Chinese infrastructure projects in Africa attract unusual scrutiny and hysteria. The reality is that Chinese inroad in South America appears more extensive and breath taking than what obtains in Africa. Bai Yunyi of Global Times writes of China deep incursion into Argentina as a case study for Latin America.
China has taken on ambitious and large-scale infrastructure projects in Argentina. These projects have been condemned or promoted in domestic power struggles for one side to gain advantage over another. The projects have ultimately continued because of a focus on providing benefits to the people rather than currying political support
Blowing its whistles, a freight train runs along the Belgrano Cargas freight rail network on the vast grassland of the Pampas,Argentina. Just a few years ago, the railway network was in dire condition,buried in wild grass and stones. But today, it’s shining with newopportunities. The Belgrano Cargas railway line was first established in 1876.Linking northern and western Argentina with Buenos Aires, it covers Argentina’sagricultural heartland and connects producers with the eastern exporting hub ofRosario.
However, in the past 20 years or so, due to Argentina’s changing policies and shaky economy, most of the railway was in bad repair. During the worst time, only 1,400 kilometers of the 7,409-kilometer cargo railway were in operation. The average speed of cargo trains was less than 30 kilometers per hour, and accidents were common.
A Chinese company is giving a second life to the railway. In December 2013, China Machinery Engineering Corporation (CMEC) signed a contract with Argentina to revive a 1,500-kilometer section of the railway. Yin Zhixin, its project manager, told the Global Times that since the project kicked off in September 2014, 500 kilometers have been completed so far. The entire project is expected to be completed by 2019. China has also delivered 107 locomotives and 3,500 rail cars.
“Trains are already running on the 500-kilometer section that has finished construction. According to our plan, it can reach a speed of up to 80 kilometers per hour, and each locomotive can carry as many as 100 rail cars. Even now, when the signal system has not been fully finished, the trains can already run at 50 to 60 kilometers per hour, which is much faster than before,” Yin told the Global Times.
In addition to speed, the renovation project is also bringing in an obvious boost to freight traffic. According to Argentina’s Ministry of Transport, Belgrano Cargas freight traffic hit a 20-year high this July, transporting 180,722 tons of freight. This is a 139 percent increase from July 2015 when it carried 75,502 tons of freight.
In the meantime, the cost for freight traffic dropped 40 percent since the cooperation with the Chinese company, according to Guillermo Dietrich, Argentina’s minister of transport.
On the construction site, Argentine workers are changing the earth beneath the tracks, adding stones on them and tamping them. On another site, another group of workers are busy checking and welding steel tracks. They may not know that the project will change many people’s lives in Argentina.
Previously, corn and soybeans had to be delivered by truck, which was low in delivery capacity and costly. This has undermined the competitiveness of Argentina’s grain prices in the global market. The renovated railway will become a strong shipping platform for Argentina’s agricultural exports.
It will also revive many farms in northern Argentina which had been abandoned, and likely improve the livelihood of numerous farmers and workers in the region. For a country that’s short of foreign reserves, this project will also provide favorable conditions for improving its trade balance and for earning foreign reserves through exports.
Southernmost power plants
Patagonia, Argentina, is almost the southernmost region in the world. Its stunning blue sky, unspoiled forest and the magnificent Glaciar Perito Moreno all signify one of the ends of the world.
This won’t stop Chinese companies and projects from reaching there. About 200 kilometers to Glaciar Perito Moreno, Chinese construction and engineering company China Gezhouba Group Company (CGGC) is working with Argentine companies to build two hydropower projects collectively called the Condor Cliff and La Barrancosa dams project.
In order to prevent environmental damage, the companies adjusted the water level of the dam 2.4 meters lower than the previous design. In addition, fish passages and water holes have been added to meet the environmental requirements of local residents.
Yuan Zhixiong, a deputy manager of Gezhouba Group, told the Global Times that the Condor Cliff-La Barrancosa project is not only the southernmost hydropower project in the world, but also the biggest project between China and Latin America, with a total investment of $5.3 billion. It’s also the biggest overseas project by a Chinese company overseas and the biggest energy project under construction in Argentina. The project is expected to boost the nation’s power supply by 6.5 percent.
Argentina has always been troubled by a shortage of electricity. During its midsummer, in the second half of December, power failures often spark complaints from locals. Residents will have to cope with scorching heat at home as air conditioners and electric fans stop working, and department stores and schools will be in the dark.
