in late 2022. The Colombian-Chinese consortium formed by Powerchina International, Yellow River, and Colombian company Schrader Camargo, despite being the only bidders, were not awarded the tender because they did not meet the required experience.
The Chinese companies are however not giving up hopes to win this contract, and according to a source close to Empresas Públicas de Medellín (EPM), who preferred to remain anonymous, “for the new bidding, Yellow River, Power China, and another Chinese company called China Gezhouba Group Company are going to present themselves again,” she said. This continues to generate many tensions in the sector because “they are companies linked to and controlled by the Chinese state, with a bad reputation because they have demonstrated historical failures and non-compliance in various projects, not only in Colombia but also in the region,” she added. If a consortium composed of Chinese companies wins, it would be the first incursion of Chinese engineering in this field in Colombia.
But its tentacles have a far reach, as China has also set its sights on Colombia’s copper, a metal of incalculable strategic value. “Copper is the most important new product after lithium in China’s energy transition scheme and Colombia has potentially huge copper deposits that are entirely unexplored,” Guzmán of Risk Analysis said.
China’s biggest bet is in the field of technologies, particularly with the installation of the 5G network in Colombia. Chacón highlights the interest of the Asian country in this field: “The communist party congress itself declared that technology is its most important asset to expand China’s presence in the world, and we are not talking about selling equipment, but about controlling servers, cloud, data, all the information.”
It is estimated that, in the second half of the year, Colombia will open the bidding process to choose the supplier for the fifth generation network infrastructure and the Chinese company Huawei will be one of the major bidders.
Huawei, which already has an important presence in Colombia — it has about 30 percent of the cellular market in the country — has been strongly questioned due to its links with the communist party, which would represent a threat to national security, by serving as a surveillance channel, in addition to controlling data that would allow it to generate pressure on foreign policy decisions.
Despite Huawei’s attempts to prove that it is a private and independent company with all the security conditions in place that is not linked to the Chinese regime, there are arguments to the contrary, such as the military background of Reng Zhenfei, founder of the company, who was a member of the National People’s Liberation Army and a member of the Communist Party of China.
Additionally, China’s 2017 National Intelligence Law grants powers to Chinese intelligence agencies to collect information and act in defense of national security and imposes a duty on companies and individuals to cooperate with the government and the military by providing information. Beijing could force Huawei to carry out espionage. China knows that if it controls technological development, it not only enriches its economy, but boosts its geopolitical influence.
“In China there is no concept of individual freedoms as we understand them in the West. That’s why when they say, ‘no, it’s okay, the Chinese government is not going to have access to information,’ it’s not true. In China there are no private companies, there are seemingly private companies with a strong state control,” Chacón insists. Myers, for his part, states that, from a data security perspective, “there are obviously real concerns, especially because Huawei is committed, by law, to hand over information to the Chinese authorities at any time […].”
Countries such as the United States, Canada, the United Kingdom, and Australia have already banned Huawei’s 5G network. While other major powers such as France and Germany have begun to implement restrictions.
It will dawn and we will see, whether the dragon brings silk or spits fire
While China sees opportunities to expand its capital in Colombia, it does not have it easy, said Guzmán of Risk Analysis, for whom China and Colombia “do not share the same political values, including the values of elections in democratic governance, respect for the human rights of ethnic and religious minorities, and the legitimate rights to have political opposition.”
In addition, Colombia’s strong political and economic ties with the United States remain its strongest shield. In the words of Myers of the Inter-American Dialogue, “a stronger alignment between Colombia and China would be a very critical step because it would inevitably mean a decline or weakness in alignment with the United States.”
But China is tremendously strategic and seems to know each country’s rules of the game well. “China has been trying to win tenders in Colombia for years, but only now is it starting to win projects because it already understands that here it has to follow rules and that it cannot apply the same strategy it uses in other countries,” Guzmán added.
Contrary to what one might think, the fact that Colombia is not yet part of the Belt and Road Initiative (BRI), launched by the Chinese government in 2013 to develop trade routes connecting China to the rest of the world and invest in infrastructure, and to which 21 countries in the region have already adhered, has not proven to have a significant impact on bilateral relations between the two countries and proof of this is that China has already been awarded the largest infrastructure projects in the country. However, according to Myers “if, for example, Colombia decided tomorrow to sign up to the BRI, it would not make a big difference in the course of China-Colombia relations and would not change much […].”
The question is whether there is a Colombian strategy for what is to come. Experts claim that Colombia does not have a clear economic policy in its relations with China and this will prevent the South American country from fully understanding the risks involved in a boom in its relationship with China. “Colombia does not have a coherent and sustained foreign policy approach toward China, which shows that the government is not prepared for a deepening of its relationship with China from an economic, geopolitical, strategic, and monitoring point of view,” Guzmán said.
Colombian President Gustavo Petro is expected to make a state visit to China in the second half of the year, probably in October. A visit in which important bilateral commitments will be unveiled. “I have received an invitation from the Chinese government to talk about their work in Colombia and establish the future of our state and social relations,” the president tweeted.
For former Ambassador Monsalve this visit does not promise major changes. “The Chinese are very pragmatic and have been weaving the idea of investing more in Colombia, however, the current security problems with which they have been affected will prevent major advances in investment,” he said.
The relationship between the governments of Colombia and China is just beginning, everything will depend on what Colombia knows to handle this new relationship. “We should not overestimate China’s presence in Latin America. This power seeks to extend its influence in the world, and we are part of that strategy. But we should not underestimate it either. We are not talking about just any country, but the most powerful communist country in the world,” political expert Chacón concluded.
