Historical Background

Argentina established diplomatic relations with the People’s Republic of China (PRC) in 1972. After his overthrow in 1955 and exile to Spain in the 1960s, Argentine General Juan Domingo Perón would make public his sympathy for the Chinese Revolution and the Maoist government, however, under his administration (1946–55) there was limited trade relations with the PRC at the private level.

Until 1972, with US influence in Latin America particularly strong in the context of the Cold War, Buenos Aires had recognised Taiwan as the sole government representative of China. The military dictatorship led by General Juan C. Onganía (1966–70), who was very close to Washington, kept its distance from the PRC due to the Argentine policy of ‘ideological frontiers’, which was associated with the US strategy of cutting all ties with communist countries. Since the early 1970s, however, a growing number of countries have started to recognise the PRC, especially after US President Richard Nixon’s 1972 visit to Beijing, at a time when the United States was weakened by the failure of its intervention in Vietnam, the dollar crisis, the growing economic competition from Europe and Japan, and the expansionism of the Soviet Union. In Argentina, the tough internal struggle between the factions associated with the two superpowers brought General Alejandro A. Lanusse to power in the last stage of the military dictatorship. During his term, from 1971 to 1973, he paved the way for the normalisation of diplomatic relations with Beijing, as part of a strategy of distancing himself from Washington. Lanusse also improved relations with the Soviet Bloc, abandoning the policy of ‘ideological borders’ in favour of ‘opening to the East’, which included stipulating far-reaching trade agreements with Moscow. This continued to a large extent in the foreign policy of the new Peronist government (1973–76), which sought to distance itself from the United States by strengthening diplomatic ties with both the Soviet Union and China.

After Mao Zedong’s death in 1976 and the beginning of the economic reforms under Deng Xiaoping in the late 1970s, a new stage in bilateral relations began. In Argentina, the coup on 24 March 1976 installed a violent dictatorship that would last until 1983. This regime had strong economic, political, and strategic ties with both superpowers but was increasingly leaning towards the Soviet Union. Dictator Jorge R. Videla (in power from 1976 to 1981) consolidated trade relations with the Soviet Union, while at the same time building political relations with Beijing, encouraged by the changes taking place in China and the normalisation of relations between Washington and Beijing in 1979. In June 1980, Videla paid a six-day official visit to China, where he signed a series of agreements on the sale of meat and grain and on scientific, technological, and financial cooperation. These agreements helped to lift Argentina’s dictatorship out of international isolation following the 1976 coup, and to counter criticism from the international community of the brutal human rights violations perpetrated by the regime.

After the return to a constitutional regime in December 1983, the government of Raúl Alfonsín (1983–89) intensified diplomatic relations with China as part of a strategy of international reintegration to widen Argentina’s autonomy vis-a-vis the United States. Alfonsín’s visit to China in 1988 added military cooperation to the bilateral agenda, which until then had been largely associated with grain sales.

In the 1990s, the end of the Cold War and the global hegemony of neoliberalism shaped bilateral relations during the two successive governments of Carlos Menem (1989–99). As trade with the Soviet Union had been in decline since 1986, Argentina sought to replace Moscow with Beijing as a trade partner. This was why the Menem government did not support Western sanctions against Beijing after the crackdown on the Chinese democratic movement in 1989. Although Argentina’s strategic realignment with the United States in the early 1990s took precedence over bilateral relations with China, President Menem politically supported China’s aspiration to join the World Trade Organization (WTO) after his re-election in 1995 and Argentina continued to back China’s attempt to be recognised as a ‘market economy’ even as the controversy continued long after China’s accession to the WTO in 2001.

After the deep economic, social, and political crises of 2001 in Argentina, the 12 years covered by the presidencies of Néstor Kirchner (2003–07) and Cristina Fernández de Kirchner (2007–11 and 2011–15) marked a qualitative leap in bilateral relations with China. China became a major trading partner, investor, and key source of financial support for the Argentine Government. The ‘strategic partnership’ that Argentina established with China in 2004 was upgraded to a ‘comprehensive strategic partnership’ in 2014.

Despite some initial distancing from the government of the conservative Mauricio Macri (2015–19) due to the reorientation of its foreign policy towards the United States, trade, financial, and investment relations with China remained stable, and intensified again in the context of the COVID-19 pandemic under the presidency of Alberto Fernández, which began in December 2019.

Current bilateral relations between Argentina and China are not exceptional within Latin America. China is the first or second destination for exports and origin of imports, investment, and loans for most Latin American countries, many of which have established ‘strategic partnerships’ of various types with Beijing.

BRI Status

Bilateral relations between Argentina and China must be understood in the context of Latin America, since the countries of the region generally share similar economic processes rooted in a common historical-social matrix, although with differences due to their respective political evolution. China is already the first or second-largest destination for exports and origin of imports, investment, and loans for most countries in Latin America and the Caribbean (LAC) and, in the past decade and a half, various countries in the region have established ‘strategic partnerships’ of various kinds with China.

In the first days of February 2022, during his visit to Beijing for the Winter Olympics, Argentine President Alberto Fernández concluded a long series of economic and political agreements with his Chinese counterpart, President Xi Jinping. Despite the objections of the US Government, Argentina joined the Belt and Road Initiative (BRI) (in contrast with Brazil, Mexico, and Colombia—the major economies in Latin America that have not yet done so). The agreement cleared the way for Argentina to receive 23.7 billion USD of financing for projects at the national and provincial levels in areas such as transportation, education, science and technology, agriculture, and hydroelectric and nuclear power. Some preexisting projects already approved and under way (for instance, the Belgrano Cargas railway and two dams in the province of Santa Cruz) will receive new impetus, while new projects still waiting for approval (gas pipelines, electric power lines) were added. The Sino-Argentine joint statement expresses the intention to promote the expansion and diversification of bilateral trade, and to intensify Chinese financial support for exports to Argentina. According to the statement, ‘options were explored to increase the participation’ of Argentine supplier companies in Chinese infrastructure projects in the country, although the document stops short of putting forward any specific measure in this regard.

Along with Argentina joining the BRI, the 2020 currency swap agreement was renewed, thus promoting the greater use of national currencies in bilateral trade and investment. China also pledged to intercede with the International Monetary Fund (IMF) to facilitate Argentina’s access to the IMF’s Special Drawing Rights, which would enable the Argentine Government to access new external financing as the country’s reserves are depleting.

The agreements signed with China were finalised a few days after a pre-agreement (pending parliamentary approval) between the Argentine Government and the IMF regarding the repayment of a loan of 57 billion USD the IMF had granted to the previous conservative government of Mauricio Macri in 2018—a loan that at the time had Beijing’s endorsement. However, these funds (the 46 billion USD actually received) were not used for productive or social purposes: one portion was used to pay external debts to foreign banks, while another left the country in a ‘currency flight’. The current joint statement confirms the financing obtained from Beijing will be used for infrastructure and cultural development projects, although it must be noted that such financing is not aimed at promoting the productive and technological capacity of Argentina, and could further increase its indebtedness, while existing debt servicing is already strangling the country’s finances.

On a regional scale, although the trade and investment agreements and China–LAC cooperation institutions are labelled bilateral and often presented as part of an agenda of cooperation, sustainable development, and mutual benefit, the investment agreements now finalised—like almost all previous ones—are unidirectional (from China to LAC). Many involve trade concessions or the direct signing of contracts (that is, without prior bidding), which is not substantially different from the exchange, investment, financing, and cooperation style of other global powers.

President Fernández’s agreements have also strengthened the Comprehensive Strategic Partnership at the political level. President Xi promised to support Argentina’s entry into the BRICS group (Brazil, Russia, India, China, and South Africa)—which has its own development bank for financing projects—and backed Argentina’s historical claim of sovereignty over the Malvinas Islands; for its part, Argentina reiterated its support for Beijing’s One-China Policy. Both governments agreed to underline the importance of the G20 as a leading forum for international economic cooperation.

Current Economic Relations

Trade: China has been among Argentina’s top trading partners in recent years. Until 2008, the trade balance was in favour of Argentina. However, since then, the balance has reversed, with an average annual deficit close to 4.5 billion USD in the following decade. China is today Argentina’s main export market for agricultural products. It buys mainly soybeans (28% of total exports to China), frozen beef (17%), grain sorghum (14%), grain barley (8%), animal and vegetable fats and oils (7%), and bird meat and offal (3%). In 2019, China was the destination for 75% of Argentine meat exports. Exports of wine and fish products to China also grew. Argentina is one of China’s major sources of beef imports. The rapid growth of meat exports to China since 2019 has raised the expectations of the Argentine ruling classes of a new boost in livestock exports, given the troubles of the local economy. Meanwhile, Chinese exports to Argentina include printed circuits for mobile phones, parts for electrical appliances, radios, glyphosate, automatic machines for dataprocessing, and other industrial products.

Today China also has a substantial presence across the entire production chain for soybeans, which are Argentina’s main exportable product, from the supply of seeds to the control of export ports. Added to this are the large investments in key export sectors (mainly agri-food items such as soybeans, barley, soybean oil, chicken, and beef), including the acquisition by the Chinese state-owned food processing giant COFCO Group of 100% of the local subsidiaries of Nidera and Noble Agri, making it a leading firm in oilseed milling in Argentina. In 2018, the COFCO Group exported the highest volume of grains and derivatives among companies in Argentina.

Investment and Financing: Along with the intensification of trade relations between Argentina and China, Chinese investment increased markedly. The oil, mining, and infrastructure sectors see intense competition among Chinese, European, Russian, and US corporations, with the backing of their respective states.

Chinese companies have investments or are involved as contractors in a wide range of activities: oil, through CNOOC and Sinopec; energy projects (the Atucha III nuclear power plant, with its Chinese technology and capital; Condor Cliff and La Barrancosa hydroelectric dams in Santa Cruz Province; and a photovoltaic solar energy plant in Caucharí, Jujuy Province); aerospace activities (the Bajada del Agrio Space Station in the Province of Neuquén); surface and underground railway projects; mining (the Veladero gold and silver mine; lithium and potassium mines in the provinces of Salta and Jujuy); electronics assembly plants; soy and its derivatives (flour and oil), biodiesel, and cattle in the Pampas region; and financing and swaps.

Chinese direct investments in and loans to Argentina are growing. They have been used to replenish the foreign reserves of the central bank and to buy products from China, as well as hiring Chinese companies for the construction of infrastructure projects. After the signing of more than 30 bilateral economic agreements in December 2018, the Argentine Ambassador in Beijing, Diego Guelar, stated that China is today the ‘first investor, the first banker, and the first market for Argentina’.

The agreements that are currently being implemented include the construction or improvement of important railways linked to the soybean export complex—for instance, the renovation of the Belgrano Cargas and San Martín Cargas railways, to facilitate access to the Pacific Ocean. The renovation involves not only financing from China, but also the import of Chinese-made locomotives and wagons. In this way, Argentine governments are allocating large financial resources to the purchase of industrial and capital goods from China, instead of directing them to the reactivation of Argentina’s once advanced domestic railway industry—a situation that has been the subject of criticism and debate in political and academic circles in Argentina.

Consecutive Argentine governments have requested currency exchanges with China. The first, for about 10.5 billion USD, was agreed to in 2009 by the government of Cristina Fernández de Kirchner and expired in 2012 without having been used. A second swap, for 3.8 billion USD, was signed by the same government at the end of 2014 and extended in 2015, and then renewed for three years by the Macri government in July 2017. The Joint Action Plan 2018 agreed to expand this second currency exchange by 8.7 billion USD, which was renewed in July 2020 by the current government of Alberto Fernández. The exchanges amount to a total of 130 billion yuan—equivalent to almost 20 billion USD. At the time of the last renewal in July 2020, this amount represented 42% of the reserves (43.35 billion USD) of the Central Bank of Argentina.

