Bolivia seeks China's support in the face of its first economic crisis in two decades | International

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Employees separate fruit at a food processing plant in Cochabamba, Bolivia.Marcelo Perez del Carpio (Bloomberg)

Bolivia is getting more Chinese loans and investment to deal with its first economic crisis in 20 years. The amounts are small, confirming the pessimistic perception of the Asian giant regarding the size and legal certainty of the Bolivian economy that has been observed in the last decade. However, the recent agreement with a Chinese consortium to carry out a lithium extraction project, a mineral for which Bolivia has the largest brine reserves in the world, may mean an opportunity to reverse the disinterest of China and other investor countries.

Last week, President Luis Arce announced that the investment of the Chinese consortium CATL, Brunp and CMOC (CBC) in the extraction of Bolivian lithium would increase from some 1,000 already agreed to 1,400 million dollars. Shortly before, he had informed that a zinc refining plant will be built with a loan of 250 million dollars from Eximbank-China.

China is Bolivia's main trading partner, but the relationship is unequal: Bolivian exports to the Asian country, minerals, have been barely 20% of Chinese exports to Bolivia, which receives all kinds of finished goods. Chinese direct investment, especially in mining, has been insignificant compared to that received by neighboring Peru and Chile. And although China is the main bilateral source of credits, it only occupies a secondary position within the total external debt. "All the flows that arrive from China to Bolivia are small," says expert Daniel Agramont. "This has always been the case and I don't think there will be changes, because the Chinese do not act out of political sympathies, but rather for their interests," adds the economist.

The governments of the Movement for Socialism (MAS) have prioritized economic relations with the Asian power and, therefore, in relative terms, the presence of China has followed a clear ascending line. "Between 2005 and 2018, Bolivia multiplied its exports to China 19 times and its imports 13 times," says economist Napoleón Pacheco, one of the authors of the book. corrosive capital, in which he studies the investments of "non-democratic" States that have done business in the country. As for the debt with China, it increased 26 times in the governments of Evo Morales.

“More than China, in Bolivia there are Chinese companies that, with the support of their State, carry out the policy go out [ir fuera] that Beijing started in 2001″, explains Agramont. Since 2011, when they first arrived in the country, these companies have worked mainly in the construction of roads, bridges and industrial plants. Another economist, José Luis Evia, has listed 28 companies that have a presence in Bolivia, including some large ones, such as CAMC or Sinohydro.

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Several have worked in fragile ecosystems, such as the Amazon, arousing, in general, the rejection of the population. A survey from five years ago showed that Bolivians had a better perception of China as a country than of its companies. “Chinese companies have been involved in all kinds of scandals,” says Agramont. Studies on this subject show the existence of labor and environmental problems, technical breaches, and cultural clashes between Chinese workers and Bolivian rural populations. On several occasions, local workers have denounced that their Chinese employers treated them arrogantly and wanted to reduce them to “slavery”, alluding to grueling work methods.

In 2016, CAMC was linked to the deterioration of the image of then President Evo Morales due to his personal relationship with one of the Bolivian managers of the Chinese contractor, who claimed to have had a child with him. Jin Zhengyuan, an executive with the China Harbor Engineering Company, was recently dismissed on charges of bribing Bolivian officials to obtain a highway contract. This ruling did not satisfy almost anyone, because, before, the main witness against Zhengyuan died in an unclear way in the United States. The matter has been part of Morales' arsenal of accusations against the Arce government, which has escalated in recent months despite the fact that both are members of the same political party.

Lithium, at the center of the discussion

The Bolivian government announced an agreement for the extraction of lithium with the CBC consortium in January of this year. The specialists consulted by this newspaper consider CBC as a "serious" company. One of its partners is CATL (Contemporary Amperex Technology), the world's largest manufacturer of electric batteries. Its executive, Burton Roy, was at Arce's side when he announced the increase in the committed investment.

But Bolivia's initial project to include in the process other foreign companies that, like the Chinese, achieved high levels of lithium recovery from their salt flats, has not been fulfilled so far. The biggest criticisms of the agreement with CBC, from sources linked to the other interested companies, attack the honesty of the choice of the Chinese consortium. The fact that a contract with CVC has not yet been signed and that the agreement is not public does not help. Much work remains to be done to create the legal and political conditions that could guarantee the project's success. Potentially producing Bolivian regions, Potosí and Oruro, aspire to obtain, with expensive lithium, rents much higher than those that are now established to compensate them for the extraction of minerals.

“Bolivian legislation on non-renewable natural resources is very harsh; only the State can exploit them”, says Agramont. “That's why there hasn't been much mining or oil investment from China, nor from other countries. The agreement with CBC constitutes a window of opportunity. If the government finds a way for this Chinese concessionaire to work – and its privileged access to Bolivian lithium reserves does not only serve to improve its stock price – then Bolivia could be more attractive for investments from China or other countries,” he points out. . "But it won't be easy," warns the analyst.

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