China's Central
America investments a one-way street
By Danilo Valladares
GUATEMALA
CITY - The most innovative or ambitious
investments in Central America, from satellites to
inter-oceanic canals, are coming from China - even
though six of the seven countries in this
sub-region do not have diplomatic ties with the
Asian giant.
But Central America is
failing to convert China's major expansion in
trade and industry here into increased exports to
the Asian superpower.
"China's interests
have grown, and like any world power, what it has
to sell is more than it wants to buy," Jesus Garza
told IPS. The cooperative he belongs to forms part
of the Association of
Non-Governmental
Organizations of Honduras, which promotes
sustainable business development.
In
eastern Honduras, the Chinese state-owned dam
builder Sinohydro is building the Patuca III
hydropower plant at a cost of US$350 million.
Honduran President Porfirio Lobo met in September
with executives of the China Development Bank to
explore further investment in energy and
communications.
China's presence is much
more ambitious in Nicaragua, where President
Daniel Ortega signed a memorandum of understanding
in September with the recently created Hong
Kong-based HK Nicaragua Canal Development
Investment Co to finance and build a canal linking
the Caribbean Sea and the Pacific Ocean - a dream
long cherished by Managua.
According to
Nicaragua's estimates, the canal will cost $30
billion and take 10 years to build. HK Nicaragua,
headed by Chinese telecom mogul Wang Jing who is
chairman of the Xinwei Telecom Enterprise Group,
is to build a waterway that will serve larger
ships than the Panama Canal, as well as a "dry
canal" railroad for freight.
It will also
construct a deep-water port at Monkey Point, on
the Caribbean, and upgrade Corinto, the country's
main Pacific Ocean port.
Managua is also
negotiating with the China Great Wall Industry
Corporation (CGWIC) for the development and
purchase of Nicasat-1, a $300 million
third-generation satellite that will offer modern
telecom, Internet and digital TV services to
Nicaragua and other countries in the sub-region as
of 2016.
An agreement for that could be
reached before the end of the year in Beijing
between the Instituto Nicaraguense de
Telecomunicaciones and the CGWIC, which has
manufactured satellites for several countries in
Latin America, Africa and Asia.
In El
Salvador, Costa Rica and Guatemala, China has
invested in different industries, including solar
energy, oil and telecoms, through companies such
as Huawei, Suzhou Guoxin Group and the China
National Petroleum Corporation.
Garza said
that despite the positive economic effects of this
investment flow, it was necessary to monitor "what
conditions it takes place in - whether labor
rights and environmental standards are respected,
because that is the area where negative impacts
could be seen."
In Honduras, the
non-governmental Patuca Association denounced
irregularities in the environmental permit granted
to the Patuca III dam construction project by the
Secretariat of Natural Resources and the
Environment in 2011.
Central America does
not have competitive conditions to sell its
products to China. The enormous difference in
population size - 42 million people in this entire
sub-region against 1.3 billion in China - is just
the most obvious aspect.
Most of what
Central America produces is in agriculture. "But
it is not cost-effective for China to buy beans or
fruit here because of the distances and costs
involved," given that volumes are relatively
small, Garza said.
Nor has Central America
managed to establish a customs union, which would
bring a single tariff and common trade, customs
and sanitary regulations and laws, facilitating
foreign trade and competitiveness, according to
the Secretariat for Central American Economic
Integration (SIECA).
Although Central
America's sales to China have increased, the trade
balance is still heavily skewed in favor of China.
Five of the sub-region's seven countries - Costa
Rica, El Salvador, Guatemala, Honduras and
Nicaragua - sold goods worth $196 million to China
in 2004. The total went up to $220 million from
January to May 2012, according to SIECA figures.
Imports from China by those five countries
amounted to nearly $1.44 billion in that same
period.
"In the area of trade, China
cannot be denied," economist Paulo De Leon, with
the Guatemala-based consultancy Central American
Business Intelligence, told IPS.
But the
benefits to the region "are not as obvious as the
benefits seen by Chile, which is the world's
largest producer of copper, with China its biggest
buyer."
Because of the distance and cost
of transport, it is not convenient for China to
buy commodities from Central America because "the
cost would be too high," De Leon said. In his
view, the region should focus on the much closer
US market.
"We have to look more towards
the United States," he said. "We have a big market
one-and-a-half hours away by plane; we also have
Mexico and Colombia, with which we have free-trade
agreements."
On the other hand, China can
benefit the region with investment, because of
Central America's "big needs for energy, for which
Guatemala, for example, does not have the
necessary capital," he said.
Central
America is also constrained because it has chosen
diplomatic relations with Taiwan over mainland
China. But in Costa Rica, the only country in
Central America that has official ties with
Beijing, things don't look much different.
In agribusiness, "we're talking about
coffee, sugar and one or two other agricultural
products," Gilbert Ramํrez, a member of a farming
cooperative, told IPS. In Costa Rica, the
establishment of formal relations with China in
2007 "has not had a big impact on trade."
Nor has the free-trade agreement signed by
San Jose and Beijing in 2010.
"We have
talked to Chinese companies about selling coffee
and sugar, and about microcredit or credit, to
consolidate our business model through Costa
Rica's export promotion agency. But even though
some time has passed, we haven't reached an
agreement on any specific project," Ramํrez said.
The US market is still the most attractive
because "it is closer, and it understands us
better," he said, referring to cultural barriers
between Central America and China.
Central
America continues to seek trade opportunities in
China. Pedro Barnoya, a businessman with the
China-Guatemala Chamber of Cooperation and Trade,
told IPS that on October 19 a trade office opened
in Shanghai, China's financial and commercial hub
and the world's largest cargo port, "to look for
buyers for our products."
He also said "we
are working with the China Council for the
Promotion of International Trade and with private
institutions, to create a permanent committee for
negotiations with this region."
In
addition, a Guatemalan delegation was at the sixth
China-Latin America and Caribbean Business Summit,
held October 17-18 in Hangzhou, 180 kilometers
from Shanghai in eastern China.
Barnoya
said "the most important thing is to make headway
in Asia, because that is where the purchasing
power is".
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