At a meeting prior to taking office in December 2019, President Fernández and President Xi’s envoy, Arken Imirbaki, Vice-Chairman of the National People’s Congress, discussed the construction of a fourth nuclear power plant in Argentina, which would use exclusively Chinese technology and be financed with a loan of 9 billion USD from China. The Argentine President expressed his willingness to join the BRI, and the Chinese authorities also showed interest in the strategic waterway of the De la Plata and Paraná rivers, connecting Argentina with Bolivia, Brazil, Paraguay, and Uruguay.

Following the outbreak of swine flu in China in mid-2020, Argentine and Chinese authorities agreed to establish 25 megafarms for pig production in Argentina—financed by China and for export to the Chinese market—but the project was postponed twice. This is a government-to-government agreement, which would be implemented by the private sector in both countries. The project is highly controversial because of the serious implications for public health of techniques already used in many countries for intensive pig production (some have described it as a ‘pandemic factory’) and because of the risk it will increase Argentina’s industrial and financial dependence on China.

Aid: Argentina is not a major recipient of aid. However, during the COVID-19 pandemic, Beijing donated and assisted with the assembly of modular hospitals. Argentina also purchased medical supplies and vaccines from China.

Key Controversies

Asymmetric Trade: Since 2008, bilateral trade has been asymmetric in terms of both trade balance and trade composition. Trade with China has reinforced Argentina’s specialisation in the export of primary goods—primarily, agri-food—and its dependence on imported industrial goods and foreign capital. While political and business leaders, as well as academics, have repeatedly called for trade diversification and value-adding to the exports to China, these recommendations have not been heeded. Many have proposed overcoming these imbalances by attracting investment from China for the establishment of new industries (such as the installation of large pig farms for intensive production) or big infrastructure projects. But so far this investment has not helped to stop the entry of massive amounts of Chinese industrial goods to the detriment of national production. Instead, it has consolidated Argentina’s old primary-export specialisation and the country’s tendency towards deindustrialisation.

Financial Dependence: The increasingly frequent appeals to Chinese financing—both to sustain Argentina’s foreign exchange reserves and to fund construction projects—contribute to a dependent economic structure. The currency swap with the Chinese central bank in November 2020—equivalent to nearly 20 billion USD—constituted 50.3% of Argentina’s international assets. This is significant given the renminbi is not yet a freely convertible currency and renminbi assets can only be used to pay for imports from China, to remit profits from Chinese companies, or to finance Chinese projects.

Strategic Conflict between the United States and China, and Hindrance of Latin American Integration: The willingness of the Fernández government to join the BRI coincides with other Latin American countries’ reconfiguration of their international engagements, as they associate their development strategies with China—the rising power that provides them with a market, industrial goods, investment, and financing. The gradual adaptation of national economic policies to the priorities of the Chinese partner could lead to a strategic alignment of Latin American countries with China in a possible conflict with the United States. However, the presence of powerful interests linked to the great powers in Latin American countries accentuates the divergent orientations of the governments in the region and hinders the long-delayed integration of Latin America.

Key Sources

Media:

There are very few English-language media outlets in Argentina, and the few that exist are foreign and not objective. Among Spanish-language print media, several are strongly anti-Chinese (for instance, InfoBAE, and the newspapers Clarín and La Nación), while others are very vocal in favour of the strategic partnership with China (Página12). On issues of bilateral relations with China, a good source of information on the internet is LaPoliticaOnline and the platform China en América Latina.

Books, Reports, and Scholarly Articles:

Laufer, Rubén. 2017. ‘Argentina y su asociación estratégica con China en la era Kirchner [Argentina and its Strategic Partnership with China in the Kirchner Era].’ Jiexi Zhongguo: Análisis y pensamiento iberoamericano sobre China (22). Link.

Laufer, Rubén. 2019. La asociación estratégica Argentina–China y la política de Beijing hacia América Latina [The Strategic Partnership between Argentina and China and Beijing’s Policy towards Latin America]. Centro de Estudios Latinoamericanos, Universidad Nacional de San Martín. Link.

Mangione, Germán. 2021. ‘China: relación complementaria o subordinación y dependencia [China: Complementary Relationship or Subordination and Dependency]?’ Agencia Tierra Viva, 26 March. Link.

Oviedo, Eduardo Daniel. 2000. La política exterior argentina hacia China (1945–1999) [Argentina’s Foreign Policy towards China (1945–1999)]. Universidad Nacional de Rosario. Link.

Romero Wimer, Fernando G. and Paula Fernández Hellmund. 2016. Los capitales chinos, el agro argentino y algo más [Chinese Capital, Argentine Agriculture, and More]. Universidad de Buenos Aires, Facultad de Cs. Económicas, Biblioteca Digital. Link.

Svampa, Maristella. 2020. ‘Argentina será la nueva fábrica de cerdos para china [Will Argentina be China’s New Pig Factory]?’ Observatorio Plurinacional de Aguas (OPLAS), 31 July. Link.

Updates & Corrections

23 February 2022: The section on the Belt and Road Initiative has been substantially revised and updated in light of Argentina joining the initiative earlier in February.

Historical Background

Sino-Cuban relations date to the mid-nineteenth century, when the first groups of Chinese indentured workers arrived to work on Cuban sugar plantations. The working conditions for this population, which were investigated and documented by a Chinese imperial mission in 1873, were overwhelmingly poor and unfree. The number of Chinese workers in Cuba eventually totalled more than 150,000, making Cuba the site of one of the largest Chinese diasporas in the region at the time (alongside Peru) and leading to the formation of Havana’s famed Barrio Chino (Chinatown). Chinese community organisations were established throughout the island, including the Casino Chung Wah, which is still active today. Chinese migrants also fought in the Cuban wars of independence beginning in 1868, and several military leaders of the 1959 Cuban Revolution were of Chinese descent.

Following the establishment of the People’s Republic of China (PRC) in 1949, the relationship between Cuba and China took a somewhat distinct trajectory from that of the rest of Latin America because of the ideological commitments of the Cuban Revolution. In 1960, Cuba under Fidel Castro became the first country in Latin America to recognise the PRC—a fact that is frequently referenced by both Cuban and Chinese officials in contemporary diplomatic relations. However, relations soured in the mid-1960s due in large part to the Sino-Soviet Split and Cuba’s allegiance to the Soviet Union. The relationship was to remain chilly for nearly 30 years.

In the wake of the collapse of the Soviet Union in 1991, Cuba entered a severe economic crisis (known in Cuba as the ‘Special Period’) and made substantial adjustments to both domestic and foreign policy to mitigate the loss of its greatest economic and political ally. This included rapprochement with China. Fidel Castro first travelled to China in November 1995 for an extended diplomatic visit. In 1996, Cuba and China implemented a new trade framework based on hard currency rather than the previous barter system. During the 1990s, China shipped hundreds of thousands of bicycles to Cuba to help meet the island’s need for transportation in the face of severe fuel shortages, eventually setting up a bicycle factory on the island with Chinese capital and technology. Bicycles remain a symbol of the Special Period for many Cubans.

Since the early 2000s, economic engagement between China and Cuba has grown substantially (mirroring a broader pattern across Latin America), particularly with regards to trade but also including foreign direct investment (FDI) and concessional lending. High-level diplomatic visits and economic cooperation agreements have become regular occurrences.

Further, both international and Cuban observers have speculated that China’s gradual economic liberalisation and subsequent growth could prove to be a model for Cuba despite the obvious differences in scale of the two economies. Across Latin America, China is perceived by some as a model for development due to its rapid economic growth and poverty reduction since the 1980s. For Cuba, viewing China as a role model is even more salient due to their political and ideological commonalities: China represents the possibility of growth under a one-party system and the gradual implementation of market reforms in a socialist economy. As such, China is a source of not only allyship, but also political legitimacy.

Indeed, Chinese officials since the 1990s have actively encouraged Cuban leaders to move towards ‘market socialism’. Although Castro (Cuba’s leader from 1959 to 2008) was reluctant to undergo these kinds of reforms, there is evidence his brother Raúl Castro (Cuba’s president from 2008 to 2018) was more enthusiastic about emulating Chinese-style socialism. China’s Reform and Opening Up may have been an inspiration for Raúl’s market-oriented reforms during his presidency—formalised in the 2011 Lineamientos de la Política Económica y Social del Partido y la Revolución (Guidelines on the Social and Economic Policy of the Party and the Revolution)—which included loosening restrictions on private enterprise, foreign investment, and property. However, the transition to a market economy has been much more gradual and halting in Cuba than it was in China—allegedly leading to frustration on the part of Chinese leaders and businesses. Today, China is undoubtedly one of Cuba’s top diplomatic allies and economic partners. Officials and state media in both countries describe the relationship, in the language of South–South cooperation, as mutually beneficial under the diplomatic label of ‘good brother, good comrade, good friend’. While one might expect a celebration of socialist solidarity in this bilateral relationship, unlike Cuba, China typically shies away from explicitly anti-capitalist rhetoric. Despite speculation that China may grow to replace Cuba’s previous economic benefactors, the Soviet Union and Venezuela, Chinese economic policy has thus far fallen short of filling those shoes.

BRI Status

Cuba was among the first countries in Latin America to sign a memorandum of understanding (MoU) to join the Belt and Road Initiative (BRI), on a state visit to China by President Miguel Díaz-Canel (in office since 2019) in November 2018. This trip was one of Díaz-Canel’s first state visits as president on a diplomatic trip that also included Russia, North Korea, Vietnam, and Laos. Cuban officials and media outlets emphasised Cuba’s aspiration to attract Chinese investment as part of the BRI, as well as highlighting the agreement as a continuation of the two nations’ solidarity. An exhibition in Cuba’s national library, the Biblioteca Nacional Jose Martí, in the same year contained images of successful BRI projects around the world, accompanied by a Chinese donation of televisions, computers, and Spanish-language translations of Chinese books.

Despite the formal agreement, few BRI projects materialised in Cuba. According to the China–Latin America Finance Database, Chinese policy banks have made no new loans to Cuba since 2017 (pre-2017 loans totalled 240 billion USD). However, some forms of aid and investment have been labelled as part of the BRI, including the expansion of digital television, 3G and 4G mobile phone technology, and public wi-fi hotspots using Chinese equipment. Further, in 2021, Cuba signed two additional BRI agreements that may pave the way for future projects. In October 2021, Cuba joined the Belt and Road Energy Partnership during its virtual Second Ministerial Conference, joining Bolivia, Suriname, and Venezuela as the fourth Latin American country in the partnership. Observers noted the potential significance of this alliance for Cuba—a country that relies in large part on ageing thermoelectric plants for its electricity. Cuba has the goal of increasing its use of renewable energy to 24% by 2030, including through the construction of biomass plants, solar parks, and wind farms (all of which have been targets of Chinese lending to the island since 2015). From the Chinese side, Cuba also represents a site for oil and gas exploration. In addition to the energy agreement, the two countries signed a new BRI agreement in December 2021 focused on implementation of the 2018 MoU. This cooperation plan emphasises priority sectors such as infrastructure, science and technology, communications, and tourism. According to the Cuban Government, this will lead to the ‘effective insertion of Cuba’ into the BRI.

Current Economic Relations

Trade: According to the Observatory of Economic Complexity (OEC), China is by far Cuba’s top destination for exports, accounting for 38.2% of its total exports in 2019 (Spain came in second, with just 10.5% of Cuban exports). Cuban exports to China are highly concentrated in sugar and nickel, followed by zinc, lead, and seafood. Meanwhile, Cuban imports from China are diversified across a range of manufactured goods, especially in machinery, transportation, processed metal, chemical, and textile sectors. This trade composition mirrors that of most other Latin American countries with China, concentrating in the export of primary products and the import of higher value-added goods. In 2019, 15% of Cuban imports originated in China, making China the second-largest source of imports after Spain.

