Do Chinese Mining Companies Exploit More?
Do Chinese Mining Companies Exploit More?
In the Fall 2011 issue of Americas Quarterly, Barbara Kotschwar, Theodore Moran, and Julia Muir examine Chinese mining practices in Latin America.
China’s huge appetite for energy and minerals to fuel its expanding economy has strained international markets for oil, natural gas, iron ore, coal, copper, nickel, aluminum, and other resources. To satisfy China’s hunger for raw materials, Chinese companies, backed by the government, have been acquiring equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals in Africa, Latin America, Australia, Canada, and other resource-rich regions.
In fact, more than half of Chinese foreign direct investment (FDI) in natural resources is in Latin America. It is concentrated in 34 major projects that stretch from Venezuela and Ecuador through Brazil, Bolivia and Peru to Argentina and Chile. Since China launched its “going out” strategy, encouraging companies to become more competitive, total Chinese FDI in Latin America has increased nearly sevenfold, from $226 million in 2003 to $1.6 billion in 2009.
As Chinese FDI in Latin America has grown, so have concerns about the practices of Chinese companies.
Egregious violations of international labor and environmental standards, particularly in the mining sector, have been uncovered in Chinese-led investments in the Democratic Republic of the Congo, Angola and Zambia, to name a few examples. And persistent allegations of corruption and bribery offer an additional cautionary note for Latin American policymakers. “China has difficulty regulating what its companies do abroad,” writes Cynthia Sanborn of Peru’s Universidad del Pacífico, who has conducted an extensive study of Chinese investment in Latin America. “There are no incentives for Chinese leaders to take a stand on social and environmental responsibility.”
The controversial activities of Chinese companies abroad underscore the larger question about the implications of such a huge investment—and its impact on individual countries and the region as a whole. How can host-country policies in Latin America be structured (and enforced) to achieve the most benefit from Chinese resource investments—while ensuring that those benefits do not cause harm?
Access the full article at www.AmericasQuarterly.org.
Barbara Kotschwar is research associate at the Peterson Institute for International Economics (PIIE) and adjunct professor of Latin American studies and economics at Georgetown University. Theodore Moran is nonresident senior fellow at PIIE and holds the Marcus Wallenberg Chair at Georgetown University's School of Foreign Service. Julia Muir is research analyst at PIIE.
