As China expands its involvement into critical infrastructure projects throughout Latin America, concerns persist about the actual benefits.
A recent case in Chile, highlights this trend. In late April, Chile’s state railway company, EFE, awarded a $470 million contract for the civil and railway works of the Santiago-Batuco project’s surface section. The contract, which EFE described as the “most important individual contract ever awarded” in its history, went to a consortium comprising China Railway Rolling Stock Corporation Limited (CRRC), China Railway 22nd (CR22), and China Railway Construction Electrification Bureau (CRCEB). The agreement covers tracks, stations, and vehicle and pedestrian crossings, among others.
The performance of Chinese companies in such construction endeavors, however, continues to raise questions. These often include concerns about labor practices, adherence to local environmental regulations, and the long-term quality and maintenance of the completed infrastructure. Such issues were underscored by an earlier incident involving a major train acquisition.
In August 2023, Chilean digital daily The Clinic reported that the Chilean Ministry of Transport and EFE announced the purchase of 32 new trains for the future Melipilla-Alameda and Quinta Normal-Batuco services. This represented one of the largest orders for railcars ever placed by the Chilean government.
In that deal, a consortium led by CRRC was awarded the Quinta Normal-Batuco section for $171 million. However, the Spanish company Construcción y Auxiliar de Ferrocarriles (CAF), which participated in the tender and had previously worked for the Santiago Metro, criticized the proposal, describing it as “a reckless bid both in terms of trains and maintenance,” The Clinic reported.
CAF claimed that the costs presented by the Chinese company were “well below market value,” almost 40 percent lower than CAF’s. As such, they filed a preliminary injunction with the Chilean Free Competition Defense Tribunal, the entity responsible for preventing, correcting, and punishing acts that threaten free competition in the country.
“The term ‘reckless bid’ is a conceptualization of a non-serious proposal and is used doctrinally and jurisprudentially in matters of free competition, public tenders, and contracts in general,” Ignacio Barrenechea, CAF’s director in the Americas, told the press. “The Chilean legal system requires that a bid be serious.”
While CAF’s appeal was unsuccessful, the incident further fueled scrutiny regarding the competitive practices and performance of Chinese state-owned enterprises (SOEs) in infrastructure development. These issues are not isolated to Chile; similar dynamics are observed in other regional projects.
Peru, Colombia, and Mexico
In Peru, some business leaders have expressed reservations about the mega-port of Chancay, developed by China’s SEO COSCO. Roberto De la Tore, president of the Lima Chamber of Commerce (CCL) told Peruvian newspaper La Razón that while it will increase commercial traffic, “ it will take up to 30 percent of the cargo from Callao, the country’s main port.”
“Reducing the journey to Asia by 10 days will help lower logistics costs, but it will also attract cargo from other countries in the region and local production, without greater incentives, could be affected,” De la Torre added. Chancay is not a magic solution for Peruvian foreign trade, he said, according to La Razón.
“In the case of Chancay, we face a particularly complex situation,” Andrés Gómez de La Torre, a Peruvian international analyst, told Diálogo. “China’s presence, which, due to its well-known modus operandi, typical of the Communist Party and the People’s Liberation Army, raises legitimate concerns.”
Meanwhile in Colombia, Chinese infrastructure projects have faced significant delays, drawing similar attention. A notable example is the Regiotram light rail line from Bogotá to Zipaquirá, which has been hampered by issues such as the inability of China Civil Engineering Construction Corporation to obtain legally required right-of-way from local communities and other environmental concerns, Infobae reported.
In Mexico, the rehabilitation of maintenance and repair centers for trains on Line 1 of the Mexico City Metro, undertaken by CRRC, has also been significantly affected by contract breaches and multiple anomalies in the progress of the work. Mexico daily La Jornada Hidalgo reported that the work’s progress was described as “nil” and was riddled with irregularities such as bribery, fraud, and even threats from Kevin Lee, CRRC’s general manager for Latin America to Ramón Martínez, one of the project’s subcontractors. “According to Martínez, Lee warned that it was not in his best interest to have him as an enemy and that he should be careful about what he was reporting,” La Jornada Hidalgo reported.
Alliances with China: Few benefits
“We must not lose sight of the fact that behind every Chinese company doing business is the Chinese government and, therefore, the Communist Party. There is no company where the state is not present, directly or indirectly, to a greater or lesser extent,” Alberto Rojas, director of the Observatory of International Affairs at the Finis Terrae University in Chile, told Diálogo. “Therefore, every time we see a Chinese company landing in a Latin American country, it’s the Chinese government doing so.”
Rojas warned that alliances with China often fail to benefit smaller nations, citing Beijing’s prioritization of its own interests and a lack of local job creation. He described this as a model based on establishing business hubs with Chinese labor, leveraging tax and administrative benefits, without fostering the recipient country’s internal development.
Echoing these words, regional officials, diplomats, and analysts meeting in Asunción, Paraguay, for the early June international forum “Paraguay and new economic opportunities: the role of sovereignty vis-à-vis China,” warned about China’s growing influence in Latin America. Regional leaders urged Paraguay to safeguard its democratic sovereignty while considering possible economic agreements with Beijing, news agency UPI reported. During the event, experts agreed on the political and economic risks of strengthening ties with the Asian country.
“Paraguay should take advantage of its privileged position in the region to negotiate from a position of institutional strength,” Paraguayan economist Jorge Garicoche told UPI. ‘Trade alliances should be a lever for sustainable development, not mechanisms of dependence.”