Cuba overall has a negative trade balance, exporting goods worth 1.21 billion USD and importing 5.28 billion USD of goods in 2019. The trade relationship with China reflects this pattern, though less acutely relative to Cuba’s overall trade balance: exports to China were valued at 412 million USD and imports at 790 million USD. According to external sector data from Cuba’s National Office of Statistics and Information, trade volume with China rose dramatically during the early 2000s, peaking in 2015 and declining somewhat in the following years. While China clearly represents an important trading partner for Cuba, Cuba does not rank among China’s top trading partners in Latin America and the Caribbean given its small size.

Investment: Cuba has sought to attract international investment with urgency in recent years, especially following the economic collapse of ally Venezuela and the tightening of US policy restrictions on travel, investment, and remittances beginning in 2017. Cuba is largely cut off from international credit markets and international financial institutions, including the World Bank and International Monetary Fund. The Cuban Government has repeatedly acknowledged the need for international investment as a priority for growth but has so far been unable to attract the quantities desired, including from China. Despite cooperation agreements, diplomatic statements, and optimistic media coverage, investment has been limited. Cuba is not among the top recipient countries in Latin America and the Caribbean for Chinese FDI. Further, investment by Chinese firms in Cuba is overshadowed by that of Spanish and Canadian firms, although official statistics ranking FDI origin countries are not available.

Nevertheless, investment by Chinese companies has gained some traction in the sectors of tourism, fossil fuel extraction, and communications and health technologies. Cuban efforts to attract Chinese tourists to the island have gone hand in hand with reported plans to construct hotels with investment from Chinese firms—notably, Suntime and Beijing Enterprise. In the oil sector, China National Petroleum Corporation (CNPC) and oil-drilling company Great Wall have partnered with Cuba’s Unión Cuba-Petróleo for both onshore oil extraction and offshore exploration. Although it has been hoped for years that profitable oil deposits would be found offshore, including with Chinese-built deepwater oil rigs, so far attempts to find such deposits have not proved fruitful. In 2011, there were also reports of a deal with CNPC to expand the Cienfuegos refinery, but the financing did not materialise. Chinese firm Huawei has played a significant role in expanding internet access through public wi-fi and, more recently, partnering with ETECSA to sell smartphones. Cuba’s Mariel Special Development Zone also reportedly hopes to attract Chinese technology and construction companies, although none is currently confirmed on the zone’s website.

Aid and Other Finance: Chinese aid and lending from state-backed banks to Cuba is the highest to any Latin American country, standing at 3.35 billion USD between 2000 and 2017, according to AidData. This assistance has included frequent donations of goods and cash, including contributions to relief efforts following destructive storms such as hurricanes Irma in 2017, Sandy in 2012, and Gustav in 2008. Throughout the Covid-19 pandemic, China has donated several shipments of medical equipment and food aid to Cuba, which was celebrated in Chinese and Cuban state media. Cuba also administered the Sinopharm vaccine alongside its own domestic vaccines, though it is unclear whether these doses were donated or purchased. China has also repeatedly restructured Cuban debt repayments, including in 2004, 2008, and 2010.

Aside from outright donations, Cuba has also received several loans from Chinese financial institutions since 2015. The number and terms of these loans are opaque but, based on news reports, it is clear several loans have been made to Cuba to fund energy and infrastructure projects. Perhaps most significantly, the Chinese Ministry of Commerce, the Export–Import Bank of China (China Eximbank), and the China Development Bank have all financed solar power projects across various Cuban provinces, including Pinar del Rio, Cienfuegos, and Sancti Spiritus, contracting primarily with Chinese firms and using Chinese equipment. These projects are in various stages of completion. China Eximbank also financed the Jesus Rabi biomass power plant, which was intended to use residue from the sugarcane mill of the same name and was inaugurated in 2020. The modernisation of the Santiago de Cuba Port was financed by China Eximbank to allow for larger cargo ships and was completed in 2018. The bank also financed the purchase of a floating dock to enable the repair of large vessels in the Bay of Havana.

Chinese economic significance to the island is also evident in the widespread use of Chinese technology in large-scale public projects. China’s provision of these technologies is often celebrated in Chinese and Cuban state media as symbolic of the partnership between the two countries, although whether and how Chinese institutions were involved in financing their purchase (for example, through export credits) is difficult to determine. For example, the La Herradura wind farm, currently under construction, uses Chinese technology. In addition, Chinese-made Yutong buses have been a highly visible part of the fabric of daily life in Cuba since 2005, serving as the main vehicles for urban, interprovincial, and tourist bus travel. Chinese-made passenger train carriages were also integrated in the Cuban transport system in 2019, reportedly financed by a preferential buyer’s credit.

Key Controversies

Transparency: As is clear in the analysis of economic relations above, transparency surrounding China–Cuba relations is lacking. Reliable information concerning the specifics of bilateral agreements, investments, and lending is for the most part unavailable. While this is common across Chinese lending more generally, the opacity of the Cuban Government exacerbates the issue, as does the restrictive media environment and civic space in both countries. As a result, meaningful public debate regarding Chinese projects and their social, environmental, and economic impacts (of the kind seen across other Latin American countries) is not prominent in Cuba.

Dependence and Extractivism: As with other countries in Latin America, Cuba’s trade relations with China are asymmetrical, with China primarily providing manufactured goods and Cuba exporting commodities. Chinese investment in the region, both real and potential, is also highly concentrated in the extractive sector. Both patterns carry potentially negative environmental and economic implications for Cuban development. On the other hand, optimistic analysts argue that Chinese companies have devoted considerable attention to technology transfers and human capital development in Cuba. It is therefore unclear whether Chinese companies have assisted Cuba in upgrading its technological and manufacturing capabilities, or have instead solidified its economic concentration in commodities.

Triangular Relations with the United States: Both Cuba and China have contentious relations with the United States, which, with its allies, has criticised both countries on issues including democracy, human rights, freedom of speech, and freedom of the press. US-based critics argue the Cuba–China relationship shores up authoritarianism and is contrary to US interests. In turn, both China and Cuba condemn many aspects of US foreign policy in the name of anti-imperialism and non-intervention. Chinese and Cuban state entities frequently issue public statements affirming their solidarity with each other in opposition to US actions. Chinese officials regularly condemn the US embargo on Cuba, as well as the ongoing operation of the Guantanamo Bay Detention Camp. Likewise, Cuban state media heavily criticises US policies aimed at countering China, including, for example, the US ‘trade war’ under former President Trump, the diplomatic boycott of the 2022 Winter Olympics in Beijing, and US support for Taiwan. On several occasions, Cuba has delivered joint statements at the United Nations rejecting human rights–based criticisms of China.

Key Sources

Local media outlets:

• Dialogo Chino — Cuba.
• The Cuban Communist Party newspaper, Granma, provides national government perspectives on Cuba–China relations, and has an English section.
• Other state media outlets available only in Spanish include CubaDebate, Juventud Rebelde, and Temas.
• Dissident news outlet 14ymedio has comprehensive news coverage and opinion pieces, including some translated into English.
• Diario de Cuba has a more radical anti-regime perspective, including in English.
• Miami-based publication OnCuba has extensive English coverage of Cuba-related news.
• Other independent Cuban media outlets available in Spanish include Joven Cuba, el Estornudo, el Toque, and Progreso Semanal.
• The Association for the Study of the Cuban Economy blog and annual proceedings contain detailed economic analysis from both Cuban and international academics.

Scholarly Publications and Reports:

Alemán, Arsenio J. 2021. ‘Lazos entre China y Cuba: Una visión general del período 1900–2020 [Ties between China and Cuba: An Overview of the Period 1900–2020].’ Intus-Legere Historia 15(1): 135–52. Link.

Battista, Luis Carlos and Ricardo Barrios. 2019. ‘Is Cuba Hoping to Emulate China with Its New Constitution?’ World Politics Review, 23 April. Link.

Cheng, Yinghong. 2007. ‘Fidel Castro and “China’s Lesson for Cuba”: A Chinese Perspective.’ The China Quarterly 189: 24–42.

Cheng, Yinghong. 2012. ‘The “Socialist Other”: Cuba in Chinese Ideological Debates since the 1990s.’ The China Quarterly 209: 198–216.

Ding, Bowen and Soleidy Rivero Amador. 2021. ‘La cooperación comercial entre Cuba y China: Perspectivas actuales para el desarrollo sostenible de estas naciones [Commercial Cooperation between Cuba and China: Current Perspectives for the Sustainable Development of These Nations].’ Cooperativism and Development 9(1): 137–54.

Domínguez, Jorge. 2006. China’s relations with Latin America: Shared gains, asymmetric hopes. Working Paper, June. Washington, DC: Inter-American Dialogue. Link.

Feinberg, Richard. 2016. ‘Dancing with Many Partners: Good Balance, Poor Execution.’ In Richard Feinberg, Open for Business: Building the New Cuban Economy, 45–65. Washington, DC: Brookings Institution Press.

Feinberg, Richard. 2018. Cuba’s economy after Raúl Castro: A tale of three worlds. Foreign Policy Paper Series on International Governance. Washington, DC: The Brookings Institution. Link.

Hearn, Adrian H. 2012. ‘China, Global Governance and the Future of Cuba.’ Journal of Current Chinese Affairs 41(1): 155–79.

Hearn, Adrian H. 2016. Diaspora and Trust: Cuba, Mexico, and the Rise of China. Durham, NC: Duke University Press.

Lehoczki, Bernadett. 2012. ‘Sino-Cuban Relations in the 21st Century.’ International Journal of Cuban Studies 4(3–4): 291–306.

López, Kathleen. 2009. ‘The Revitalization of Havana’s Chinatown: Invoking Chinese Cuban History.’ Journal of Chinese Overseas 5: 177–200.

López-Levy, Arturo. 2011. ‘Reformas económicas y desarrollo en el este de Asia: ¿una experiencia para Cuba? [Economic Reforms and Development in East Asia: An Experience for Cuba?]’ Espacio Laical 3: 40–44.

Mega-Lago, Carmelo. 2018. ‘El galgo y la jicotea: las economías de China y Cuba [The Greyhound and the Turtle:

The Economies of China and Cuba].’ Cuba Posible, 30 April. Link. Xianglin, Mao, Adrian H. Hearn, and Weiguang Liu. 2015. ‘China and Cuba: 160 Years and Looking Ahead.’ Latin American Perspectives 42(6): 140–52.

Cover Photo: La Habana, Cuba, by Aris Gionis (CC).

Historical Background

Relations between the People’s Republic of China (PRC) and Ecuador can be traced back to 1971. After the PRC was fully accepted into the United Nations, Ecuador formally broke relations with Taiwan and began negotiations for trade agreements with Beijing. In February 1973, Ecuador sold 20,000 tons of bananas to China for the first time. Two years later trade missions were formally established in both countries. Diplomatic relations began on 24 December 1979, when the representatives of Ecuador and the PRC signed a Joint Declaration, which entered into force on 2 January 1980 with the opening of the Chinese embassy in Quito and the subsequent opening of its Ecuadorian counterpart in Beijing in 1981. By the mid-1990s, Chinese oil companies began to enter Ecuador’s oil sector as subcontractors. The China National Petroleum Corporation (CNPC) was the first Chinese enterprise to operate in Ecuador. Between 1980 and the mid-2000s, ties between both countries were thin and consisted only of a few diplomatic cooperation agreements, trade promotion, scientific and technical cooperation, credit facilities for productive and social infrastructure, and investment agreements, particularly in the hydrocarbon sector.