The importance of the Condor Cliff-La Barrancosa project is obvious. According to Yuan, generating an annual power supply of around 5,000 gigawatt hours, the two-hydropower plants will be able to satisfy the electric needs of 1.5 million households and save $1.1 billion of foreign reserves on fuel imports each year.
According to the plan of Gezhouba Group and its Argentine partners, the project aims to be completed in April 2022. It’s not easy to reach this goal. The extreme weather conditions in Patagonia have made construction utterly difficult, and Chinese technical staff and Argentine workers often need to weather fierce wind in heavy coats and helmets.
Despite the difficulties, many Argentine locals hope they can be part of the Chinese project. Yuan said during the peak of construction, Gezhouba Group hired over 5,000 workers. More than 80 percent are Argentines. This has been a big contribution to local employment. In addition, most of the materials, such as steel bars and cement, and equipment used in construction, are bought in Argentina, which boosted the growth of local industries. Yuan estimates that indirectly, the project can provide altogether 15,000 to 20,000 job opportunities to Argentina.
Risks, controversies and prospects
Chinese infrastructure projects have not always gone smoothly in Argentina. Many have experienced obstacles and challenges and progress has been slow.
Take the Condor Cliff-La Barrancosa project as an example. Gezhouba Group was awarded the contract in 2013 when Cristina Fernández de Kirchner served as President of Argentina. But after she stepped down in 2015, the project went through new negotiations with the government and was questioned by environmentalists and local residents. In 2016, it was suspended by an Argentine court, and was revived in October 2017.
Many think the project became involved in Argentine’s political struggles. The project, being one of the most important projects by Cristina Fernández de Kirchner, was formerly named after Kirchner’s late husband Néstor Kirchner, also a former Argentine president. Its strong connections with the Kirchners added to its political risks after their political rival, Argentina’s incumbent President Mauricio Macri took office.
“Political risks are the major risk Chinese companies face in Argentina,” Yin told the Global Times. He said political struggle is often intensive in Latin America. “Using every possible means to defeat the opposition party is very important and common here. In some way, Chinese companies and projects often become a victim,” he said.
Unlike European and North American countries where democracy is more mature, in Argentina, elections often result in complete reshuffles in the government and even executives in State-owned enterprises. This often results in a lack of consistency in political strategy and administration, and in turn brings uncertainties and pauses to the approval of projects with China.
Ernesto Taboada, executive director of the Argentine-China Chamber of Production, Industry and Commerce, said the political environment in Argentina is more complicated than many people can imagine, with labor unions and environmental NGOs being an important political force.
“The slow progress is not the fault of Chinese companies, but the traditional style of Argentina’s politics,” he told the Global Times.
“For example, the railway project may threaten the interest of the truck trade union, and they will find every excuse to protest to the government,” he said.
Taboada’s advice to Chinese companies is that they should not take sides in Argentine politics, and should put more attention on what real benefits these projects can bring about. “In fact, the projects that are ongoing in Argentina are all ones that can bring benefits to both sides,” he said.
Profitability and the “debt trap” it potentially brings to Argentina are another two issues surrounding Chinese projects that have been hyped up by Western media in recent years. Whether historically or at present, the debt crisis is the sword of Damocles hanging over Argentina. In the past 200 years, Argentina has defaulted eight times, including the massive default in 2001 which was regarded as the biggest sovereign debt default in history. One major reason is its lack of foreign reserves. Some foreign media therefore thinks that Chinese projects in Argentina will worsen this situation.
However, both Yin and Yuan disagree. Yuan told the Global Times that the total investment of the Condor Cliff and La Barrancosa dams is $5.3 billion, while they are expected to generate $1.1 billion in earnings each year.
Yin, of CMEC, said Argentina borrowed $3 billion from China for the Belgrano Cargas railway project, which isn’t a very big burden for the country. While the country does face economic challenges, its economic condition has recovered from its 2001 depression and is much better than many countries in the world.
Enrique Dussel, former counselor at the Economic Commission for Latin America and the Caribbean (CEPAL), said a country’s debt condition usually depends on its own financial policies, rather than its Chinese projects.
“Infrastructure projects cost a lot of money and no country would offer them for free. This is a test of a country’s strategic vision: What kind of infrastructure does your country need the most? Projects that look glamorous but are useless, or those that can serve the public, commerce and the society? Have you made enough plans before to clear the debts using various funding and payment methods?” ,hee told the Global Times.
“Latin American countries have a long history of foreign debt for complicated reasons. Blaming China is unfair.”
*This article was first published in Global Times