[Marxism] China’s Ambitious Rail Projects Crash Into Harsh Realities in Latin America

Louis Proyect lnp3 at panix.com
Mon Oct 5 10:19:45 MDT 2015

NY Times, Oct. 5 2015
China’s Ambitious Rail Projects Crash Into Harsh Realities in Latin America

LUCAS DO RIO VERDE, Brazil — The ambitions are dizzying, some of the 
grandest in Latin America since thousands of laborers perished building 
railways through the forbidding jungles of Brazil more than a century ago.

China has sought to build a “dry canal” in the form of a railway across 
Colombia, linking the Caribbean to the Pacific. Chinese investors 
announced another huge venture in Honduras, two ports and a 375-mile 
railroad from sea to sea. Then this June, China announced yet another 
megarailway — nearly 10 times as long — across Brazil and Peru, 
stretching from one coast of South America to the other.

A Chinese construction truck in Oudom Xai, Laos. A planned railroad 
extension project may pose a risk to the Laotian economy and 
environment.Laos May Bear Cost of Planned Chinese RailroadJAN. 1, 2013
But across the region, one large Chinese rail venture after another has 
come crashing against the hard realities of Latin American politics, 
resistance from environmental groups, and a growing wariness toward 
China. While China boasts of its rail initiatives around the world, it 
has often been stymied here in Latin America, reflecting how even 
China’s formidable ambitions have limits.

Now, new worries over China’s economic growth are raising more doubts 
about the blitz of what China calls its “railroad diplomacy,” as parts 
of Latin America reel from their dependence on China.

The enormous twin-ocean railroad across Brazil and Peru, in particular, 
“will be a crucial test of China’s mettle as a global power and the 
potential for greater acquiescence in South America to the designs that 
China has on our resources,” said José Eustáquio Diniz Alves, a 
Brazilian scholar.

“We’re experiencing the downside of our overreliance on China now that 
the opaque Chinese economy is in flux,” he added. “Imagine what will 
happen if this railway somehow advances, bringing with it environmental 
devastation and even more leverage for China in our affairs.”

More than 100 years ago, Americans were among the foreigners who rolled 
into the heart of South America with ambitious plans to build railways. 
The ruins of their grand designs for the Brazilian Amazon, called the 
Devil’s Railway because of the thousands of workers who died building 
it, are a testament to the dangers of relying too heavily on commodity 

Officials slowly abandoned the railroad, parts of which are now 
swallowed by jungle, after rubber prices collapsed generations ago. 
These days, China is the one suffering an array of setbacks in railroad 
projects across the region, at a time when the demand for Latin 
America’s commodities — like soybeans, iron ore, copper and oil — has 

Last November, Mexico abruptly canceled a Chinese-led bid to build a 
$4.3 billion high-speed rail system after accusations that the Mexican 
government had favored contractors who were part of the consortium.

In Honduras, two years have passed since Chinese investors announced the 
railway linking the Caribbean Sea to the Pacific. Yet Miguel Servellón, 
an official with the state agency promoting the project, said it was 
“still a long way from happening,” listing obstacles like a complex 
environmental approval process.

In another project aimed at finding an alternative to the Panama Canal, 
the Colombian president, Juan Manuel Santos, said four years ago that 
Colombia and China had a plan that was “quite advanced” to build a 
railway linking the Pacific to the Caribbean. But the mood has changed 
considerably since then.

“It’s a subject that was mentioned in 2011 and subsequently had minimal 
relevance,” said Daniela Sánchez, the director of the Colombia-China 
Chamber of Commerce.

In Venezuela, Chinese companies actually broke ground on a 290-mile 
high-speed railway, part of a grandiose plan by President Hugo Chávez, 
to “rebalance” the population away from the coast.

But while Venezuela’s government boasted that passenger service would 
start in 2012, the project has been fraught for years with work 
stoppages and money shortfalls on the Venezuelan side. The Chinese 
authorities say that more than half of the railway has been built, 
though Venezuelan news media reported in June that work camps on the 
route had been abandoned.

“The process would be faster if we had abundant capital,” Liang Enguang, 
deputy general manager of the China Railway Engineering Corporation’s 
Venezuelan unit, told reporters.

An even bigger project floated by a Chinese telecommunications tycoon, a 
172-mile canal across Nicaragua, intended as a rival to the Panama 
Canal, has been met with broad skepticism about its feasibility as well 
as protests by farmers living along the proposed route.

Despite the obstacles, China has pressed ahead with the twin-ocean 
railway across Brazil and Peru, building on trade between China and 
Latin America that surged to $285 billion in 2014, from $12 billion in 
2000, according to figures from the International Monetary Fund.

Lucas do Rio Verde, a farming outpost of 70,000 people, could find 
itself almost in the middle of the proposed 3,300-mile route, raising 
hopes that it could be transformed into a major agricultural shipping hub.

But in the shadows of the grain silos towering over soybean fields and 
the meat-processing plant here, the responses have often involved more 
shrugging than jumping for joy.

“I don’t doubt that China has the money and know-how to make this 
happen,” said Ricardo Tomczyk, the president of an industry group 
representing soybean farmers. But “we know that Brazil’s bureaucracy is 
more formidable than building a railway across the peaks of the Andes.”

More enthusiastic supporters of the venture argue that the recent flux 
in the Chinese economy is merely a blip in China’s rise in Latin 
America. Though some economists have noted the steady decline in China’s 
foreign currency reserves, Chinese banks and engineering companies are 
still expected to have ample funds for the $10 billion project, they 
say, despite the recent drop in China’s currency, the renminbi.