After the election of President Rafael Correa in November 2006, his presidency determined that relations with China were strategic and pushed the relationship to its high point. Ecuador started to turn to China for financing and construction of major public works. The boom in commodity prices and the government’s interest in building a ‘sovereign’ economic policy, together with a surge in public spending, laid the foundations for the expansion and deepening of financial relations with China. Shortly after President Correa took office, he broke relations with the World Bank and, one year later, defaulted on the country’s foreign debt, losing access to traditional financial markets. Only a few months after assuming office in his first term, in November 2007, President Correa visited China and met with then Chinese President Hu Jintao in order to lay the groundwork for broader bilateral cooperation. On that occasion, 14 bilateral agreements were signed in such diverse areas as agriculture, railways, sports cooperation, cultural exchange, tourism, sanitary and phytosanitary measures, labour issues, employment and social security, although most of them were not made public. Correa’s second official presidential visit to Beijing in January 2015 was during the China–Community of Latin American and Caribbean States (CELAC) Forum. There, both countries signed a ‘strategic partnership’ agreement and, the next year, in November 2016, when Chinese President Xi Jinping visited Quito for the first time, this relationship was upgraded to a ‘comprehensive strategic partnership^’, one of the highest levels of China’s diplomatic recognition.

Over the past decade, Ecuador has become the fourth largest recipient of Chinese funding in Latin America. By 2019, China had become Ecuador’s second largest trading partner, as well as its main source of bilateral financing and main contractor for public infrastructure projects. Numerous Chinese firms have come to Ecuador to build a wide array of projects in sectors such as energy, mining, oil rigs, telecommunications, construction of roads, hospitals, schools, security facilities, and technological systems. Significantly, the majority of Chinese hydroelectric undertakings in Latin America are in Ecuador, which is remarkable considering that Ecuador is a relatively small country in the region.

BRI Status

On 11 December 2018, Ecuadorian President Lenin Moreno (in office since May 2017) arrived in Beijing for a three-day official visit, during which he met with Chinese President Xi Jinping. During this visit, representatives signed a Memorandum of Understanding (MoU) that marked Ecuador’s official joining of the Belt and Road Initiative (BRI), the 16^th country in Latin America and the Caribbean to do so. Among the projects announced as part of the two countries’ cooperation under the BRI are the reconstruction of the ‘Eloy Alfaro’ airport in the port city of Manta, roads in the provinces of Esmeraldas and Imbabura in north Ecuador, and bridges in the province of Manabí. In addition, a dozen projects that were already underway were now placed under the BRI umbrella, including seven hydroelectric plants (the largest of them Coca Codo Sinclair) and the copper mines of Panantza-San Carlos and Mirador (which is marred by serious socio-environmental conflicts, as explained in the relevant project profile). In addition, on 1 November 2019, Ecuador became the first Latin American country to be a full-fledged member of the Asian Infrastructure Investment Bank (AIIB), and later became the first Latin American recipient of an AIIB loan.

Current Economic Relations

Trade: From the turn of the century, China’s growing consumption of commodities boosted trade with primary-exporting countries around the world, and Ecuador was no exception. Trade between the two countries grew 50 times during the first two decades of the 21st century, though it was associated with an increasing trade deficit on the Ecuadorian side. Bilateral trade volumes grew from 133.8 million USD in 2000 to 6.7 billion USD in 2019. The year 2014 saw the highest trade deficit for Ecuador (4.1 billion USD), which then dropped to 940 million USD in 2019. In 2001, China was the 32^nd largest export market for Ecuador (0.2% of Ecuador exports) and its tenthlargest import market (2.8% of Ecuador imports). By 2019, China was already the second largest export market for Ecuador (13% of Ecuador exports) and its second largest import market (18.9% of Ecuador imports).

The bilateral trade balance has entrenched Ecuador’s traditional role as an exporter of raw materials and importer of manufactured goods and technology. In 2019, Ecuadorian imports from China consisted of nuclear reactors, boilers, machinery (15.6%); electrical and electronic equipment (15.6%); vehicles (9%); iron and steel (8.4%), mineral fuels, oils, and distillation products (5.3%); articles of iron and steel (4.9%); plastics and articles thereof (4.7%); among others. On the other hand, Ecuador’s exports to China consisted of products such as fish, crustaceans, and mollusks (73.4%), which have become important since 2017, particularly due to exports of tuna and shrimp. In fact, 2019 was a record year for the shrimp industry in Ecuador in terms of sales to China. Other exports include mineral fuels, oils distillation products (9%); edible fruit, nuts, peel of citrus fruit, melons (7.6%); wood and articles of wood (4.6%); and ores, slag and ash (2.8%). It is worth noting that the growing export of wooden products is related to China’s great demand for balsa wood, a fast-growing species of tree used to manufacture blades for wind-power turbines. This is causing deforestation and uncontrolled logging. In the midst of the COVID crisis, the ‘balsa wood fever’ has also contributed to spreading the coronavirus to isolated communities across the Ecuadorian Amazon.

Investment: Investment and loans are closely related and represent the main driver of Chinese–Ecuadorian economic relations. As in the rest of the region, the presence of Chinese companies in Ecuador has occurred through two channels: foreign direct investment (FDI) and the construction of infrastructure projects. Although the latter category is often confused as FDI, the distinction matters when analysing specific projects, the performance of actors, and their impacts in the host country. According to the Central Bank of Ecuador, between 2006 and 2015, Chinese FDI in Ecuador grew dramatically from 11.9 million USD to 113.8 million USD. From 2017, FDI dropped significantly due to the falling oil prices and the completion of several infrastructure projects. Thus, in 2019 FDI reached only 28 million USD. Statistics from the Chinese Ministry of Commerce (see the chart below) show a corresponding trend. Put in context, China went from being an almost non-existent investor (in 136^th position in 2005) to one of the top five origin countries of FDI in Ecuador between 2007 and 2017 (even the second position between 2011 and 2014). Its position then dropped to the eight and tenth in 2018 and 2019, respectively.

The expansion of Chinese FDI in Ecuador began in 2006 and has concentrated in extractive sectors such as oil and mining and hydroelectric infrastructures. Ecuador became the first South American country in which Chinese companies established a major presence in the oil sector. Several projects have been developed in the provinces of Sucumbios and Orellana (Tarapoa-blocks 62, 14, and 17) and recently Pastaza (blocks 79 and 83) by Chinese companies such as Andes Petroleum, a joint venture between CNPC and China Petrochemical Corporation (Sinopec) that at the time of writing is the largest oil company operating in Ecuador.

In the mining sector, three of the Ecuadorian government’s large mining projects are currently granted to Chinese companies: the Mirador project, Ecuador’s first large-scale open pit copper mine, is operated by Ecuacorriente (a consortium of China Railway Construction Corporation Limited and Tongling Nonferrous Metals Group Holdings Co. Ltd.); Rio Blanco is operated by Ecuagoldmining S.A. (owned by Junefield Mineral Resources Holdings); and Panantza-San Carlos operated by ExplorCobres S.A., a subsidiary of Ecuacorriente. In 2019, Mirador began exploitation and exported its first 22,000 tonnes of copper concentrate to China. Both Rio Blanco and Panantza-San Carlos are paralysed by serious social and environmental conflicts, as communities opposing Chinese mines claim their right to be consulted.

As for infrastructure projects, the most relevant are large-scale hydroelectric dams. Between 2007 and 2017, eight hydro projects were built with Chinese participation (five are now operating): Coca Codo Sinclair-CCS; Sopladora; Minas-San Francisco; Toachi-Pilaton; Delsintanisagua; Quijos; and Mazar-Dudas; as well as one wind power project, Villonaco. Other important projects include the Integrated Security Service System (ECU911), a national emergency response and video surveillance system built by Chinese companies and financed by Chinese state loans; roads throughout the country in urban and rural areas; hundreds of schools and the Yachay and Ikiam universities; hospitals; and state buildings such as the Government Financial Platform, a mega-building constructed to accommodate 2,800 civil servants working in economic ministries, built by the state-owned company China CAMC Engineering Co., Ltd.

Aid: Official data on Chinese aid in Ecuador varies greatly. According to the Ecuadorian Ministry of Foreign Affairs, Chinese aid to Ecuador totalled 53 million USD between 2007 and 2019 and concentrated in security, promotion of production, human resources, natural resources, social sectors, and others. However, this figure differs from that offered by an independent study that found the amount to be higher, that is 62.74 million USD just between 2007 and 2016. The amount of Chinese aid is likely to have been even higher in the period after 2016, due to the increase in grant aid cooperation agreements for the reconstruction after the 2016 earthquake in Manabí. For instance, just in 2017 several agreements were signed for the construction of two hospitals, donation of 10,000 computers for schools, and humanitarian aid projects, among others. For the year 2020, the exact figures of Chinese aid during the COVID-19 pandemic are still unknown. However, the Ecuadorian Ministry of Foreign Relations has produced a detailed report of around 100 aid transactions carried out by the Chinese government agencies, private companies, and banks operating in Ecuador.

Other finance: China has been Ecuador’s main creditor since 2010 (with amounts considerably larger to those from any other country or multilateral institution), only surpassed by sovereign bonds since 2017. Under Rafael Correa’s administration (2007–17), the share of debt from China in Ecuador’s total External Public Debt (EPD) went from 0.1% in 2009 to 36% in 2013. From there, during Correa’s second term, the share of Chinese debt decreased to levels slightly above 20%, but in 2016 it still reached an amount close to all multilateral debts combined. From 2010 to 2019, China and Ecuador signed 26 credit agreements for a total of 13.6 billion USD, an amount surpassed only by Venezuela, Brazil, and Argentina. All the loans are tied to the construction of infrastructures with Chinese firms or to oil payments. The main Chinese banking institutions present in Ecuador are the China Development Bank (CDB), which contributes to 60% of all Chinese loans, most of them negotiated as oil backed loans under the conditions of a Four Party Agreement scheme which ties the payment of the credits to the sale of oil to Chinese companies. This arrangement involves three types of agreements: the contract loan signed between the CDB and the Ministry of Finance; the sale of crude between PetroEcuador and PetroChina International Company Limited (a subsidiary of CNPC); and, lastly, an agreement for managing bank accounts. The Export–Import Bank of China (China Eximbank) lends 26% of the loans, all of which were tied to the construction of infrastructure projects, for example the Coca Codo Sinclair Dam. The Industrial and Commercial Bank of China (ICBC) and the Bank of China are each responsible for 8% and 6% of the loans, respectively.

Facing a serious debt crisis in the wake of the COVID-19 pandemic, Ecuador has been able to renegotiate its debt with China. In August, Ecuador agreed with the CDB on a 12-month moratorium for the 417-million-USD debt repayment scheduled for this period; in September, Ecuador reached another agreement with China Eximbank for the rescheduling of 474 million USD of debt repayment. Soon after that, Ecuador found itself situated in a tug of war between China and the United States. In late September 2020, a few weeks after Ecuador and the Chinese banks reached agreements on debt rescheduling, Ecuador obtained a new Extended Fund Facility from the IMF for 6.5 billion USD, with an immediate disbursement of 2 billion. In November, in the middle of the US-China tech race, the country joined the ‘Clean Network’ initiative promoted by the United States as a strategy to curb the influence of the Chinese communications networks. These events paved the way for what happened in early 2021.

