The influence of the Chinese regime in Latin America has grown significantly in recent years. So much so that this relationship has already transcended economic cooperation. However, today it is not possible to speak of an extremely beneficial alliance. The growing dependence of the countries in the Beijing region has been causing serious effects, which represent a great concern for the future. Among them, deforestation stands out, as well as the environmental and social impacts.
Monica Nunez Salasassistant professor of Environmental Law at the Universidad del Pacífico in Lima, Peru, produced a report for Florida International University, entitled “China‘s investments and land use in Latin America,” in which she analyzes the great Chinese expansion and, at the same time, the poor management of the countries of the region.
Although Beijing has become in recent years the main trading partner of Latin American countries, “The increase in the demand for raw materials is affecting natural resources and local populations, at a time when climate change makes sustainability practices more urgent.”
Given this context, the report indicates that the region needs to review its practices and “prioritize the efficient management of land, water, minerals and waste.” It is that for many industries, Chinese investment and trade increased when Latin American countries were at the maximum of their capacities to supply their internal markets and other Western nations. This makes The main challenge for the region is to adapt to this increase in Chinese demand, “while guaranteeing the social and environmental sustainability of its territories”.
A symptom of concern, according to the report, is that, although Latin American countries continue to explore new Chinese markets for their products, “the problem is that the region’s unsustainable production practices have not changed.” In other words, the same standards that preceded the boom in Chinese demand for Latin American products persist.
The study focuses mainly on three of the most traded raw materials with China, such as soybeans, copper and beef. Likewise, it warns about the impact that the growing demand for lithium and pork can generate in Latin America “in the face of the imperative to expand climate action and stop environmental degradation.”
China’s goal is to take advantage of emerging markets and support them financially. Thus, many countries have been able to access financial resources, cover their shortcomings in transport and energy infrastructure, and ensure a constant demand for their products. This machinery was further exacerbated during the covid-19 pandemic, after the Xi Jinping regime promoted what became known as the “mask diplomacy”, through which multiple Chinese actors made supplies available to deal with the outbreak originating in China. The result: millions of items arrived on the continent in poor condition.
In addition, 19 countries in the region have joined the “Belt and Road Initiative” in recent years, considered China’s New Silk Road. But the terms of the loans are highly questionable, and constitute what is known as the “debt trap”.
This background has long raised the question of whether the growing dependence of Latin America on China is really beneficial for the region.
“Achieving equitable mutual benefit in the trade and investment relationship between China and Latin America remains a challenge. Throughout their joint history, Latin America has maintained its role as provider of natural resources, at a high cost to its ecology and local communities”indicates the report.
It also adds that the strategic association has benefited the parties “unequally”. In this sense, he points out that nine of the ten Latin American countries that have established strategic alliances with the Asian giant “are abundant in essential raw materials to sustain Chinese growth.”
This means that the countries of the region “depend to a large extent on a single partner”, and the scale at which production is required, added to the previous internal and international demand, “is becoming unsustainable and increasing vulnerability to multiple levels”.
Countries like Brazil and Argentina have become dependent on Chinese demand for beef and soybeans. Despite initiatives to adopt sustainable production standards, these industries continue to be linked to deforestation and forest fires to clear agricultural land.
The report highlights that, for example, in the extraction of lithium in Chile and the production of soybeans in Argentina, excessive environmental damage has not been detected compared to operations carried out by Western companies. However, China’s demand for soybeans is significantly higher than that of other countries.
While, the latest results show that the Chinese demand for beef does represent a greater risk of deforestation. This, the report clarifies, would also improve if the country adopted better supply standards, such as sanitary requirements and slaughterhouse approval processes.
“A unique case of copper extraction in Peru shows how world authorities can regulate a management change that would affect the development plans of local communities and environmental rights, despite complying with national legal frameworks. These issues could be foreseen by the Latin American countries, in order to focus transparency and public participation and prevent the risks of socio-environmental conflicts in the long term”, underlines the study.
As a result of these agreements, many countries in the region are running out of non-deforested land for agriculture. Others, meanwhile, are causing socio-environmental conflicts around extractive industries and land use change. “Most Latin American countries have inadequate regulations or have shown an unwillingness to enforce their existing environmental provisions; therefore, they fail to adapt to the context of growing demand and urgency to implement sustainable strategies”.
The report warns that the loss of habitat for wildlife causes interactions with domestic animals and people, which represents a risk to public health. In turn, the loss of shade, the refractive capacity and other thermoregulatory services increase the flow of heat and dryness, affecting the stability of ecosystems. This is being felt by countries like Argentina and Uruguay, both recording lower crop yields due to droughts. At the same time, specialists maintain that Rising deforestation and carbon emissions could push the Amazon to a tipping point: A drier climate would make the tropical forest unable to sustain itself, initiating a process of transformation into a savannah ecosystem. In fact, the Amazon, considered the lung of the world, is already releasing more carbon than it absorbs, which makes it urgent to curb emissions.
“China could reduce its risk of deforestation in the beef supply chain by applying better sourcing standards, such as those related to animal welfare and tracking indirect deforestation,” the report suggests.
It also states that the countries of the region should pay special attention to investments in highly concentrated markets, such as the case of lithium in Chile.
Going forward, lithium is expected to add to Latin America’s demand for minerals for new energy technologies. In the last decade, its demand has already doubled, given the growing need for energy storage devices (lithium-ion batteries for solar panels, personal devices, mobile phones and electric vehicles).
In May 2018, the Chinese company Tianqi Lithium, acquired a 24 percent stake in the Chilean SQM (Sociedad Química y Minera de Chile), a leading producer of lithium worldwide and one of the two extractive companies operating in the Atacama Desert. Tianqi Lithium also bought the shares from Nutrien Ltd., a Canadian fertilizer company, following approval from the Chilean competition authority.
To date, SQM and Albemarle are the only ones extracting lithium in Chile. Tianqi Lithium is now a business partner of the two economic groups: Albemarle, in Australia, and SQM, in Chile.
Chilean lithium is attractive to the international market due to its low extraction cost. Mineral deposits are found in complex aquifer systems under the Atacama desert. This also leads to social conflict, as indigenous communities have long denounced the impacts of extraction on their livelihoods. In addition, local farmers in San Pedro de Atacama are experiencing a shortage of water and a decrease in agricultural activities, which is also affecting their food security and fracturing the social fabric of their communities.
Chinese companies also dominate global investments in the agricultural sector, and Chinese players are not only interested in buying land in the region, but also in investing in the entire production chain.
This level of dependency led Latin American countries to become sensitive to changes in the Chinese economy. When China’s growth slowed between 2 and 3 percentage points between 2013 and 2014, and has remained stable between 6 and 7 percent since then, Argentina and Brazil, for example, “felt the full force of a negative shock from the Chinese GDP”.
In 2016, China represented 13.1% of Argentina’s trade, and Argentina 0.3% of China’s. Likewise, China represented 18.1% of Brazil’s trade, and Brazil 1.8% of China’s.
For its part, the report acknowledges that the relationship between China and Latin America has also helped some countries in the region to make the transition to renewable energy technologies. Chile, for example, managed to reach its goal of 20% non-conventional renewable energy in record time.
But, despite some few benefits, the countries of the region that commit to expanding their production of basic products continue to do so “at the cost of human and environmental health”.
“It will depend on whether the region can keep up with these demands in a sustainable way that its association with China will contribute to achieving ‘the South American industrial and energy dream’”concludes the report.
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