China pours billions into Colombia,
Washington's closest regional ally
Duque, center right, meets with Xi Jinping outside the Great Hall of the People in Beijing on July 31.
Bogota metro and rail line are among the big-ticket items
U.S. worries about massive Chinese investment in Latin America
By Andrea Jaramillo and Ezra Fieser / Bloomberg
Petroleumworld 01 27 2020
For years, as China has spent heavily in Latin America, Colombia -- Washington's closest regional ally -- has stood out as the major country with the smallest Chinese investment. That's changing, and fast.
In the past several months, Chinese companies have reached deals on Bogota's first metro line, a railway to neighboring towns and a gold mining company, amounting to a bigger total investment than over the previous 15 years, according to the American Enterprise Institute 's China Investment Tracker.
Colombia's ties with the U.S., especially after the 2000 launch of the Plan Colombia counter-narcotics program, have kept it looking north. But with U.S. dependability called into question in the Trump era, Colombia is “diversifying relationships,” according to Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue.
“A number of years ago there was concern about angering the United States by engaging more extensively with China,” Myers said. “But certainly the U.S. has not been the same trustworthy and steadfast partner under the current leadership as it has been previously.”
“Done Nothing For Us”
Although Colombian President Ivan Duque is deeply pro-American and has teamed up with Washington to isolate Venezuela's Nicolas Maduro, President Donald Trump attacked him last March for his failure to curb cocaine traffic. Trump said Duque has “ done nothing for us ” and threatened to “decertify” Colombia as a partner in the war on drugs. That would lump it with Venezuela, meaning the U.S. would end most economic aid and automatically vote against Colombian loans from organizations such as the World Bank.
The White House backed away from that threat, and during a visit to Bogota this week Secretary of State Mike Pompeo said the U.S. values the “important friendship” with Colombia and will continue to prioritize it. Still, Colombians worry about the future
Last July, Duque visited Beijing where President Xi Jinping assured him that China would respect Latin America's right to pick its own development path. China, the world's second-largest economy, is on a constant hunt for new markets and sources for natural resources, even as some of its deals have fallen apart in poorer countries. Pan Deng, secretary general of the Latin American Studies Center of Charhar Institute in Beijing, says that Colombia has improved conditions for foreign investment and China is testing new models by joining consortia with foreign companies.
China says it isn't trying to compete with Washington for political influence, only to invest. The Trump administration has bristled at this however, invoking the Monroe Doctrine, a two-century-old claim of U.S. primacy in Latin America. This month, Chinese Foreign Minister Wang Yi dismissed the doctrine as “out of date.”
On Thursday in Davos, Duque was asked in an interview with Bloomberg whether he's concerned about the rivalry.
“We don't see this as a geopolitical battle,” he replied. “We see this as calling for international investment in the country. The Bogota metro was a public bid. A Chinese consortium won it because theirs was the better offer.”
Washington is especially concerned about the building of 5G networks and China's ability to control how countries are wired or communicate internally, according to a U.S. official. Huawei Technologies Co. and ZTE Corp. , both of which have been labeled potential security threats by the Trump administration, are already in Colombia.
Minister of Commerce Jose Manuel Restrepo said his goal isn't only more Chinese investment but tourists and selling Colombian farm products there.
There are growing Chinese investments in smaller Colombian industries, such as hotels and consumer industries, noted David Mauricio Castrillon, who teaches at Universidad Externado de Colombia. A ride-hailing service, DiDi Chuxing Inc. , began operating last year.
Students are increasingly considering scholarships in China, a state visit from a senior Chinese politician is under discussion and the Colombian government is talking about possibly joining China's massive Belt and Road Initiative, a global development strategy giving it extensive reach and influence. Western officials have warned that poorer countries may wind up burdened by debt when they accept loans as part of the initiative. Bolivia, Uruguay and Venezuela are members.
In fact, all of Latin America is rapidly growing more comfortable with China's money. In recent years, Brazil received $66 billion in Chinese investment, Peru $25 billion and Chile $9 billion . Chinese trade with the region jumped to $225 billion in 2016 from $12 billion in 2000, according to Jason Marczak, a director at the Atlantic Council , a Washington-based think tank. China is the biggest trading partner for Brazil, Chile and Peru.
Now China is finding newly fertile ground in Colombia, which provides it mostly with crude
“Colombia is not only about increasing access to basic commodities critical for Chinese consumers, but it's also about providing new opportunities for Chinese firms that are otherwise running out of infrastructure-building opportunities in China,” said Marczak.
In October, state-owned China Harbour Engineering Co. led a group of companies that won the more-than- $4 billion Bogota metro contract. Two months later, a separate Chinese consortium won a $1.1 billion contract to construct the rail line. And in December, China's Zijin Mining Group Co. announced it agreed to buy Continental Gold Inc. for C $1.37 billion ( $1 billion ), giving it control of the Buritica gold project in Colombia.
Juan Gabriel Perez, the head of Invest in Bogota, said given the increased investment from China he plans to hire a Mandarin speaker this year.
Besides building the metro, China Harbour Engineering, which joined China's Xi'An Metro and Canada's Bombardier Inc. , will operate it for 20 years. The group was chosen in a public process over a consortium led by Mexican billionaire Carlos Slim's Carso Infraestructura y Construccion with Spanish and French firms.
Bogota Resembles Xi'an
The company said it was attracted to Bogota, in part, because it resembles Xi'an, a city of nearly 13 million in northwest China. Both are expanding and undergoing positive social change, the company said in response to questions.
China Harbour and its parent company, state-owned China Communications Construction Company Ltd. , have won major projects across the region, including a bridge over the Panama Canal, a shipping container terminal in Mexico and a port in the Bahamas. It made its foray into Colombia last year, striking a deal to build a highway near Medellin.
Mei Xinyu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, which is affiliated with the commerce ministry, says China isn't trying to pry Colombia away from the U.S. It needs that stability inherent in that relationship.
“Chinese companies are in Latin America to do business, not to create political conflict,” Mei said. “China wants places it invests in to have normal relations with the U.S., especially if they have very close ties already. Any deterioration in economic and political relations between the two countries would impact investments, especially with large infrastructure projects.”
By Andrea Jaramillo and Ezra Fieser from Bloomberg.
bloomberg.com 01 23 2020
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