Chinese Investment Threatens Brazil

The visit of Premier Li Keqiang to Brazil last week has boosted bilateral trade but is likely to further worsen the reputation of Chinese companies for harming the fragile environment in Latin America.

Li inked 35 trade and investment agreements with Brazilian President Dilma Rousseff that will see Beijing invest billions in Brazil’s decaying infrastructure. This will help build an ambitious 3,500km transcontinental railroad that will ease commodity exports to resource-starved China.

The railway will run from the Brazilian port of Santos on the Atlantic to the Peruvian port of Ilo on the Pacific. It is supposed to be completed in six years.

This project is crucial to the Asian giant as both Brazil and Peru are key suppliers to the Chinese market. Lima sends out copper and gold; Brasilia supplies iron ore and oil. Yet, it is a double-edged sword.

Li and Rousseff signed a declaration on climate change to reduce greenhouse gas emissions but they have neglected the major environmental impact the railway is likely to have. The rail network will probably worsen climate change, weaken fragile ecosystems, erode the soil, accelerate deforestation and put the livelihood of indigenous communities at risk.

Environmentalists worry that it will run through protected areas in the Amazon rainforest.

The Brazilian organisation, the Amazonian Network of Geo-Referenced Socio-Environmental Information, pointed out that the railroad would cross the lands of about 600 indigenous and protected communities. It could also spur illegal logging and encourage drug trafficking.

Chinese companies are already known in Latin America for failing to preserve the region’s biodiversity and having poor environmental standards. Such claims will only further harm their reputation, which stems from their investment in extractive industries that cause the most environmental damage.

Such industries are also a common source of social conflict among indigenous people over land rights.

Extractive industries represent over four-fifths of Chinese direct investment in Latin America and the Caribbean, according to a 2015 report from Boston University titled “China in Latin America: Lessons for South-South Cooperation and Sustainable Development”. This includes 70 per cent in oil and gas.

Chinese companies have also prompted an outcry with their investment in oil development in an environmentally sensitive area in Ecuador. Equally controversial, the Chinese-financed Nicaragua canal has triggered mass protests about fears of environmental degradation. Scientists said it could threaten wildlife.

The transcontinental railroad should have rung alarm bells, given that its predecessor, the interoceanic highway, completed in 2011, raised similar environmental concerns. The 2,600km route runs through the Andes mountains and the Brazilian Amazon.

In the end, however, Beijing should not be solely blamed for Latin America’s environmental damage. Preserving the region’s vulnerable ecosystem is a joint effort with local governments.

Brazil and Peru are keen to build the transcontinental railroad (Bolivia may be as well, if the network crosses the country).

China has vowed to invest US$250 billion in the region in the next 10 years, and hence is becoming a powerhouse. Chinese-financed mega projects could encourage Chinese companies and Latin American governments to enforce environmental laws or replace lax regulations. In this way, China has a great opportunity to drive positive environmental change.


This piece was published in the South China Morning Post on May 25, 2015. Link here. Click here to download the PDF.


Leave a Reply

Your email address will not be published. Required fields are marked *