New Pirates in the Caribbean?

Baha Mar Resort
The 2,300-room Baha Mar resort hotel in the Bahamas received Chinese financing.

 

 

By Horacio J. Godoy

English pirates trolled the Caribbean five hundred years ago seeking  the best plunder for the British Crown.  Spanish colonizers of the Americas shipped the gold and silver from this region to Europe. Later, the United States rose to power and defined the whole Americas as their area of influence through the Monroe Doctrine. The Caribbean lived a particularly intense version of this doctrine. The 20th century began with President McKinley intervening to support the independence of Cuba from Spain and imposing the Platt Amendment on the island, followed by Theodore Roosevelt taking Panama to build the Canal, and finally Reagan invading Grenada and Bush bombing Panama. The Caribbean has been a focal point of the major economic players of the world now for five centuries.

More recently, for a short period, Hugo Chávez’s Venezuela became an active player in the Caribbean to fill a gap of an increasingly indifferent United States, disbursing cheap fuel and financing broken economies through the oil alliance Petrocaribe.

Today, a new global power is making waves in the Caribbean. It is the People’s Republic of China. In order to satisfy its voracious internal demand, China began to acquire the area’s natural resources (bauxite, alumina, nickel) and agricultural products (sugar), as it did in the rest of Latin America. At the same time, it significantly increased its exports of manufactured goods to these countries and is now the largest or second-largest trade partner for almost all the region. Moreover, in countries like Cuba, Trinidad and Tobago, and Jamaica, to name a few, Chinese imports are up to five times larger than exports to the Asian republic.

Since 2015, however, China started to go well beyond trade, to concentrate also on investment, especially in infrastructure such as roads, ports, tourism and energy. Through its development banks, the government has multiplied its loans to Latin America sixfold since 2007, according to the Council on Hemispheric Affairs, and the Caribbean is not the exception. In a few years, China has become the major foreign investor in this continent, surpassing the United States and Europe. A closer look at some of these investments shows the magnitude of China’s impact on the small Caribbean nations.

Known as the “Beijing highway,” Highway 2000, completed in 2016, is a state-of-the-art divided road that connects Jamaica north to south. The 41.6 mile artery that cost $732 million, linking the capital city of Kingston with the popular beachside resort of Ocho Rios, may be the single biggest investment by China in the Caribbean thus far. The highway was constructed by the China Harbor Engineering Co. (CHEC), a state-owned global company.

In return, the Jamaican government has handed over to the Chinese 1,200 acres of land along the road for the construction and development of hotels and resorts. Three luxury hotels with up to 2,400 rooms are planned, as well as a host of other investments in the area.  Despite some serious questions concerning jobs for local workers, environmental threats to the sites, and potential negative effects on local competitors, the Jamaican government continues to be very supportive of new Chinese investments.

China has also expanded investment and trade in Cuba, despite their limited relationship during the Cold War. Trade between the two countries has increased since 2010, and in 2016 China surpassed Venezuela as Cuba’s largest trading partner, with a bilateral trade of $2.5 billion, only 257 million of which were exports to China. Chinese firms have invested in Cuban infrastructure with projects such as renewable energy research, hotel development and tourism. A new Air China Beijing-Havana flight has increased the number of Chinese visitors to Cuba since 2017 and is expected to grow further.  

Barbados, Grenada, Guyana, Panama and Suriname have all received a major influx of Chinese funds, varying from economic investments to gifts and direct aid. In 2017, Beijing went even further and presented a new comprehensive development plan for Grenada. This is a blueprint for infrastructure development, including highways, railways, deep-water ports for cruise and cargo ships and a new economic center built around St. George, the capital. “Helping other nations to design a national development plan is a demonstration of our soft power,” said Chen Fengying, a fellow at the China Institute of Contemporary International Relations (CICIR). “It is an equal and friendly gesture from China to other developing countries.” 

 

Chinese Adventurers

However, not all Chinese investments have been so orderly and successful. Largely encouraged and enabled by China’s central government, Chinese firms set out to invest overseas with diverse qualifications and capacity. Civil society activists in Latin America and the Caribbean have criticized a few of these projects for employing and giving special conditions to Chinese workers and lacking effective environmental impact policies. Some projects have run out of funding, causing great economic distress, and in others, the origin and intentions of investors have been opaque.  

 In 2016, for example, the Chinese had plans for a monumental deep-sea port on the coast of Jamaica’s Great Goat Island, with a price tag of 1.5 billion dollars, to process cargo from the newly expanded Panama Canal. It would have been the biggest Chinese investment in the region to date, but the project was brought to a halt, and later virtually shelved, due to strong pressure from environmental groups that argued the area was an ecological reserve, home to endangered local species. 

The Bahamas partnered with China on a number of high-profile investments including trans-shipment ports and luxury resorts to accommodate the growing tourist trade. In 2017, the Baha Mar resort, a $4.2 billion project with 2,300 rooms, finally opened its doors, some four years behind schedule and with severe financial difficulties including a bankruptcy of the initial owners and hundreds of jobs lost. The import-export bank of China finally sold the project to the Cheng family from Hong Kong, known for its casino businesses in Macao. They completed the works and inaugurated (although partially) the site only last year.

