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