Colombia, unlike other Latin American countries, was until recently almost immune to China’s penetration. However, this has changed significantly in recent years. According to data from the Bank of the Republic of Colombia, in 2022 direct investment from the People’s Republic of China (PRC) tripled in the Andean country. The increase in investment is largely due to the growing participation of Chinese companies in infrastructure projects — investment that come hand in hand with concerns about scandals and allegations that have marred Chinese infrastructure projects in the country.
At the heart of the matter is the Bogotá Metro, which tender was won by a Chinese consortium formed by two state-owned companies, China Harbour Engineering (CHEC) and Xi’an Metro Company. The project has already been fined for non-compliance and is under investigation for possible corruption; a situation exposed in the first part of this report. But this is not the only case. Other Chinese companies already leading important infrastructure projects in Colombia have also been subject to criticism and complaints. Here are three examples of some of the most questioned projects.
China takes over Colombia’s largest hydroelectric plant
Illustrating the saying “third time’s a charm,” China’s ambition and perseverance is such that, after two failed attempts, it was awarded the largest hydroelectric power plant in Colombia: Hidroituango. A path full of controversies and questions.
The PRC’s interest in this megaproject dates back to more than a decade ago, when in 2010 a building process for Hidroituango was opened. The two state-owned companies Three Gorges Corporation and Sinohydro Corporation Limited (a subsidiary of Power China) were at the forefront for China to win the contract. Finally, Empresas Públicas de Medellín (EPM), the entity in charge of the execution of the work, awarded the construction to locals, and China was left out, newspaper El Colombiano reported.
Twelve years later, in a new tender for the construction of the final phase of Hidroituango, Sinohydro reappeared under the umbrella of the Ituango PC-SC consortium, together with the Chinese state-owned Yellow River Engineering Consulting Co. and the Colombian company Schrader-Camargo. The bidding was declared null. “The Colombian-Chinese consortium, the only bidder, was unable to prove [that it had] the required experience, to which were added warnings from the Attorney General’s Office — an institution that defends the interests of the State — about irregularities in the process,” Luis Guillermo Vélez, economist and former head of EPM’s regulatory unit, told Diálogo.
After the failed bidding, EPM opened a second public request for bids, in which 12 firms bought participation rights. After a quick process, and despite being the highest bidder with the least accredited experience, the Colombian-Chinese consortium formed by Yellow River (this time without Sinohydro) and Schrader Camargo, won the contract for $254 million, El Colombiano reported. The decision was announced on October 11, 2023, and since then alarms have been going off about possible corruption in the process. “It is not only about the two companies that had already been rejected, but also that modifications were made in the new tender to favor the consortium,” Vélez said.
The result has also aroused suspicions among associations and experts in the construction sector, who claim that it was a planned strategy. “The EPM Professionals Union warned of the existence of a confidential memorandum with the intention of awarding the contract to a Chinese company, and so it was,” Enrique Posada, president of the Society of Engineers and Architects of Antioquia, told Diálogo.
It is striking that another state-owned Chinese company, China Gezhouba Group, was also in the tender, a situation that was not denounced, contrary to the ongoing bidding process for the second line of the Metro Bogotá, where there is a conflict of interest among participating Chinese companies that could jeopardize the process, Colombian magazine Semana reported.
For Vélez, this represents the final quest of a 20-year-old Chinese strategy, which started when China tried in 2003 to keep the contract for the construction of EPM’s Porce III hydroelectric power plant. “They asked for the project to be handed over to them in exchange for financing and construction, a plan that did not work out for them back then. Time will tell if in this expired bidding process they ventured outside the legal process, or not, to keep Hidroitunago,” Vélez said.
Hidroituango: an uncertain end
The controversial awarding of Hidroituango to China is worrying, not only because of the irregularities reported, but also when it comes to assessing in whose hands the country’s main hydroelectric power plant will be left. “Chinese companies’ record in the region is not only filled with corruption, but is also highly questionable in its quality,” said Francisco Santos, former vice president of Colombia. “One only needs to look at what has happened with our neighboring country Ecuador to understand the seriousness of the matter.” Santos is referring to the Coca Codo Sinclair project, the dam that China built in Ecuador, which, according to The Wall Street Journal, is still not operating at full capacity. Yellow River also took part in this project.
Another project in which Yellow River’s reputation raises doubts is the Fomi dam in Guinea. According to a report by Business Human Rights Resource Centre, the project was ready to begin in 2017, however, ecological concerns and environmental and social safety complaints have stopped the work — yet another reason for concern for the Colombian infrastructure sector.
“In the serious organizations of the city [Medellín] we don’t quite understand why the Hidroituango project was awarded to a company that has a [negative] track record in several countries, it’s as if it were immune to something so delicate,” José Fernando Villegas, president of the Colombian Chamber of Infrastructure in Antioquia, told Diálogo.
Power China and Colombia’s most important river
Power China Construction Corporation of China (Power China) is the Chinese company with the largest number of projects in Colombia. “They range from hospitals, solar parks, and water treatment,” Santiago Villa, a former Colombian news correspondent in China, said. Among the projects the company is developing in Colombia are the Usme Hospital and the Tibitoc Water Treatment Plant, both in Bogotá. Its most recently awarded project is the Tepuy Photovoltaic Solar Park.