The construction of the Nicaragua Canal, an allegedly $50 billion project to be financed by private Chinese investors, was to begin in 2013. Surrounded by secrecy and doubts regarding the funds, the future of the project remains uncertain. A recent study by Belgian-based research institute Porteconomics shows that the project is rife with uncertainties and challenges, as well as high economic and environmental costs. Additionally, Nicaragua does not have diplomatic relations with Beijing, as it still recognizes Taipei.

 

Beachside resorts
The Chinese are constructing beachside resorts in the Caribbean.

 

Why the Caribbean?

In 2016, China released its White Paper on Latin America and the Caribbean and introducing guidelines for the region, complementing its first 2008 paper on the region. The White Paper lays out broad principles of peace and stability, non-interference and mutually beneficial relationships, which are to be the basis of China’s engagement with South America. China has become a member or observer state in most regional international organizations, from the Inter-American Development Bank (IADB) to the Community of Latin American and Caribbean States (CELAC), a regional organization including all countries except the United States. It is also an active partner within the Caribbean Community of the English, French and Dutch-speaking countries, known as CARICOM.

 Why would the second biggest economy in the world bother to develop such tight relations with the small nations of the Caribbean? 

“It’s the economy,” most analysts answer.  They argue that trade, as in the whole world, is China’s main motivation. Caitlyn Campbell states, for example, in a U.S.-China Economic and Security Review Commission (UCESC)  report, that “China’s engagement with the Caribbean is primarily economic in nature and appears to be tied to Beijing’s broader efforts to gain access to key markets.”

It makes sense to claim that in Latin America, China had initially focused on assuring access to the region’s natural resources. However, Caribbean economies are too small to be significant for China’s trading plans. This region accounts for less than one percent of the Asian country’s trade. But viewed from the Caribbean perspective, China’s partnership is indeed very significant.

Other studies emphasize China’s intention to contribute to South-South cooperation for development. This explanation is particularly strong given the scarce attention that the region has been receiving from its traditional partners, the United States, Europe and South America. Nevertheless, as expert Evan Ellis has noted, “China’s Caribbean involvement does not represent an altruistic Sino-Marshall Plan. Beijing talks about ‘win-win,’ but actually this means ‘China winning, and if Latin America will go along with what China wants, that’s good too.’”  

Other observers contend that China has been investing systematically in the Caribbean in the last 15 years as part of Beijing’s diplomatic efforts to obtain the recognition of the People’s Republic of China (PRC) over that of Taiwan. Of the 19 countries in the world that maintain formal diplomatic relations with Taiwan, ten are in Latin America and, with the exception of Paraguay, all are in Central America and the Caribbean.

In the years leading up to the 2007 Cricket World Cup, for example, China doled out $132 million to Caribbean countries in aid and flexible loans. The soft touch rendered some fruits. In 2005, after Grenada severed ties with Taiwan and recognized Beijing, it received a token of appreciation from the mainland Chinese government: a $55-million cricket stadium. 

A 2008 diplomatic truce between China and Taiwan came to an end in 2016, when Taiwan elected nationalist Tsai Ing-wen of the Democratic Progressive Party as president.  China’s push for switching recognition became stronger then, and it has been paying off lately. In 2017, after a Chinese conglomerate funded and completed expansion of the Panama Canal, Panama cut ties with Taiwan and recognized the People’s Republic. The Dominican Republic followed suit, and in May 2018 announced its severance of relations with Taiwan and recognition of Beijing. Prior to this decision, China had promised $800 million in infrastructure investments, including the Yuna River Project, a construction of low-cost housing and a trash recycling/energy generating plant. 

A third explanation of Beijing’s interest in the Caribbean is geopolitical. Some specialists consider that China, responding to its global strategic plans, is defying the U.S. influence in the area. “Beyond market access, China’s increased presence in Caribbean affairs can be understood as a subtle jab at American Western Hemisphere dominance at a time when Washington is pushing Beijing in the South China Sea,” says University of Akron China specialist Jared Ward.  Although Ward explains that China does not represent a direct threat to U.S. security today, he argues China’s footprint will grow and challenge U.S. power.

There are no indications so far that Chinese growing influence in the Caribbean poses a security challenge to the United States. China’s military and security presence in the region is minimal. Cooperation, loans and institutional relations are indeed growing in the military and security sectors, but seem to be mostly token gestures, like sending military support troops and medical units with the UN mission for the recovery of Haiti after the earthquake or offering other countries vehicles for rapid police deployment.

For the last five centuries, the Caribbean has seen rising and declining powers navigate its waters, and what happened in that region reflected shifts in power in the world. It is no different today. The United States seems to be in retreat. In 2013 Secretary of State John Kerry announced the end of the Monroe Doctrine. He stressed the need and desire of the United States to re-engage with the region, but this has not yet taken place and, under the current circumstances, seems unlikely that it will happen in the near future.

Thus the real question for the Caribbean leaders is not whether China’s economic and political influence will affect the United States, but rather how they are going to take advantage of their developing relationship with China. They could seek a different historical path, so that the newcomers are not yet another wave of pirates in this sea, but visitors who will help to produce greater autonomy and a more prosperous future for their citizens.

 

Horacio J. Godoy is currently working in London on a paper about China’s involvement in Latin America. For a decade he has been a professor of International Relations at the Universidad del Norte, Barranquilla, Colombia. Twitter: @hgodoy9