In fact, some political analysts say that the decline in commodity 
prices and Brazil’s stumbling economy could actually enhance China’s 
bargaining power, helping it to persuade the local authorities to accept 
Chinese terms for the railway.

“Barring a more intense crisis in China, Chinese investors still wield 
enormous financial clout, far more than the strained players in the 
Brazilian market,” said André Nassif, an economist at Fundação Getúlio 
Vargas, an elite university in Rio de Janeiro.

Still, political leaders, farmers and environmental activists are eyeing 
China’s difficulties in completing railroads elsewhere in Latin America. 
They point out Brazil’s particularly nettlesome bureaucracy, its laws 
prohibiting China from hiring its own laborers, a web of auditing 
courts, and the capacity of dozens of different prosecutors to cripple 
megaprojects with lawsuits.

“On top of all that, we have a very fragile government,” said Otaviano 
Pivetta, the mayor of Lucas do Rio Verde, noting the push to impeach 
President Dilma Rousseff, who supports the Chinese railway project. 
“Sure, I’d like this to happen, but we cannot ignore the obstacles.”

China already outranks the United States as Brazil’s largest trading 
partner. But while Chinese demand for commodities fueled the growth of 
farming cities like Lucas do Rio Verde, exports of soybeans and corn are 
still largely taken to ports on deplorable public roads like BR-163, a 
1,097-mile route cutting across the Amazon.

Stretches of the road remain unpaved, raising freight costs. When it 
rains, some truckers along muddy stretches simply find themselves stuck 
for days.

Scholars of China’s ties to Latin America say the proposed railway would 
go well beyond cutting shipping costs, reflecting Beijing’s efforts to 
secure raw materials, improve its food security and find new markets for 
Chinese engineering and rail firms at a time when the nation’s economic 
growth is slowing.

“The Chinese don’t fully trust that the U.S. won’t try to restrict them 
at certain strategic choke points,” said R. Evan Ellis, a professor of 
Latin American studies at the United States Army War College Strategic 
Studies Institute, pointing to China’s reliance on shipping lanes like 
the Panama Canal.

Some political leaders in both Brazil and Peru have welcomed the Chinese 
proposal, gauging its seriousness by the fact that Li Keqiang, the 
Chinese prime minister, personally promoted the project while visiting 
both countries in May. Chinese officials agreed to deliver a feasibility 
report in about a year.

The governors of three states in the Brazilian Amazon that the railroad 
would traverse are voicing support for the railway. But even some who 
stand to benefit from it acknowledge the vexing array of challenges.

“I don’t want to be pessimistic about their railroad, but it will be 
very hard,” said Marino Franz, a former mayor of Lucas do Rio Verde.

Powerful political and business figures, whose river ports and soybean 
processing centers could be threatened by the railway, are already 
blasting the Chinese venture.

“I don’t believe in it,” Senator Blairo Maggi, a soybean farmer and 
former governor of Mato Grosso State told his counterparts in the Senate.

Beyond the opposition among powerful Brazilian agribusiness interests, 
environmental groups are also marshaling resistance to the railway, 
claiming that it could accelerate deforestation in the Amazon River basin.

Brazil’s labor laws, which make it considerably difficult for companies 
to hire foreign workers, are another potential obstacle, in contrast to 
railroads in African countries that the Chinese have built with their 
own laborers.

Then there is the record of large infrastructure failures in Brazil to 
consider. One mega-project after another has been stalled or abandoned 
in recent years, often because of corruption, lack of money, 
bureaucratic hurdles, cost overruns, or all of the above.

“With all due respect, the African countries are a little bit more 
desperate,” said Kevin Gallagher, a scholar at Boston University who 
studies China’s forays into Latin America. “In Latin America, there’s 
more red tape, some of it good, some of it bad.”

Of course, other Chinese infrastructure projects have made progress in 
Latin America, helping reshape the region. In Argentina, where Chinese 
companies are upgrading a dilapidated cargo network, imports of railroad 
materials and trains from China reached around $700 million in 2014, up 
from $50 million in 2011. In Ecuador, state-owned Chinese banks have 
already put nearly $11 billion into the country, building a dam, roads, 
highways, bridges, and hospitals.

Some in Brazil argue that Chinese companies are learning from their 
successes and setbacks. Here in Brazil, Sinopec, the Chinese energy 
producer, built a $1.3 billion gas pipeline. Now Brazilian officials are 
investigating claims of gross overbilling in its construction.

With Brazil’s economy ailing, some powerful officials are signaling that 
they may be willing to accept China’s proposal, while also suggesting 
that the railway could be pursued with a less ambitious, piecemeal approach.

“The Twin-Ocean Railway could be done in parts,” Nelson Barbosa, 
Brazil’s planning minister, said in testimony before the Senate, 
emphasizing in particular two stretches where farming groups have 
clamored for railroads.

Mr. Gallagher said the railway ranks among the largest infrastructure 
projects in Latin America in the last century.

“China will have to race up the learning curve for this to succeed,” he 
said. “If the Chinese can’t make this happen, then no one can.”

Reporting was contributed by Frances Robles from Managua, Nicaragua, 
Paulina Villegas from Mexico City, Jonathan Gilbert from Buenos Aires, 
Andrea Zarate from Lima, Peru, Susan Abad from Bogotá, Colombia, and 
Patricia Torres Uribe from Caracas, Venezuela.

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