China's growing involvement in hydropower development in the region boosts clout but also leads to allegations of poor corporate responsibility
There has been a huge increase in Chinese dam projects in South America, which has expanded China's geopolitical clout in the continent but also drawn allegations of poor corporate social responsibility.
"China's involvement in hydropower development in Latin America has grown significantly since 2010. It's fair to say that Chinese dam-building companies are targeting the Latin American market," said Grace Mang, China programme director at International Rivers, a green non-governmental organisation in the United States.
Before 2010, International Rivers was aware of only two Chinese hydropower projects in Latin America, both in Belize, Mang said. Now, there are 22, of which three are completed, seven are under construction and 12 are on the drawing board.
The three completed Chinese dams are in Belize and Ecuador with a total installed capacity of 47 megawatts and costing more than US$30 million.
The seven being built are in Costa Rica, Ecuador and Honduras, with a total installed capacity of 2,087 MW and costing more than US$2.53 billion. Among them is the US$1.7 billion Coca Codo Sinclair dam being built by Sinohydro, a Shanghai-listed state-owned dam builder, and financed by the Export-Import Bank of China.
The 12 proposed hydropower projects are in Costa Rica, Ecuador, Guyana, Honduras, Peru and Argentina, with a total installed capacity of 5,069 MW. The total budget, which includes funding from Latin American sources, is more than US$12.25 billion, according to International Rivers.
These include two in Argentina to be built by Shanghai-listed China Gezhouba and Argentine firms with a total value of US$4 billion, which will be financed by China Development Bank and Bank of Communications.
Latin America was the second-biggest hydropower market in the world after China, said Mang. "So it's no surprise that Chinese companies want to take a share of it. The Chinese government's desire to build better bilateral relations has resulted in dam projects such as the Coca Codo Sinclair project in Ecuador," she said.
Patricia Adams, executive director of Probe International, a Canadian non-governmental organisation, said China was expanding its dam-building into Latin America partly for geopolitical reasons.
For example, mainland state-owned firms had replaced those from Taiwan to build three dams in Honduras, which recognised the island, Adams said.
Chinese state institutions were involved in the hydro-sector planning of Ecuador, said Paulina Garzon, international financial co-ordinator of the Centre for Economic and Social Rights, an Ecuadorian non-governmental organisation.
The National Water Secretariat of Ecuador maintained close collaboration with the Ministry of Water Resources in China, while the Yangtze River Chinese Institute was in charge of the management plan of watersheds in Ecuador, Garzon said.
At least half of the financing provided by China to Ecuador since 2009, comprising US$10 billion of loans in return for Ecuadorian oil, had been earmarked for hydro projects, she said, adding that seven of Ecuador's 11 hydro projects were in the hands of Chinese companies.
The rise in Ecuador's debt to China, currently more than US$7 billion, had sparked concerns over an erosion of Ecuador's sovereignty, reported the Economist Intelligence Unit.
Adams said: "There is great resistance to dam-building in Latin America and special worry about Chinese dams because of the opaque nature of China's decision-making and poor quality in these dams. The construction industry is more plagued by corruption than any other and China's dam-building industry is well known for corruption."
In November 2012, local workers at Sinohydro's Coca Codo Sinclair dam project complained at a meeting with Ecuador's Minister of Labour Relations Francisco Vacas and members of the National Assembly that they had not received all their wages and had been subject to physical and verbal abuse and sexual harassment, local media reported.
A Sinohydro spokesman said the Latin American press report was inaccurate, and Vacas affirmed on November 26, 2012, the company's compliance with Ecuadorian labour regulations.
"Strong local opposition has contributed to the view that while Latin America is a market with a lot of opportunities, it is also a very difficult market because Chinese companies are not familiar with local issues," said Mang.
This article appeared in the South China Morning Post print edition as Chinese dam builders rush to Latin America