But not everything has gone as Power China has hoped; it has also had unsuccessful attempts to win large projects. The double attempt, already mentioned for Hidroituango, in which Power China did not succeed, and its intent to build a deep water port in Barranquilla, are just some examples. Also noteworthy are the well-calculated maneuvers to take over Colombia’s main river, which crosses the country from south to north and is the backbone of the country’s economy and development: The Magdalena River, whose basin generates about 80 percent of Colombia’s GDP. It is the primary source of drinking water, power generation, and industrial supply. The Magdalena River and its tributaries produce wetlands, marshes, and coastal lagoons of extraordinary hydrological value and are the basis of one of the world’s greatest biodiversity.
In 2015, Power China tried to take over the contract for the recovery of the navigability of this river, which was awarded to the Navelena S.A.S consortium, led by Brazil’s Odebrecht, Reuters reported. As a result of financial defaults, the project entered an expiration process and Sinohydro once again saw an opportunity to take over the project. The Chinese state-owned company expressed without hesitation its intention to take over the contract by way of assignment. This never materialized and, according to local media, the government declared the contract expired. And that makes two.
However, it would not be surprising if China goes for a third attempt, since the Asian country’s interest in the Magdalena is not new. In 2011 HydroChina, another subsidiary of Power China, was in charge of formulating the master plan for the development of the Magdalena River. The plan was highly questioned, because, as the Attorney General’s Office informed Diálogo, “it did not count on the participation of the farming and fishing communities affected by several of its works.”
A circumstance that sets a precedent and worries experts about environmental risks, among others, if Power China finally gets the project. “This could lead to ecological devastation and massive resettlement of the Magdalena River,” said Villa. According to Villa’s investigation, among the environmental complaints against HydroChina is the extinction of the Yangtze River dolphins, in China’s Hubei province, resulting from the construction of the Three Gorges hydroelectric plant.
Sinohydro has also been involved in environmental scandals. The most controversial is the aforementioned case of the Coca Codo Sinclair hydroelectric plant in Ecuador, which threatens the destruction of the dam due to the erosion it caused in the Coca River, several reports indicated. But there is more. The company is also facing criticism in Peru, for the contract for the construction of the Amázonica Waterway. According to environmental scientists, the environmental impact study lacks crucial information and puts the surrounding communities and the planet in general at risk, due to the large amounts of carbon dioxide that would be released from the project, among other environmental consequences, German news agency Deutsche Welle reported.
The first high-impact infrastructure project awarded to China in Colombia was the Mar 2 Highway. Initially, China Harbour Engineering (CHEC) had a 30 percent share, but over time the company ended up with 65 percent of the consortium, buying out its Colombian partners. Although this type of situation usually occurs in projects of this magnitude, experts fear that it is a strategy that Chinese companies tend to repeat. “It’s interesting to see how Chinese companies’ bids start with a smaller ownership stake and then increase over time. Another example is Tianqi, a lithium company that is trying to pressure Chile to increase its stake in the Chilean lithium company SQM,” Leland Lazarus, associate director for national security at the Jack D. Gordon Institute for Public Policy at Florida International University, told Diálogo.
This project has also received criticism for other matters, such as contractors’ abuses. “They arrive at Mar 2 and the first thing they do is exploit subcontractors, because they arrive with more lawyers than engineers,” Santos told Diálogo. A situation that Santos says he witnessed and denounced at the time. “I saw when they asked an energy company in Colombia, which they wanted to contract for Mar 2, to bill them a higher amount than what they were offering them, the company did not agree, and they went to another one that did and that is what I denounced.”
The little local employment that the work created has also been exposed. Álvaro Guerrero Arango, a journalist with El Colombiano, who spent a few days in Dabeiba, the municipality where CHEC was established, told Diálogo that “there were few local people working on the project, while there were large camps for Chinese employees.”
According to El Colombiano, the Colombian Ministry of Migration reported that 2,435 Chinese arrived in Colombia in 2019 and about 609 reported Antioquia as their residence, the department where the project took place. Guerrero tried to find out directly with CHEC, how many Chinese personnel they had in the works, but it was not possible. “They don’t tell anything, everything is secret.”
In addition to all this, there are also allegations of engineering failures. According to Villa, who had direct contact with an employee of the construction site, two of the tunnels collapsed, and proof of this were photographs that showed the state in which they were found.
Is China’s money a threat to Colombia’s independence?
Colombia has stood out for its financial prudence that prevented it from falling into China’s debt trap. On the contrary, Colombia bet on a system of public-private partnerships through international bids for the development of this sector.
China did not miss this opportunity and, through its state-owned companies, entered to participate. The result: China has won the largest contracts in recent years. The Colombian sector expressed concerns about the unequal competition between state-owned and private companies and suggested that Colombia is becoming financially dependent on China.
“Chinese companies have been left alone in these processes, because no other private company is capable of competing with the financial backing they receive from the State, they do not even participate anymore and that is why China is taking all the projects,” Vélez said.
For Villegas, the presence of Chinese companies forces one to rethink the current contracting system. “With Chinese companies in the market the conditions have to be adjusted, otherwise, they will always be the favorites and there is no one to compete with the financing conditions they offer.”
A favoritism that can result in dependence on China, and a risk to sovereignty. “We are falling into an enormous trap as a society, letting China into our economy, dazzling us because they bring the machines, they put up the money,” Santiago García, civil engineer and director of the construction consortium for the first phase of Hidroituango, told Diálogo. “But in the end, all they end up doing is setting their conditions and being the owners of things, very complex conditions that hopefully will not become a headache for society.”