As Chinese Premier Li Keqiang prepares to travel to Brazil, Chile, Colombia, and Peru, speculation is rife that he’ll be bringing a bonanza of infrastructure investment to the region—including a rail line from Brazil to Peru.
Given the region’s appalling infrastructure deficit, a roads, railways and ports windfall should be welcome news—unless you’re an indigenous tribe in the Brazilian Amazon, but more on that later. The baited expectation raises two questions: why hasn’t the U.S. or other traditional donors invested in this critical, woefully underdeveloped area before? And is there a risk that it’s coming from the Chinese?
There’s no denying that Latin America’s level of infrastructural development is abysmal, both in the countries and—especially—across borders. To cite a few numbers, in 2011 only only 14 percent of Peru’s roads were paved (and you have to assume most of those are in the capital city, Lima), in Colombia in 2004 the number was 15 percent; even the largest economy in South America, Brazil, has only 13 percent of its roads paved.
At the same time, the bulk of Brazil’s railroads were build over 60 years ago. But worse, in a legacy of the country’s primary-product and latifundista economy from centuries ago, most of those rail links connect rural areas directly with the ports (better to ship out rubber, coffee, agricultural products and, then later, minerals and metals to external markets), at the expense of retarding a more integrated domestic infrastructure. The same is true in other countries that Premier Li Keqiang will be visiting.
And then there is the sad lack of cross-border physical connectivity. According to LatinAmericaGoesGlobal contributor Barbara Kotschwar, Latin America’s intra-regional infrastructure is woefully inadequate. The cost is that Latin American economies remain severely under-integrated. According to the Inter-American Bank (IDB), trade among Latin American countries has only reached 50 percent of its potential, even at a time when their economies and middle classes have been growing, representing potentially powerful markets for their goods.
A study done by the Inter-American Development Bank estimated that reducing transportation costs by 10 percent would have a greater effect on the region’s export growth than lowering tariff barriers by the same amount.
All of this begs the question: why does it take China to deliver this much needed injection of infrastructure? Given the proven impact on economic growth, integration, development, and—even—social inclusion, shouldn’t the U.S. and traditional donors (USAID and the IDB) been doing this long before? I suspect there are a number of answers—none of them particularly satisfying.
For one, infrastructure investment fell victim to familiar cycle of development trends. In development terms, infrastructure is so ‘70s. After the U.S. and multilateral donor community was pinned with the blame for creating a series of infrastructural boondoggles and white elephants, they begin to focus elsewhere. In the 1980s it was all about rural development; early 1990s micro-enterprise and the grassroots; mid-1990s civil society, institutions, and decentralization.
For another, there’s been a self-defeating lack of coordinated action among regional governments to appeal for cross-border infrastructure projects. While knitting together regional economies is very much in the spirit and strategy of regional investors, governments and the Asian Development Bank (the IDB’s analog to the east) in the East, no such culture or coordinated effort has existed in the Western Hemisphere.
So, China is filling a much-needed gap, right? Yes, but there is a risk. For one, there have historically been issues with open, transparent bidding when it comes to Chinese investment projects. There was the issue of the Chinese investment in a bullet train in Mexico—which frankly was overblown. But there are other cases, among them the rather strange plan by a Chinese investor—who isn’t clearly supported by Beijing—to create a second trans-isthmus canal across Nicaragua to compete with the Panama Canal. Who knows if that impractical and environmentally disastrous will ever be completed (I’m betting not), but it indicates a larger problem.
Even if the procurement process is transparent and open, there is the issue of land rights and what the International Labor Organization Convention 169 calls “consulta previa.” That right grants indigenous communities the right to be consulted when a policy or project (including infrastructure investment) impinges on their land. The planned transcontinental highway that China is planning that would stretch from Brazil to Peru is guaranteed to do that.
Will the Chinese consult? If the treatment of their communities in their own urbanization and expansion is any indication, then unlikely. It’s enough to make you wish the U.S. and traditional donors hadn’t dropped the ball on infrastructural investment decades ago—not just because we’d all be in a better position, but also because indigenous communities would be too.