Wandering China

An East/West pulse of China's fourth rise from down under.

Chinese investors become responsible in Latin America – study


Better days ahead.

Credit to a press wire for positive reporting on China where and when it is due.

Read the International Institute for Environment and Development (IIED) study here.

Thanks to ChinaSouthAmerica for the heads up.

– – –

Chinese investors become responsible in Latin America – study
By Megan Rowling
Source: Thomson Reuters Foundation, published – Thu, 9 May 2013

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Pelicans gather as fishermen unload anchovies from ship at north Peru port of Chimbote. Peru, world’s top fishmeal exporter, sells anchovies as fishmeal for pigs in China. Picture December 14, 2012. REUTERS/Enrique Castro-Mendivil

LONDON (Thomson Reuters Foundation) – Chinese investors in Latin America are showing greater awareness of the social and environmental impacts of their business activities, and have started applying standards to make trade more sustainable, a research report said on Thursday.

The study from the International Institute for Environment and Development (IIED) looked at investment by Chinese state-owned enterprises in Peru, Brazil and Chile, in the mining, agriculture and forestry sectors. China is expected to overtake the European Union to become Latin America’s second-largest trade partner next year, after the United States, it noted.

“While Chinese companies have often been accused of performing worse in terms of sustainability than their foreign and domestic counterparts, evidence for this is far from conclusive,” said Emma Blackmore, the report’s lead author.

“Chinese investors face steep learning curves with respect to local practices and the contexts in which they are operating – both cultural and regulatory. But they are showing signs of increased recognition of the importance of sustainability in informing investment decisions and in building long-term relationships and China’s reputation in the region,” she added.

The main benefits for Latin America include economic growth, job creation and infrastructure development, such as roads or soy processing plants, the report said. “But there is a vital need to balance economic growth with improvements of livelihoods of the poor as well as protection of increasingly scarce natural resources,” it emphasised.

Development experts have made similar recommendations about China’s huge investments in Africa, but the report did not touch on this region.

‘MIXED’ RECORD

In Latin America, the IIED study described the social and environmental record of Chinese mining companies as “mixed”. It cited one example in Peru where a Chinese steel company, Shougang Corporation, was fined for reneging on a promise to invest $150 million in the local community. The firm has also been accused of paying very low wages.

In another case, that of the Toromocho mine project in Peru, Chinese aluminium giant Chinalco has built a new town to resettle the inhabitants of Morococha, and is due to create 5,000 jobs. The process has not gone smoothly, with some people reluctant to move.

But the company’s efforts to consult with the community and set up a social fund appear to “signify recognition by the company of the need to obtain a social licence to operate, and lesson-learning from previous Chinese experiences in the region”, the report said.

In Brazil, there are also positive signs. In 2011, Chongqing Grain Group announced a $4 billion investment in a new 100-hectare soy processing plant to be built in Barreiras in Bahia state on land donated by the local authority – a project that was welcomed by the Bahia agriculture secretary.

“This development may offer greater employment opportunities and allow Brazil to add value to its soy, although tangible benefits remain to be seen,” the report said.

DOMESTIC GUIDELINES

The study said that China had so far had limited involvement in international standards to boost the sustainability of trade and investment. For example, Beijing has rejected the Extractive Industries Transparency Initiative (EITI), but has given explicit backing to the ISO 26000 global guidance on social responsibility.

Blackmore told Thomson Reuters Foundation that international guidelines have tended to focus on trade between northern and southern hemisphere countries, applying largely to investors from member states of the Organisation for Economic Cooperation and Development.

“There is a need to involve southern trading partners, and China really can play a part,” she said. “Things are changing in the way standards are developed.”

China has crafted a number of domestic initiatives to ensure more responsible trade and investment, which may carry more weight. Outlined in the study, these include the Guidelines on Environmental Protection for China’s Outbound Investment and Cooperation, developed by China’s ministries of commerce and environmental protection, and China’s “green credit” guidelines, which are intended to shape the investment decisions of banks by assessing environmental and social risks.

Blackmore welcomed these as a positive development, but said they should not exclude smaller business and farmers. “They look great on paper, but it will be important to see what happens and to have oversight of that,” she added. A growing number of Chinese civil society groups are keeping tabs on what corporations are doing, even though social networking tools like Facebook are restricted, she noted.

Despite the difference in governance systems between China and the Latin American nations where they operate, Chinese companies are increasingly engaging with local communities in a democratic context, Blackmore said.

The paper also highlighted the importance of legislation and regulation, and how these are enforced in the host country. In Peru, Chinese investors have set up new companies and projects that are fully owned, or obtained majority shares of Peruvian companies, giving them more independence. But in Brazil, they have often had to form partnerships with local firms, inheriting their relatively well-developed sustainability agendas, it said.

This week, the Peruvian government said it is trying to quash the ability of companies to avoid paying environmental fines by lodging judicial appeals that linger for years, as part of a push to crack down on polluters in the top mineral-exporting nation.

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Filed under: Beijing Consensus, Charm Offensive, Chinese Model, Communications, Culture, Economics, Government & Policy, Ideology, Influence, International Relations, Latin America, Mapping Feelings, Media, Peru, Reuters, Soft Power, Tao Guang Yang Hui (韬光养晦), The Chinese Identity

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