On 14 January 2021, the US International Development Finance Corporation (DFC)—a US development finance institution focussing mainly on financing private development projects in lower- and middle-income countries— announced that it had signed a framework agreement with the government of Ecuador to provide up to 3.5 billion USD of loans to refinance external debt and to fund development projects with private investment. Prior to approving this loan, the then head of the DFC, Adam Boehler, had said that the bank should confront Chinese ‘neo-colonialism’. Once the agreement was signed, he stated that it ‘allows DFC to streamline support for projects that refinance predatory Chinese debt and help Ecuador improve the value of its strategic assets.’ The deal pushes Ecuador to privatise oil and infrastructure assets and to ban Chinese technology imports into the country. In response, China’s ambassador to Ecuador, Chen Guoyou, said he was unconcerned by the DFC deal and reiterated that ‘China respects the sovereign and independent decision of the Ecuadorian government to develop pragmatic, balanced and diverse partnerships with other countries.’

Key Controversies

Transparency and accountability: China’s relationship with Ecuador through financing and investment has been plagued by special agreements, secrecy, and lack of stakeholder participation, especially in projects in the extractive and infrastructure sectors (electricity, mining, hydrocarbons, telecommunications). Many of these projects were governed by exceptional legal frameworks, through special presidential decrees to overcome financing difficulties, accelerate the bidding and construction processes, or justify delays in the development of feasibility and impact assessment studies and issuance of environmental licenses. The lack of transparency is also related to exorbitant levels of cost overruns, corruption, embezzlement, and bribery. In addition, Chinese stakeholders keep the Ecuadorian civil society largely at bay. It is extremely difficult to obtain information from official agencies, Chinese banks and companies. Confidentiality and secrecy surrounding Chinese agreements hinder public participation and oversight, making a large part of these projects untraceable. The controversy surrounding the Chinese state-owned firm Sinopharm International Corporation is worth mentioning in this regard. Based in Ecuador since 2012, the company has been a major investor and medical supplier in the country. In the midst of the COVID-19 pandemic, cases of embezzlement and corruption in the sale of Sinopharm’s diagnostic supplies and rapid tests came to light and the company has come under investigation.

Environmental and social conflicts: Most of the extractive (oil and mining) and hydroelectric projects operated by Chinese companies are located in highly diverse, ecologically and socially fragile areas. For instance, the Mirador and Panantza-San Carlos open-pit copper mines are located in the Cordillera del Cóndor region and within the Shuar indigenous territory. Several conflicts have arisen on matters such as the displacement of 116 indigenous people, discrimination, intimidation, threats, and worsening environmental degradation. Oil extraction has led to a vast array of problems, including serious deforestation, droughts and floods, soil erosion, mass carbon store release, as well as social conflicts due to displacement, land dispossession, increase in violence and crime, militarisation, and violations of human rights. The rainforest where much of the exploitation occurs is also home to several indigenous communities, including the Sápara, whose territory is within the Yasuní National Park. This has led to what some call a cultural genocide of this UNESCO Heritage of Humanity group that is already near extinction having only 560 people left. The lack of channels for participation, consultations, and institutional arrangements for conflict management aggravate existing conflicts in the territories granted to Chinese firms. In addition, hydroelectric infrastructures such as Coca Codo Sinclair have also caused irreversible environmental effects on the water basin, ecological water flow, river sedimentation, and regressive erosion processes. Most of these projects fail to achieve sustainable development in the territories where they operate.

Fishing: In August 2020, in the midst of the COVID-19 pandemic crisis, the discovery by the Ecuadorian navy of a vast fishing fleet of 340 Chinese vessels operating in international waters of the Galapagos Islands stirred alarm over ‘indiscriminate’ fishing practices. It is not the first time this has happened. Chinese fishing practices already caught the attention of the Ecuadorian public in 2017, when the Chinese-flagged ship ‘Fu Yuan Yu Leng 999’ was intercepted by the Ecuadorian navy within the Galapagos Marine Reserve. 300 tons of threatened and vulnerable fish were found on board. It was considered the biggest shark-smuggling bust in Galapagos history.

Poor material quality and technology. The quality of the projects executed by some Chinese companies has been questioned because of poor material quality and technical failures of equipment and technology. The best-known case is Coca Codo Sinclair, where the Comptroller General of the State found 171 defects, including wall water leaks, accumulation of sediments, turbine damage, poor quality welds, and 7,648 cracks and micro-fissures in water distributors located in the machinery room. Other known cases include the hundreds of defective security shackles supplied by China National Electronics Import & Export Corporation (CEIEC), construction rods of poor quality manufactured by the Chinese company Xinlong, structural failures in the schools built by China Gezhouba Group, the roads built by Sinohydro, and the governmental buildings constructed by China CAMC Engineering.

Key Sources

Media Outlets:

China Dialogue, Reuters, Mongabay, and The New York Times all have correspondents who report from Ecuador.

Local media that often report on China-related issues include Plan V (English edition), Periodismo de Investigación, Primicias, and El Telégrafo (government-owned press, English edition).

NGO Sources:

Systematic research work about China-Ecuador relations has been carried out by the Colectivo sobre Financiamiento e Inversiones Chinas, Derechos Humanos y Ambiente (CICDHA); Acción Ecológica; the Environmental Justice Atlas; and China-Latin America Sustainable Investments Initiative / Iniciativa para las Inversiones Sustentables China-América Latina (IISCAL).

Books, Reports, and Scholarly Articles:

• Acción Ecológica. 2016. ‘Serie: Xi Jinping en Ecuador.’ Link.
• Castro, Diana. 2019. ‘Unpacking Chinese Financing In Ecuador.’ In China’s Financing in Latin America and the Caribbean, edited by Enrique Dussel Peters, 295–320. Red Académica de América Latina y el Caribe sobre China, UNAM. Link.
• Colectivo sobre Financiamiento e Inversiones Chinas, Derechos Humanos y Ambiente (CICDHA). 2018. ‘Incumplimiento de obligaciones extraterritoriales de China en Ecuador.’ CICDHA website, 28 September. Link.
• Garzón, Paulina and Diana Castro. 2018. ‘China-Ecuador Relations and the Development of the Hydro Sector.’ In Building Development for a New Era: China’s Infrastructure Projects in Latin America and the Caribbean, edited by Enrique Dussel Peters, Ariel C. Armony, and Shoujun Cui, 24–57. Mexico: Asian Studies Center, Center for International Sudies, Universidad de Pitsburg, y Red Académica de América Latina y el Caribe sobre China.
• Herrera-Vinelli, Lorena and Mateo Bonilla. 2018. ‘Ecuador-China Relations: the Growing Effect of Chinese Investment on Ecuadorian Domestic Politics, 2007–2016.’ Journal of Chinese Political Science 24: 623–41.
• Luzuriaga, Miguel. 2017. ‘Inversiones Chinas en Ecuador. Andes Petroleum y los Bloques 73 y 83.’ Red Académica de América Latina y el Caribe sobre China website. Link.
• Ray, Rebecca and Adam Chimienti. 2017. ‘A Line in the Equatorial Forests: Chinese Investment and the Environmental and Social Impacts of Extractive Industries in Ecuador.’ In China and Sustainable Development in Latin America: The Social and Environmental Dimension, edited by Rebecca, Kevin Gallagher, Andres López, y Cynthia Sanborn, 107–45. London: Anthem Press.
• Ray, Rebecca, Kevin Gallagher, and Cynthia Sanborn. 2018. ‘Standardizing Sustainable Development: Development Banks in the Andean Amazon.’ Global Development Policy Center, University of Boston. Link.
• Reyes, Milton and Po Chun Lee. 2017. ‘La relación China-Ecuador en el siglo XXI: elementos relevantes para la discusión.’ Instituto de Altos Estudios Nacionales, Quito. Link.
• Vallejo, María Cristina, Betty Espinosa, Francisco Venes, Víctor López, and Susana Anda. 2018b. ‘Evading Sustainable Development Standards: Case Studies on Hydroelectric Projects in Ecuador.’ Global Development Policy Center, University of Boston, Working Paper 19. Link.Viola, Carolina. 2016. ‘Territorios y cambio estructural en hábitats periurbanos: Coca Codo Sinclair, inversión china y el cambio de la matriz energética en el Ecuador.’ Revista Ciencias Sociales 38.

Cover Photo: Quito, Ecuador. Credit (CC): Frank Plamann.

Background

Jamaica’s relationship with China began as part of the larger project of Asian indenture adopted by the British Empire after the abolition of slavery in the West Indies. In 1854, 224 Chinese indentured labourers arrived in Jamaica on the SS Epsom. Additional groups of labourers arrived throughout the nineteenth century, largely via other Caribbean and Latin American islands. The largest of these ships, the SS Prinz Alexander, transported 694 labourers from southern China through San Francisco and Panama. This project was, however, largely unsuccessful, as the predominantly male labourers often left the island after their tenure because of the poor conditions.

A second wave of Chinese—this time, businessmen—arrived in the early twentieth century through chain migration and interisland circulation. Unlike other islands, which attracted both Hakka and Punti Chinese migrants, on Jamaica, the kin-based chain migration system facilitated the migration of predominantly Hakka Chinese people during this period. Geographic information system mapping of records from the Chinese Cemetery in Jamaica’s capital, Kingston, reveals that most of these migrants emigrated from a small number of villages surrounding what is now the city of Shenzhen, in Guangdong Province. Most of these migrants entered the grocery retail trade, beginning a long tradition of Chinese shopkeeping that lasts to this day.

Multiple incidents of anti-Chinese violence throughout the economic turmoil of the mid and late twentieth century and the adoption of socialist policies by the administration of Prime Minister Michael Manley (in office from 1972 to 1980 and, with a different economic program, from 1989 to 1992) led to mass emigration of the Hakka Chinese population in the 1970s and 1980s. Building on his time as a labour organiser, Manley ran on a platform that saw racial and economic equity for Jamaica’s poor, black lower class as achievable only through radical change and democratic socialism. Once in office, Manley implemented a series of social policies that prioritised the needs of Jamaica’s marginalised black majority, including a national minimum wage, paid maternity leave, abolition of bastardy laws, and price controls on staple products. However, his amendments to the income tax laws that were to fund his redistributive policies were less well received by Jamaica’s upper and middle classes—many of whom were Chinese. Manley’s increasingly socialist tone and his relationships with leaders like Cuban President Fidel Castro led to international scrutiny by countries such as the United States, an ensuing destabilisation campaign by its Central Intelligence Agency (CIA), and a corresponding reduction in international investment. Due to a significant ‘brain drain’, economic and political insecurity, and resource scarcity, much of the Jamaican Chinese population moved to the United States or Canada, reducing the overall Chinese population in Jamaica from 11,781 in 1970 to 5,320 by 1980.

In the mid 1980s and 1990s, a third wave of Chinese migrant labour arrived in Jamaica, this time to service factories in the Kingston Free Zone (KFZ). The KFZ was founded in 1976 with the hope of creating more jobs and reviving the quickly collapsing Jamaican economy. It functioned as a warehouse, transhipment, and later, export processing plant for international goods. Under the Jamaica Export Free Zone Act, companies within the KFZ were exempt from taxes on profits, imports into, or exports from the zone—preferential treatment that incentivised companies from the United States and Hong Kong to build export processing plants there. The migrant workers at the KFZ were predominantly women who specialised in the garment industry. Because of the informality of hiring practices, it is unclear how many women worked in these factories. However, it is estimated that up to 4,000 Chinese workers were employed in the KFZ at its peak.

Chinese migrant workers in the KFZ were shuttled between the factories and their dormitories, providing them with few opportunities to engage with the local Jamaican population outside grocery shopping and English classes facilitated by the Chinese Cultural Association. Correspondingly, few were expected to stay following the decline of the KFZ (which was often attributed to more competitive arrangements in other countries). However, locals report that once married (some in China and others locally), some of the women from the KFZ returned to create wholesale businesses, leading to a new wave of Chinese migration. Unlike the original Hakka Chinese community, this new cohort hails from diverse locations throughout China and predominantly speaks Mandarin Chinese. Not only did their presence rejuvenate the wholesale grocery trade on the island, but also they formed several hometown associations, including the Dongguan Hometown Association and the Fujian Hometown Association. In 1972, Jamaica formally recognised the People’s Republic of China (PRC). The following year, the PRC Embassy was established and, in 1977, the Jamaica China Friendship Association was created to facilitate greater local knowledge of China.

