Over the past decade, the China dragon has stampeded into the hemisphere, buying up ore, crude oil and soybeans, building dams and railways and breathing fire into the region’s economies.
But that wandering dragon now looks weary, anemic, even feeble, hobbled by an economic slowdown back home. China’s rising influence in the hemisphere seems more modest today than it did only six months ago.
It takes only a quick look at the massive Baha Mar resort and casino complex to see how far off the rails the Chinese dream has gone. Bahamian authorities once believed the dazzling 2,200-room gaming and entertainment complex would account for one-eighth of the island nation’s economy and create thousands of jobs.
A Chinese export-import bank and construction company bankrolled much of Baha Mar, and thousands of Chinese laborers toiled around the clock to build what was touted as an ultra-chic resort with four world-class luxury hotels and 40 restaurants. But money ran out earlier this year, and the project, said to be 97 percent complete, is at a standstill.
A chain-link fence surrounds the unfinished $3.5 billion complex. Grand openings were postponed twice this year as Baha Mar fell into bankruptcy and liquidation proceedings. Some 2,000 employees were laid off last month.
Now, amid reports that the plumbing system is not functional, top business leaders ponder what was once unthinkable – that the project may become a blight.
“We do not want to see it turn into an eyesore because of lack of maintenance,” said Edison Sumner, chief executive of the Bahamas Chamber of Commerce and Employers’ Confederation. “As in the case of any building, if it sits for too long without live bodies in it, without proper levels of maintenance and care, it can become a deteriorated project.”
“It really is a storybook disaster,” said Leonard Sands, head of the Bahamas Contractors’ Association. Workers from local firms hired by a subsidiary of China State Construction Engineering Corp. said “they were looking at stuff on site and saying, ‘How is this going to pass code?’ . . . You could flush something on the ground floor and on the first floor it would back up.”
Baha Mar is not the only Chinese-backed plan under a cloud in the hemisphere.
While China’s economy has been cooling for several years, signs of real trouble arose in mid-June with gyrations on the Shanghai Stock Exchange. Within a month, a third of the value of its leading shares evaporated. Aftershocks hit in late July and late August. China in the last quarter posted its slowest growth in six years.
Among those hit by the turmoil was Wang Jing, a telecommunications tycoon whose Hong Kong company in 2013 won a 50-year concession to build and operate a canal across Nicaragua to rival the Panama Canal. In June, Wang’s net worth peaked at $10.2 billion according to Bloomberg’s Billionaires Index. But the plunge of the Chinese markets squeezed Wang hard. Forbes lists his net worth today at $3.1 billion.
Whether Wang can raise the money to finance the cost of a canal that has a $50 billion price tag is in doubt. Wang has close ties with the People’s Liberation Army but Beijing asserts that it has nothing to do with the project. Only a symbolic ground breaking has taken place.
Everyone knows how important China is now for South America, and for Peru, specifically.
José Tam Pérez, Peru-China Chamber of Commerce
Shock waves from China’s slowdown now ripple across South America, where dependence on Beijing’s once gargantuan appetite for commodities has left the region with a severe hangover. Eight nations of South America list China as their No. 1 or No. 2 destination for exports. Brazil saw its trade with China climb from $1 billion in 2000 to $40 billion last year, only to watch it head off a cliff.
The Chinese slowdown has undercut prices for copper, iron ore and other metals. Every single month so far this year, China has posted a decline in its imports, leaving South American economies wincing.
The commodities shock is a big reason why the International Monetary Fund sees Latin America and the Caribbean falling into recession this year, shrinking region-wide by 0.3 percent.
Current economic travails only bring into sharper relief the inroads that China has made in the hemisphere over the past decade. Chinese state-owned companies have snapped up oil and mining concessions, built dams and highways, locked up resources and played banker to the region. In July, Chinese banks rescued Brazil’s scandal-tainted Petrobras oil giant with $7 billion in loans. China now provides more loans to Latin American than multilateral entities like the World Bank.
