China in Latin America: Seeking a Path Toward Sustainable Development

Rebecca Ray, a fellow at the Global Economic Governance Initiative at Boston University, spoke to the weekly Tufts environmental science Lunch and Learn about her research on the social impacts of Chinese investment in Latin American development. The two main questions in Ray’s research are:

  1. Has China been an independent driver of environmental and social change in the region?
  2. Do Chinese investors have different behavior from their international peers?

These questions were answered through a series of eight case studies of Chinese investment in different countries and industries from oil extraction in Colombia and mining in Bolivia to soybean agriculture in Brazil.

Findings show that China has been an independent driver of environmental and social change by quickly meeting most local standards with the right oversight. There has also been an effect of developers pushing governments to lower their environmental and social standards for resource extraction, so there are crucial roles for Latin American government officials and civil society to protect the environment and the people who reside in and alongside it. Luckily, in most cases the “pollution haven” model does not apply as Latin American countries tend to have higher standards than China.

Figure 1 below, from Ray and the Global Economic Governance Institute’s paper “China and Latin America: Lessons for a South-South Cooperation and Sustainable Development,” shows China’s share of Latin American exports over time, illustrating China’s increasing power in the region.

Figure 6 from the same publication shows the average environmental impacts of exports to China as compared with all exports, showing a much higher ecological footprint for Chinese exports. This doesn’t even cover the effect of the roads created for development projects. Every dam, mine and railway project must first build roads to deliver supplies. Once roads are built, according to Ray, new towns are developed along them that further deplete natural resources, totally separate from the extractive industry for which the roads were initially built.

Jobs generated due to exports to China are illustrated in Figure 5 below, which has been decreasing over time.

The map below demonstrates the fine line these developments must (but often don’t, especially without proper oversight) straddle between areas of immense and protected biodiversity, lands occupied by indigenous peoples, and a state’s desire for outside investment into its eonomy.

Luckily, according to Ray, Chinese investors in development are often better behaved than their peers when high environmental standards are enforced. Latin American governments have a responsibility for holding extractive industries accountable, as showcased by a lawsuit against Sinopec (a Chinese petroleum and chemical corporation) in Colombia in which the judge placed much of the blame on regulators for ineffective oversight. In cases of strong and effective oversight, regulations were followed successfully with minimal protest from surrounding communities. Pushback from civil society, as seen below, is a logical outcome when government can’t always be held accountable. This in particular when, in times of economic slowdown, governments will tend to loosen environmental regulations to spur increased investment.

Ray’s talk closed out with recommendations to Latin American governments, the Chinese government, and Chinese development banks: Don’t erode environmental safeguards, prioritize dialogue with civil society, train investors in development behavior that complies with international standards, and learn from previous experience.