Chinese investment in Jamaica, as in many Latin American and Caribbean nations, has boomed in the twenty-first century. The PRC’s foreign direct investment (FDI) stock in Jamaica grew from 40 million USD in 2011 to 839 million USD at the end of 2016, while Chinese policy banks provided loans with a total value of 2.1 billion USD to the Jamaican Government from 2005 to 2022. Much of this money has been used to fund road infrastructure projects, urban revitalisation, and the development of Jamaica’s natural resource sector. One of these projects was the North–South Highway, completed in 2016, spanning six Jamaican parishes, and connecting Ochos Rios (a major tourist city) to Kingston. The North–South Highway was financed by a loan of 457 million USD from the China Development Bank (CDB) and equity investment provided by the China Harbour Engineering Company (CHEC). Since then, CHEC has led several other infrastructure projects on the island, which were similarly funded by the Export–Import Bank of China (China Eximbank) and the CDB. These include road reconstruction projects throughout Kingston, additional highway projects, and Jamaica’s first road overpass connecting Spanish Town to Kingston.

In addition to projects contracted to Chinese construction companies and sponsored by Chinese development finance, Jamaica has also seen an increase in Chinese FDI. Chinese investment in Jamaica includes that by Huawei, ZTE, Sinopharm International Corporation, JISCO Alpart, and companies founded in Jamaica such as ZDA Construction and BYD Construction. Numerous small Chinese-owned businesses have also sprung up across the island—many of which sell wholesale goods. While some researchers directly attribute increased migration to Chinese policy and investment, others claim that even though private immigration benefits from the state, it is not directly facilitated by it. However, the local reception and media coverage of current PRC-sponsored projects have been fraught—with Jamaican workers’ rights and poor local perceptions of new migrants central to these debates.

While less significant in terms of expenditure than China’s engagements in Jamaica’s infrastructure and natural resource sectors, the PRC has invested in educational projects throughout Jamaica. In 2009, Jamaica became the first English-speaking Caribbean nation to receive a Confucius Institute (CI), at the University of the West Indies, Mona. In 2019, the original CI was replaced with a new, 5 million USD facility, making it the largest CI in the Caribbean.

BRI Status

In 2019, Jamaica signed a memorandum of understanding (MoU) with the PRC’s Ambassador to Jamaica Tian Qi, joining the Belt and Road Initiative (BRI). While the PRC had many investments in Jamaica at the time of signing (see below), the MoU provided the basis for future policy coordination and financial support from the PRC. At the May 2019 BRI Forum, Ambassador Tian praised Jamaica for joining the BRI, saying: ‘Looking into the future, I envisage high-quality Belt and Road cooperation in enhancing connectivity by promoting policy synergy, infrastructure development, unimpeded trade, financial cooperation and people-to-people bonds, thereby enhancing practical cooperation for the wellbeing of our peoples.’

Current Economic Relations

As is often the case in bilateral relations, the economic ties between China and Jamaica are best understood in the context of the two countries’ developmental trajectories. In the case of China, the two key factors prompting its engagement in Jamaica are the quest for natural resources to feed domestic Chinese demand and the need for markets for firms from its infrastructure sector. For Jamaica, the past four decades of crippling debt to international lenders and the impacts on the island’s economy and society need to figure in any analysis of its external relations.

Trade: Jamaica had an overall trade deficit of 3.49 billion USD in 2020. Food, industrial supplies, fuel, and lubricants dominate its imports. The country’s mining sector is the main contributor to its export basket, with alumina and bauxite making up 44% of exports. Indeed, despite its small size, Jamaica is the world’s sixth-largest producer of alumina, with a 2% share of the global market. This trade imbalance and the reliance on alumina exports pre-date the growing economic ties between Jamaica and the PRC in the past 15 years, which have been characterised more by investment and finance than by trade. The PRC does not feature among Jamaica’s top five export markets, with only 2.2% of the island’s exports shipped to the Chinese market. The PRC has become the second-largest exporter to Jamaica, although the share of imports from China (about 7.7% of total imports) remains well below Jamaica’s reliance on imports from the United States (about 45% of the total).

In this way, Jamaica’s trade with China reflects its overall quantitative and qualitative trade imbalance with the world economy. The PRC’s main exports to Jamaica include industrial machinery, electronics, processed articles of iron or steel, and vehicles. Conversely, Jamaica ships to China mostly unprocessed or low-value-added exports in categories such as ore slag and ash, inorganic chemicals, and iron and steel. The administration of Prime Minister Andrew Holness (in office from 2011 to 2012, and again from 2016 to the present) has tried to promote greater trade ties with China, and announced a ‘strategic framework’ for economic relations in 2019. Despite perennial concerns about overexploitation of the country’s fisheries, these efforts are focused on exporting goods such as live lobster, tuna, sea cucumber, and conch, as well as products such as rum and pork.

Investment and Finance: In broad terms, there are two types of Chinese investment in Jamaica: that tied to loans from Chinese policy banks, and that carried out by individual companies outside state-to-state financial frameworks. The latter has concentrated in two ‘sunset’ industries that have well passed their productivity peak. The first of these is an investment of 260 million USD by China’s Pan-Caribbean Sugar Company (PCSC), which in 2009 paid 9 million USD to acquire the Bernard Lodge, Frome, and Monymusk sugar estates when the Jamaican Government decided to privatise its sugar assets. PCSC, a subsidiary of the state-owned China National Complete Plant Import & Export Corporation, attempted but failed to revitalise Jamaica’s sugar sector, and has already divested from the Monymusk and Bernard Lodge estates. PCSC continues to run the Frome Sugar Factory, but the project has been a lossmaking venture, with the plant facing declining productivity rates. This has trumped earlier hopes that international investors could modernise Jamaica’s sugar sector and bring it up to international standards.

The second Chinese investor in a Jamaican ‘sunset’ industry is the state-owned Jiuquan Iron and Steel Group (JISCO), which acquired Alumina Partners of Jamaica (Alpart), the company that runs the St Elizabeth bauxite refinery, from Russia’s RUSAL in 2016. The St Elizabeth plant is the largest bauxite refinery in the country, and had been abandoned since RUSAL decided to shut it in 2009. The 299-million-USD purchase brought much hope and around 700 jobs to St Elizabeth Parish—although with more flexible contracts and lower salaries than in the past—but the refinery now faces an uncertain future. With the plant experiencing low productivity, JISCO decided to suspend operations in 2019 for two years to modernise the plant.

The remainder of Chinese investments in Jamaica are concentrated in infrastructure and have been rolled out with loans from China’s major policy banks. The most emblematic among these is the North–South Highway, financed with a loan of 457 million USD from the CDB in 2009, and constructed by CHEC. The project made international headlines both for its scale and for the unusual arrangement used to finance it: the Jamaican Government offered to pay with 484 hectares of prime land and a concession to operate the highway’s tolls for 50 years. Beyond this project, the CDB and China Eximbank have provided the Jamaican Government with 10 other major loans worth 2.1 billion USD for roadworks, the construction of the Montego Bay Convention Centre, and an affordable-housing project.

While Jamaica’s outstanding debt to China represents only a fraction of the country’s total debt—3.9%, according to the country’s finance minister—the Government of Jamaica announced in November 2019 that it would not be taking new loans from China. The commitment came as part of a program to reduce debt and does not preclude Chinese infrastructure companies from operating in the country, although, in the words of Prime Minister Holness, they will do so under ‘the modalities of joint-venture partnerships, public–private partnerships, or private-sector transactions directly between Jamaican firms and Chinese firms’.

Key Controversies

Chinese investment in Jamaica has been at the centre of many controversies and public backlashes. In addition to the history of anti-Chinese feelings in Jamaica, the Jamaican public has been critical of the country’s increased debt, the perceived lack of transparency around the terms of loans and project deals, and the employment of Chinese workers and companies for infrastructure projects.

Infrastructure-Related Controversies

As in other countries, in Jamaica, there have been frequent critiques of the use by Chinese companies of Chinese nationals (as opposed to local workers) on PRC-sponsored projects as well as the poor treatment of both Chinese and Jamaican workers. In some cases, local outrage against the treatment of labourers on infrastructure projects has led to strikes—for instance, in 2018, workers on the CEHC-led Mandela Highway Improvement Project went on strike for five days over working conditions—and to calls for the Jamaican Government to bring criminal charges against Chinese companies for labour rights violations. The owners of Jamaican construction businesses have also criticised the government for providing tax waivers and import concessions for Chinese companies, putting local firms at a disadvantage when bidding for contracts. Several public figures have been critical of Chinese investment. In 2017, former National Security Minister and Member of Parliament Paul Bunting released a video accusing the PRC Government of economic colonialism and predatory lending practices. Bunting’s claims were later strongly rejected in a statement released by the PRC Embassy. In 2018, Paul Golding, Dean of the College of Business and Management at the University of Technology, Jamaica, warned the nation about the PRC’s lack of transparency and the potential for Chinese investment to become a ‘debt trap’.

One of the earliest controversies regarding PRC investment in Jamaica occurred in 2013 when CHEC proposed leasing two small islands to build a transhipment hub. Great Goat Island and Little Goat Island are part of a small archipelago off the coast of Old Harbour Bay in St Catherine Parish. This proposal prompted an immediate backlash from locals and environmentalists. Critics accused then Prime Minister Portia Simpson-Miller (in office, 2006–07 and 2012–16) of selling a Jamaican ‘paradise’ to the PRC (links here, here, and here). Moreover, several ‘Save Goat Island’ campaigns were created, requesting the land be maintained as a cultural heritage or ecotourism site, to protect any endangered species on the islands. In 2016, the Jamaican Government announced it would not proceed with the project.

Later controversies arose in response to a major infrastructure development program funded in part by China Eximbank. Contracted by the Jamaican Government, CHEC completed a series of infrastructure projects across the island, including road-widening works in Kingston and the development of Jamaica’s first road overpass. As part of the road-widening project, several markets and informal business spaces were demolished, including the historic Constant Spring Market. In 2018, local activists and vendors protested the proposed demolition of the market, successfully requesting court injunctions to prevent the Kingston and St Andrew Municipal Corporation demolishing the site. However, in 2019, the injunctions were lifted, signalling the end of the legal battle and paving the way for the demolition.

Debt, Transparency, and Accountability

The financing of these various infrastructural projects with loans from China Eximbank and the CDB has also been contentious. Many of the concerns raised by the 2.1 billion USD borrowed from China mirror widespread suspicions elsewhere about Chinese development finance. These include questions about potential debt traps, uneasiness about the opacity of Chinese loans, and associated issues of accountability. The debates also have a unique Jamaican flavour, given how Jamaica has for decades had one of the highest debt to GDP ratios in the world. Debt has had a direct impact on rising poverty rates and decaying welfare, and remains a source of anxiety.

The Caribbean Investigative Journalism Network highlighted many of the concerns about Chinese loans in a 2019 report, which recognised the short-term benefits of such loans in an infrastructurally underdeveloped region. However, it also criticised the fact loan agreements with Chinese entities were rarely published and failed to adhere to approved procurement processes, while requiring excessive government guarantees that risked the seizure of publicly owned Jamaican assets. The academic literature on alleged Chinese debt traps has routinely debunked the idea that Chinese banks have any strategic interest in seizing unproductive assets in remote areas of the world. Scholars have also emphasised that Chinese banks are much more inclined to renegotiate and restructure debt repayments when a country finds itself in financial distress. In this sense, Chinese loans would appear to be more flexible than the ‘multilateral debt trap’ that Jamaica has had with Western-based organisations for four decades. Still, expressions of concern over Chinese loans have been common in the media and even in Jamaica’s popular music.