Political ties to Beijing run deeper than ever. Argentina, Brazil, Ecuador, Peru and Venezuela all have declared some form of strategic alliance with China. In Argentina’s remote Patagonia, Chinese workers put the finishing touches on a satellite tracking facility, China’s first overseas space station. China has launched satellites for Bolivia, Brazil, Ecuador and Venezuela.
In places like Colombia, where trade with China is not so high, Chinese diplomats avidly court politicians of all ideologies, pragmatically seeking to build influence.
“They are regularly inviting senators, party leaders, academics and others from all the spectrum of Colombian politics to China,” said Benjamin Creutzfeldt, a sinologist at the CESA School of Business in Colombia’s capital, Bogota.
Nowhere else in Latin America is there a greater open door to China than in Peru, home to the region’s largest ethnic Chinese population. At least 1.3 million of Peru’s 30 million citizens boast Chinese ancestry, and some say it may be as high as 3 million.
Chinese Premier Li Keqiang made Peru one of his three stops on a swing through South America in May. Li said that China had begun a “new historical period” with Latin America in which it would not only buy raw materials but also build infrastructure. He offered $10 billion to support construction of a transcontinental railway to traverse Brazil and Peru, the first such east-west route across vast South America.
“Everyone knows how important China is now for South America, and for Peru specifically,” said José Tam Pérez, president of the Peru-China Chamber of Commerce.
The trade is far from balanced, however. Eighty percent of South America’s exports to China are commodities, while most imports are autos, electronics and manufactured goods.
Nearly a dozen Chinese brands of vehicles cruise Peru’s roads and highways. Drive for an hour and one can see Geely, BYD, Great Wall, Chery, Lifan and First Auto Works vehicles. It is similar up and down the Andean region.
China also holds the purse strings in countries like Ecuador and Venezuela. Both countries, ruled by autocratic leftists, are largely shut out of capital markets. China has loaned or pledged some $57 billion to Venezuela since 2007, locking up future oil shipments as payment. Last year, according to state oil company PDVSA, China received an average of 630,000 barrels per day of Venezuelan fuel.
The good news is that when the proper incentives are there, the Chinese companies meet and beat standards.
Kevin P. Gallagher, political economist
In the Bahamas, bitterness toward China has set in. On Friday, 10-30 the British professional services firm Deloitte was appointed as receiver of the stalled Baha Mar project and will determine if it can be completed, or if it should be sold to the highest bidder. Apart from China’s Export-Import Bank, other investors in the project have now been sidelined, including Sarkis D. Izmirlian, a Bahamian who invested some $850 million since dreaming up the project 13 years ago.
“It’s a disaster. What they are waiting for is a white knight to come in and say, ‘I’ll buy you out for 50 cents on the dollar,’” said Scott Smith, managing director of PKF Consulting, a tourism consultancy in Atlanta.
The massive project, the largest one-time tourism investment the Caribbean has ever seen, has taught Bahamian officials to avoid such mega-projects unless they are built in stages.
Some Bahamians simply shake their heads at the thought that Baha Mar, set on a precious stretch of beachfront, might not get finished.
“You can’t believe that all that would go to waste. It’s such a beautiful asset,” said Larry Smith, a native Bahamian who runs a website called Bahama Pundit.
Nearly 2,000 employees were hired earlier this year to be ready for Baha Mar’s opening. With the company in liquidation, the government has tapped into an escrow fund to pay salaries. But that can’t go on indefinitely.
“A lot of people are upset,” said Donnette Burrows, a 21-year-old handing out fliers along the main shopping street in Nassau, within sight of huge docked cruise ships. “They left the job they already had to go there. Then they are left jobless because it hasn’t opened.”
This story and others on the growing Chinese influence in Latin America was supported by a grant from the Pulitzer Center on Crisis Reporting.
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