In its recent report, Panama, Ecuador and China: The Dangers of Short-Term Calculations, the United States Institute of Peace (USIP) analyzes the risk of Ecuador’s increasingly asymmetrical relationship with China, which has a high social and environmental cost for the Latin American country.
“Ecuador and Panama exemplify Latin American countries’ eagerness to collaborate with China on significant economic projects. That enthusiasm often leads to short-term thinking and an overdependence on China,” the report indicates.
Free trade agreement risks
On February 7, Ecuador approved a free trade agreement with China, which went into effect in May. As such, Ecuador joined the list of 29 countries that have signed free trade agreements with Beijing, including Chile, Peru, and Nicaragua in Latin America. Honduras is in the process of negotiation, while Panama and Uruguay are discussing it for the time being.
According to the USIP report, “the agreement grants privileged access to China to 99 percent of Ecuador’s current exports, which are primarily agricultural products.” These include nontraditional Ecuadorian exports such as pitaya and pineapple. But the agreement leaves out issues such as intellectual property rights, labor standards, and environmental protection.
“Ecuador needs foreign investment. However, when evaluating bids, Ecuadorian leaders must consider environmental, social, and governance factors. Chinese companies tend to have much lower standards than U.S. companies. The lowest bid from a Chinese company may not turn out to be the best option in the long run,” foreign policy analyst Robert Carlson, a former research associate at U.S.-based think tank Global Americans, told Diálogo.
Although the trade agreement excludes more than 800 types of products in sensitive industries for Ecuador, such as textiles, footwear, metalworking, plastics, aluminum, and auto parts, concern remains about the competitiveness of Chinese products due to their low production cost and very poor labor standards.
In addition, this free trade agreement will increase pressure to exploit natural resources and food production in Ecuador, environmental associations say.
“How much water, land, forests, mangroves will have to be sacrificed to export to China? This is an unequal agreement that could have enormous environmental and social costs for Ecuador,” Diana Castro Salgado, director of environmental protection organization Latinoamérica Sustentable (LAS), told environmental journalism platform Dialogue Earth. “The agreement could pressure the government to go against a referendum in 2023, which called for an end to oil extraction in Yasuní Park,” Salgado said.
According to the LAS report, China in Yasuní-ITT, several Chinese companies operate through service contracts in oil Block 43 also known as Yasuní-ITT, which extends over almost 2,000 hectares, 100 of which lie inside the Yasuní National Park, an area of the Amazon designated as a biosphere reserve by UNESCO in 1989.
These companies are China Petrochemical Corporation (Sinopec) and Chuanqing Drilling Engineering Company Limited (CDEC, a subsidiary of China National Petroleum Corporation, CNPC). “The oil expansion in the Yasuní […] generates multiple negative and irreversible impacts, threatens the existence of an ecosystem essential to sustain the global temperature, and could cause the genocide of the Indigenous Peoples in Voluntary Isolation (PIAV), the Tagaeri-Taromenane,” reads the LAS report.
Expansion of the mining sector
The free trade agreement lacks specific provisions on mining, which, according to experts, risks giving carte blanche to China from an environmental point of view. This is the case, for example, of the country’s largest copper mine, El Mirador, operated by EcuaCorriente S.A. (ECSA) since 2019 with a 30-year concession. ECSA is a subsidiary of the Chinese consortium CRCC-Tongguan, jointly owned by the controversial Chinese company, China Railway Construction Corporation (CRCC) and Tongling Nonferrous Metals Group Holdings Co, another China state-owned company. The project recently received a new permit for the expansion of check dams that risk having a devastating environmental impact.
For months, researchers from nongovernmental organization (NGO) E-Tech International, based in New Mexico, in the United States, have been warning of the risk of collapse of El Mirador’s tailings dams.
Using computer models, the researchers demonstrated how earthquakes in a seismically active area, heavy rainfall, and structural weaknesses could trigger the collapse of the dams. This scenario would cause catastrophic landslides capable of burying people and property, as well as contaminating downstream rivers.
“Based on the current trajectory of events, the El Mirador mine dam break is inevitable. The consequences will be one of the greatest ecological catastrophes the world has ever seen,” one of the researchers, geophysicist Steven Emerman, told environmental journalism news site Mongabay.
The region’s indigenous Shuar communities and local mayors are also strongly opposed to the dam expansion. “The Condor Mirador mining project in Tundayme brings about persecution, dispossession, and contamination for the inhabitants. Considered illegal and lacking consultation, it threatens life in an area with historical and environmental value,” Jaime Palomino, president of the Shuar Arutam People (PSHA) said to Ecuadorian human rights NGO INREDH.
Chinese corruption
China’s predatory expansion in Ecuador was done by taking advantage of corruption, among other strategies. The Coca Codo Sinclair hydroelectric plant near the Reventador volcano, 90 kilometers from the capital, Quito, is a case in point. The project, which started in 2006, soon became a national scandal as it was revealed that China paid bribes to 25 people, including several high-ranking Ecuadorian politicians.
The project turned out to be of poor construction quality. The plant, built by Chinese state-owned Sinohydro and designed to provide 30 percent of Ecuador’s electricity, has never operated at full capacity. The plant was found to have more than 7,600 cracks in its distribution pipes, due to poor steel quality and inadequate welding. Added to this is the regressive erosion that is advancing toward the dam and could lead to its collapse.
“Many of the projects financed by China demanded the contracting of companies from that country, which reduced competition and transparency in the awarding processes,” economist Sebastián Hurtado, president of the Quito-based risk analysis firm Prófitas, told Diálogo.
For Hurtado, “a greater incorporation of Western investors and companies in the development of public projects would mitigate this risk to some extent.”
Technological control
With a loan from the Export-Import Bank of China (China EximBank), a consortium of Chinese companies formed by China Road and Bridge Corporation (CRBC) and China National Electronics Import & Export Corporation (CEIEC) rebuilt in 2022 the control tower and communication systems of the General Eloy Alfaro International Airport in the coastal city of Manta, in the western Manabí province. They had been destroyed in the 2016 earthquake.
Between 2006 and 2008, the United States levied sanctions against CEIEC for violating the Iran, North Korea, and Syria Nonproliferation Act. In November 2020, the U.S. Treasury imposed additional sanctions against CEIEC for supporting the Nicolás Maduro regime in its efforts to undermine democracy in Venezuela, including “restricting internet service and conducting digital surveillance against political opponents,” the sanction reads.
CEIEC, with the support of Huawei, also implemented in Ecuador the ECU-911, a surveillance and emergency response system. It consists of 16 centers that operate a nationwide network of 4,300 cameras monitored by the Ecuadorian police, from the Galapagos Islands to the Amazon.
“Latin American countries have historically been wary of foreign investment in sectors considered critical to national security but have been strangely open to Chinese technological investment. Ecuador is no exception. The Rafael Correa government used ECU-911 to spy on domestic political opponents, and because ECU-911 relies on Chinese engineers, there is a persistent risk of foreign surveillance,” Carlson tells Diálogo.
For Hurtado, the fact that successive governments have prioritized relations with the United States, including in the security and technology sector, is helping counter the Chinese threat.
“Undoubtedly, in security Ecuador has more interests in common with the United States, given the exponential growth in crime linked to drug trafficking in recent years,” Hurtado told Diálogo.
For experts, fostering greater local geopolitical awareness of the risks of China’s predatory expansion, shared with the business sectors that could be affected by it, is one of the main tools to limit it.