Legitimate concerns have stressed that the opacity of Chinese loans has hindered the possibility of civil society oversight and participatory governance of Chinese-financed projects. The issue here is not the potentially onerous terms of repayment, but the selection of projects and their economic, social, and environmental impacts. For example, the Jamaican minister responsible for water, works, and housing, Horace Chang, condemned in 2017 the construction of the Montego Bay Convention Centre, financed with a loan of 45 million USD from China Eximbank, emphasising how little the centre was used and its high maintenance costs. He further stressed that ‘if we had spent 50 million USD on our inner-city communities, maybe the problem in Montego Bay today would not be there’. Therefore, questions have been raised about whether infrastructural development can uplift the country from its developmental impasse and, more generally, whether projects targeted by Chinese loans can generate sufficient economic activity or social benefits to justify taking these loans in the first place. As mentioned above, as of November 2019, the Government of Jamaica announced it would not be taking new loans from China.

Conflicts between Chinese Migrants and Jamaicans

Chinese investment has also been accompanied by an increase in independent Chinese migration to Jamaica, with many of these migrants operating wholesale businesses. Conflicts between Jamaicans and independent migrants frequently appear in the Jamaican press and on social media. Videos of Chinese nationals eating donkey or other forms of exotic meat are often shared on WhatsApp and other social media platforms, conforming with and propagating local perceptions that ‘Chinese nyam [eat] dog’. In one such incident, a Chinese shop-owner in Trelawny was filmed slapping the face of a Jamaican teen whom she accused of stealing. Video of the incident was circulated widely on Jamaican news outlets and social media, garnering much outrage from local viewers. After widespread calls for the shop-owner’s arrest, she was charged with assault occasioning bodily harm but ultimately not sentenced, leading to further outrage. Over the years, there has been an increasing number of cases of Chinese nationals becoming targets of theft and violence and, in some cases, even murder. While much of the violence occurs as part of a robbery (see, for instance, here, here, and here), there have been instances of Chinese nationals being specifically targeted because of their ethnicity, which has led to increased concerns among both Chinese migrants and Chinese-Jamaican leaders about the safety of the community.

China–US Tensions

US politicians have been especially critical of Chinese expansion in the Caribbean and Latin America. In 2015, then President Barack Obama undertook a three-day trip to the Caribbean and Central America, which included a visit to Jamaica (the first visit by a sitting US President since Ronald Reagan in 1982). Several media outlets—for instance, see here and here—speculated that President Obama’s visit was directly connected to increased PRC investment in the region. The visit by Obama, the first African-American US President, had special meaning for many Jamaicans.

The administration of Donald Trump took a more confrontational stance towards China’s engagement in Jamaica. President Trump nominated Donald Tapia in 2019 to serve as the US Ambassador to the country. During his short tenure (September 2019 – January 2021), Tapia frequently attacked China in Jamaican media. Tapia authored opinion pieces and gave interviews lambasting Huawei’s 5G mobile technology (which he claimed would be used to spy on Jamaicans) and Chinese debt traps. He also lobbied the Jamaican Government against the involvement of a Chinese company in the country’s gambling and lottery sector. While Tapia’s remarks mirrored the concerns of some Jamaicans, his intrusion into Jamaica’s national politics and his unsavoury style (for instance, he picked Twitter fights with Jamaicans and accused them of drinking cheap vodka and smoking marijuana) were met with significant backlash and critiques directed both at him personally and at US meddling in Caribbean politics. Since the departure of Tapia, the US Embassy in Jamaica has adopted a much less confrontational approach to China’s activities on the island.

Key Sources

Bernal, Richard. 2016. Dragon in the Caribbean: China’s Global Re-Dimensioning—Challenges and Opportunities for the Caribbean. Kingston, MI: Ian Randle Publishers.

Bohr, Aaron Chang. 2004. ‘Identity in Transition: Chinese Community Associations in Jamaica.’ Caribbean Quarterly 50(2): 44–73.

Bryan, Patrick. 2004. ‘The Settlement of the Chinese in Jamaica: 1854 – c. 1970.’ Caribbean Quarterly 50(2): 15–25.

Gonzalez-Vicente, Ruben. 2021. ‘Over Hills and Valleys Too: China’s Belt and Road Initiative in the Caribbean.’ In Global Perspectives on China’s Belt and Road Initiative: Asserting Agency through Regional Connectivity, edited by Florian Schneider, 171–94. Amsterdam: Amsterdam University Press.

Gonzalez-Vicente, Ruben and Annita Montoute. 2021. ‘A Caribbean Perspective on China–Caribbean Relations: Global IR, Dependency and the Postcolonial Condition.’ Third World Quarterly 42(2): 219–38.

Minto, Jevon. 2019. ‘The Impact of Chinese OFDI in Jamaica (2000–2017).’ In China’s Foreign Investment in Latin America and the Caribbean: Conditions and Challenges, edited by Enrique Dussel Peters. Mexico City: Universidad Nacional Autónoma de México.

Robertson, James. 2020. ‘Chinese Traders and Chinese Trade in Jamaica.’ Social and Economic Studies 69(1–2): 1–214. Tsang, Wing Yin. 2015. ‘Integration of Immigrants: The Role of Ethnic Churches.’ Journal of International Migration and Integration 16(4): 1177–93.

Cover Photo: Kingston, Jamaica, as seen by Sentinel 2A satellite. Credit: Antti Lipponen (CC).

Historical Background

Exchanges between China and Peru began in the mid-nineteenth century, when indentured Chinese workers were imported to meet Peru’s labour demand after slaves were emancipated in 1854. The first diplomatic encounter between China and Peru dates back to the signing of the Sino-Peruvian Treaty of Friendship, Commerce, and Navigation between the Qing and Peruvian government in 1875. Since then, hundreds of thousands of Chinese, after working on plantations, railway constructions, and mines, stayed and settled in Peru, building a solid cultural foundation on which both Peru and China borrowed to further their political ties. The Republic of Peru recognised the Republic of China (ROC) since its founding in 1912 and maintained diplomatic relations after the Kuomintang regime retreated to Taiwan in 1949. In 1971, Peru officially broke ties with Taiwan and supported Beijing’s bid for the seat at the United Nations as the only legitimate representative of China.

Sino-Peruvian trade relations picked up in the 1990s due to China’s rising demand for raw materials, especially minerals. Peruvian exports to China increased from 194 million USD in 1992 to 309 million USD in 1999. However, interactions between China and Peru remained limited until the early 2000s. Before then, high-level political visits were infrequent. In 2001, then Peruvian president Alejandro Toledo (in power from 2001 to 2006) met then Chinese President Jiang Zeming during the Asia-Pacific Economic Cooperation Summit (APEC) held in Shanghai, and congratulated him on China’s recent entry into the World Trade Organization (WTO). Peru recognised China’s complete market economy status in 2004. 

Sino-Peruvian relations intensified after the Global Financial Crisis of 2007/2008. As Chinese companies began to acquire distressed assets globally with cheaper prices, Peru became one of the key destinations for Chinese investment due to its abundant natural resources. Meanwhile, heavily hit by the financial crisis, Peru actively sought out China as an alternative source of capital to break its dependence on the United States and diversify its diplomatic ties. Alan Garcia (in power from 1985 to 1990, and then again from 2006 to 2011) was the first Peruvian president to passionately champion Sino-Peruvian relations. Amid the Global Financial Crisis, Garcia paid a visit to Beijing in March 2008, during which he claimed that ‘Peru’s development is tied to China’. Shortly afterwards in November, then Chinese president Hu Jintao took his first trip to Peru to attend an APEC Summit in Lima. This high-level political exchange resulted in the signing of a bilateral Free Trade Agreement (FTA) in April 2009, the first comprehensive FTA between China and a Latin American country. The China-Peru FTA came into effect in March 2010 and a year later, China surpassed the United States to become Peru’s top destination for export and second largest trading partner, a milestone for Sino-Peruvian relations. Since the FTA, China and Peru have strengthened their cooperation. In 2013, then Peruvian President Ollanta Humala (in power from 2011 to 2016) attended the Annual Conference of the Bo’ao Forum for Asia, after which Peru and China jointly announced the elevation of China-Peru relationship to a Comprehensive Strategic Partnership, the highest level of relations between China and Latin American countries. Eleven documents were signed, ranging from technological and trade cooperation, cultural and education exchanges, to agricultural research and development. In 2014, China officially replaced the United States as Peru’s top trading partner for both imports and exports. During Chinese Premier Li Keqiang’s visit in 2015, the two countries signed 10 agreements on a range of issues, including investment, transportation, hydropower development, agriculture, and education, in an attempt to diversify their bilateral economic relations away from exchanges mostly focussed on minerals. When President Pedro Pablo Kuczynski took office in 2016, he chose China for his first official trip abroad, demonstrating China’s growing importance for Peru. Kuczynski’s visit was followed closely by Xi’s attendance of the 2016 APEC Summit in Peru. New rounds of negotiations began in 2018 to update the China-Peru FTA. New versions of the agreement were planned to be put in place by 2020 but were delayed due to COVID-19. Peru signed a Memorandum of Understanding (MoU) with China to cooperate with the Belt and Road Initiative (BRI) in April 2019. However, due to the pandemic little progress was made in 2020.

BRI Status

In April 2019, Peru signed the memorandum of understanding (MoU) during the Second Belt and Road Forum for International Cooperation held in Beijing. The Belt and Road Initiative (BRI) was initially launched in 2013 by President Xi. Neither Peru nor China has an official list of BRI projects, and corporations of all scales market their projects as contributing to the BRI to either gain currency in the market or trust from the public. As of February 2021, the author was able to confirm a few BRI projects, either through corporation reports or government documents, such as the 2-billion-USD mega port in Chancay, invested by COSCO Shipping Holdings Co Ltd. in a joint effort with Volcan Compañía Minera S.A.A., and the Las Bambas Copper mine. As in many other countries, Peruvian projects that were started prior to the launch of the BRI in 2013 and Peru’s official joining in 2019 is now being rebranded as part of the BRI. The Toromocho Copper Mine is a prime example: acquired in 2008 by the state-owned Chinalco, its second-stage expansion was recently incorporated under the BRI framework when it was announced back in 2018.

In addition to confirmed BRI projects, there are numerous ongoing infrastructure projects proposed by the Chinese government. One of the most debated projects is the transoceanic railway which connects Peru’s Pacific coast with Brazil’s Atlantic coast though Bolivia. The Peruvian and Chinese governments began discussing the possibility of constructing the railway back in 2013 because it would greatly reduce transportation cost, enhance regional connectivity, and boost trade relations between China and Latin America. An agreement was reached between Peru, Brazil, and China to study the project’s feasibility during Chinese Premier Li Keqiang’s visit to Brazil in 2015. However, back in 2017, Peru opted out of the project due to its high costs, estimated at 60 billion USD. Only after a new study came out which significantly lowered Peru’s financial contribution to 7.5 billion USD, did Peru’s then president, Martin Vizcarra (2018–20), reconsider it. Another iconic project is the Amazon Waterway, which uses satellite data and GPS to make water transport in the Amazonian rainforest more secure. The Transoceanic Railway and the Amazon Waterway are probably the most controversial and capital-intensive projects proposed in Peru. Currently they are still under evaluation due to the environmental risks and operational difficulties involved.

Although the BRI centers around infrastructural connectivity, it also facilitates some high-profile Chinese investment into the mining industry, which has invited close scrutiny. The Las Bambas Copper Mine, acquired for 7.4 billion USD by MMG Ltd., a subsidiary of the state-owned mining company China Minmetals, is by far the largest mining investment in Peru’s history and highly problematic for its environmental impacts. The Toromocho project, invested in by Chinese state-owned Chinalco, also has caused much controversy, especially around the social and economic impacts of the resettlement of Nueva Morococha. Other high-profile Chinese mining investments include Zijin Mining’s Rio Blanco Project, Shougang Hierro Peru’s Marcona Iron Mine, and Zhongrong Xinda’s Pampa de Pongo Project. 

Besides direct investment in infrastructure, mining or logistics, Chinese companies have become more active in bidding contracts in Peru. Successful examples include expansion of the Huanuco–Vayanco National Highway, the Lima–Canta–Huayllay–Cochamarca–Empalme Road Corridor, and the Puno Manuel Hospital Project (China Railway No.10 Engineering Group Co., Ltd.). These contracts, often less capital-intensive or socially problematic, do not receive much media reporting or public attention. Due to the COVID-19 outbreak, China and Peru have not developed new bilateral or regional initiatives to move forward BRI related projects or set up new intergovernmental mechanisms to facilitate the cooperation. 

Current Economic Relations 

Trade: Trade between China and Peru began to pick up in the 1980s. In 1980, Peru exported only 83 million USD of goods, mainly fishmeal and minerals, to China, and imported merely 11 million USD from China. By 2019, the total trade volume between Peru and China had grown to 24 billion USD. The bilateral trade surged after China joined the WTO in 2001, as Peruvian exports and imports to and from China increased ten- and forty-fold, respectively. The trade relations received another boost after the two countries signed a Free Trade Agreement (FTA) in 2009. In 2011, the Association of Chinese Enterprises was founded with support from the Chinese Embassy. In 2014, China replaced the United States as Peru’s top trading partner for both imports and exports. According to the National Superintendence of Customs and Tax Administration of Peru, in 2019 China took up 29.4% of Peru’s total exports and 24.2% of its total imports. While bilateral trade has slowed down due to the COVID-19 pandemic, both sides remain positive about the future. 

Since Peru is a resource-rich country, raw materials make up a large share of Peruvian exports, including to China. According to the Observatory of Economic Complexity, in 2018 Peru exported 13.3 billion USD worth of copper ore, gold, refined petroleum, zinc ore, and refined copper. At the same time, Peru imported mainly machinery, electronics, cars, and broadcasting equipment from China. In the past decade, however, Peru has tried to diversify its export to China to include more value-added products and agricultural products, such as avocados, blueberries, quinoa, and coffee, although this still represents only a small percentage of its overall exports. Peru became the biggest supplier of avocados to China in 2019. 

Investment: The first wave of Chinese investment into Peru started in the 1990s, during the presidency of Alberto Fujimori (in power from 1990 to 2000), who pushed for the privatisation of Peru’s abundant natural resources. In 1992, Shougang Group, a state-owned steel producer, became the first Chinese corporation to invest in Peru as well as in the Latin America and Caribbean region (LAC). It acquired 98.52% of the shares of Hierro Perú, one of the first major state-owned Peruvian mines to be privatised. This was followed by China National Petroleum Corporation (CNPC), another giant SOE, which one year later obtained concession rights to China’s first overseas oilfield in Talara. In 2004, CNPC bought out the peruvian subsidiary of Grupo Pluspetrol, an Argentinian company experienced in oil and gas exploration and production, for a total of 200 million USD. A second, more intense wave of Chinese investment in Peru took place in the wake of the Global Financial Crisis of 2007/2008. In 2007 alone, three mega acquisitions took place, including Chinalco’s acquisition of the Toromocho Copper Mine (860 million USD), Zijin Mining Group’s takeover of the Rio Blanco Copper Mine (182.3 million USD) and a joint acquisition of the Northern Peru Copper Corporation by China Minmetals Nonferrous Metals Co., Ltd and Jiangxi Copper Company Ltd. (455 million USD).

So far, Chinese investment in Peru has concentrated in the extractive industry. According to the Ministry of Energy and Mines of Peru, China has cumulatively invested more than 15 billion USD in the sector from 2009 to 2020. The Ministry also revealed that as of September 2020, 23% of the national copper production and 100% of iron production come from mines operated by Chinese companies. Meanwhile, Chinese companies control 35% of national oil production and 25% of fishmeal production. 

Since the signing of the FTA and the launch of the BRI, both Peru and China have sought to diversify and expand their economic relations. On the Peruvian side, the key is to increase the variety of its exports and facilitate Chinese investments in fields other than natural resources production. In the past decade, Chinese companies have been investing in a range of sectors, including infrastructure, telecommunications, manufacturing, financing, tourism, logistics, and education. Jia Guide, Chinese ambassador to Peru, revealed in 2018 the plan to invest another 10 billion USD by the end of 2020, which would include the construction of the Chancay mega port (designated as a Special Economic Zone) and the acquisition of a power distribution company. In April 2019, China Three Gorges Corporation (CTG) acquired Empresa de Generación Huallaga S.A. for 1.39 billion USD, obtaining permanent concession rights over the Chaglla plant, Peru’s third-largest hydropower facility. Chinese companies have also won numerous smaller contracts to build hospitals, roads, and schools across the country.

Aid: Chinese aid to Peru takes myriad forms in numerous fields, spanning from public health, infrastrual building, military donation and agricultural cooperation. In 2015, China donated 400 agricultural sprayers to the Ministry of Agricultural Development and Irrigation. In 2017, China signed two protocols to donate 18 million USD worth of military materials to the Peruvian Armed Forces, including humanitarian equipment for demining and natural disasters. More than 10 million USD of goods were already delivered before 2015. In 2017, China built the China-Peru Friendship Hall (Centro de la Amistad Peruano China) to honour the long-standing relations between those two countries. The same year, Peru suffered the worst floods and landslides in decades, causing more than 100 deaths and resulting in thousands losing their homes. In response, China donated 1.5 million USD to help victims and contributed 16.8 million USD to build the National Emergency Operations Centre in Lima to improve Peru’s emergency response and management capacity. China renovated the Archbishop Loayza National Hospital in Lima in 2018, after helping expand the hospital in 2011. With the outbreak of COVID-19, the Chinese government dispatched four specialists as early as May 2020 to help Peru and donated personal protective equipment, testing kits, and ventilators. 

Key Controversies

Land conflict and displacement: Displacement and disputes over land are common for mining operations in Peru. In the case of Chinese investment, a few projects, such as MMG’s Las Bambas and Chinalco’s Toromocho, have resulted in displacement of local communities to make way for open-pit mining. Although both companies built what they considered modern towns with improved infrastructures to better accommodate local residents, post-resettlement conflicts arose and standards of living deteriorated. In addition, the communities of Morococha in the Junín department also denounced an illegal transfer of 34 hectares of communal land from the municipality to Chinalco (for more details see the Toromocho project profile). 

Environment: In general, Peruvian citizens worry that Chinese companies would replicate some of their known poor practices at home in terms of environmental protection, or that Chinese investors would prioritise profit over the environment. This concern is most pronounced in the extractive industry because it mostly operates in areas with fragile ecosystems and rich biodiversity, and mining poses serious environmental challenges with serious implications for nearby communities. Numerous mining projects have been halted or delayed due to continuous local protests over environmental issues. For example, the Rio Blanco copper project, acquired in 2007 by a Zijin-led consortium, has not moved past the exploration stage yet as local communities strongly oppose the mine’s development due to environmental concerns. In fact, four Chinese-owned companies—Rio Blanco Copper, Shougang, Chinalco, and Lumina Copper—have all been warned or sanctioned for environmental violations, such as illegal discharging of wastewater. Shortly after the Toromocho mine started production in 2014, Chinalco was ordered by the Ministry of Environment to suspend its operations due to acid runoffs. 

Fierce protests and demonstrations over environmental degradation have been staged by those impacted by Chinese-invested projects. For example, indigenous people and local peasants of the impacted area of the Las Bambas Mine have been protesting against air and sound pollution since the mine began operations in 2015. They voice concerns about the daily traffic of 370 trucks transporting minerals through 18 rural communities without local consent, which they worry will contaminate their land and cause damage to their health. Violent clashes between local communities and the police have caused multiple deaths and many more injuries. In addition to mining, infrastructure projects such as the proposed Amazon Waterway and Transoceanic Railway are also highly contested due to concerns about their negative impacts on local people and environment. 

Transparency: In 2011, Peru became the first Latin American country to endorse Convention 169 of the International Labor Organisation (ILO 169). This ratification has given indigenous and tribal communities the right to prior consultation on major development projects and the power to grant concession rights and permit to extractive industry. However, communities impacted by Chinese mining investment complain about the lack of transparency and perfunctory implementations of ILO 169 by these companies. For example, communities affected by the Las Bambas mine were not adequately consulted to produce modifications to the project’s Environmental Impact Study. Meanwhile, residents of Nueva Morococha were angry because after many so-called community hearings and participation workshops, their opinions and preferences regarding the resettlement were not incorporated into the final decision-making process. 

Labour conflict: Most recently, Chinese investors in Peru have adopted labour localisation strategies rather than bringing workers from China. This is a lesson learnt from Shougang’s experience back in the 1990s when the company brought over its own Chinese managers and workers to execute the Marcona Iron Ore project. According to an interview conducted in 2015 by Sanborn and Chonn with Kong Aimin, then general president of Shougang Hierro Peru S.A.A., Shougang at that time had the largest workforce among Chinese firms in Peru, employing 4,200 people including 2,000 direct hires, just 20 to 40 of whom were Chinese. Under Shougang’s management, there were reports of mistreatment of workers, such as requiring them to work in unsafe environments with outdated equipment. Workers have also complained about the dual salary scale, which resulted in newer employees receiving lower wages and less bonus. This caused much apprehension in Peru and led to decades of labour disputes and an increase in unionisation in the region, which Shougang was unable to deal with properly due to its lack of experience. The Shougang example resulted in negative perceptions of Chinese investors about their labour practices. Another notable labour-related controversy is Chinalco’s Toromocho project in Morococha, which so far has generated less local employment than the company initially promised, causing discontent.

Key Sources

English-language Media:

Peruvian Times

Peru Telegraph

Andina

Dialogo Chino (Peru)

Books, Reports, and Scholarly Publications:

• Gonzalez-Vicente, Ruben. 2013. ‘Development Dynamics of Chinese Resource-Based Investment in Peru and Ecuador.’ Latin American Politics and Society 55, no. 1: 46–72. 
• Gonzalez-Vicente, Ruben. 2012. ‘The Political Economy of Sino-Peruvian Relations: A New Dependency?’ Journal of Current Chinese Affairs 41, no. 1: 97–131.
• Sanborn, Cynthia and Victoria Chonn Qing. 2015. ‘Chinese Investment in Peru ́s Mining Industry: Blessing or Curse?’ Global Economic Governance Initiative at Boston University website. Link.
• Zhu, Lin. 2020. ‘Displacement, Development and Capitalist Modernity: The Making and Unmaking of Morococha in Central Peru.’ University of Colorado at Boulder website. Link.
• Mejía, María Osterloh, Nadia Urriola Canchari, and Xiangzheng Deng. 2020. ‘The Impact of Chinese Foreign Direct Investment on Economic Growth of Peru.’ Latin American Journal of Trade Policy 3, no. 6: 32–47.
• Ministry of Commerce of the People’s Republic of China. 2020. 对外投资合作国别（地区）指南 (秘鲁) [Outward Investment Guide (Peru 2020)]. Ministry of Commerce of the People’s Republic of China website. Link.

Cover Photo: Urubamba river valley, Peruvian andes. Credit (CC): Mario Manel.