Eye on Ecuador: Racking Up the China Debt and Paying It Forward with Oil
- January 13, 2015
- Adam Zuckerman
Ecuador's President Correa was well-rewarded for his trip last week to China, but this could have grave impacts for the Amazon and the people who live there. On Wednesday, Beijing agreed to lend Ecuador $7.53 billion to help the heavily oil-dependent economy cope with the recent drop in global crude prices. This latest sum – the largest China has ever lent Ecuador – brings Chinese financing to Ecuador to nearly $25 billion, over a quarter of the nation's GDP. In 2013 Beijing provided 61% of Ecuador's external financing and purchased 83% of Ecuador's oil; this latest loan will undoubtedly bring both numbers much higher.
Since he took office in 2007, Correa has shifted attention and dependency away from the US and towards China. When Chinese state broadcaster CCTV asked Correa whether Ecuador was "merely changing from a dependency on the US to a dependency on China," Correa rightfully criticized Western financial institutions. He described the "relationship between equals" that Ecuador enjoys with China, saying, "This will not be about submission, like Latin America has long had to suffer. Now, it is really about cooperation between friendly countries, between countries that are friends."
One major problem with Correa's claim is that it is in stark contrast with his past statements. In 2009, when China's Exim Bank demanded that Ecuador put its Central Bank's assets as collateral for a loan, Correa called Beijing's demands "barbaric," "humiliating," and "attempts against the sovereignty of Ecuador." He even said that negotiating with China was "worse than [negotiating with] the IMF."
That's because China's loans, many of which require Ecuador to provide it with a constant supply of crude, have what some analysts have called a "sovereignty immunity waiver" that would allow China to seize many of Ecuador's assets if the country fails to repay the loans. According to recently revealed official documents, Petrochina has the ability to seize assets from any oil companies operating in Ecuador if the nation does not pay back China in full. Why does this matter in the Amazon? Leaked documents have revealed that Chinese pressure may have even helped to undermine the revolutionary Yasuní-ITT Initiative. Correa continued to publicly promote the proposal to keep the oil in the ground – and request funds for it – until August 2013. That was over four years after Ecuador had already agreed to "do it all it can to help [Chinese oil companies] PetroChina and Andes Petroleum explore ITT and Block 31." Both oil blocks are home to Ecuador's last indigenous peoples living in voluntary isolation and Article 57 of the Ecuadorian constitution qualifies any operations there as "ethnocide." Still, it shouldn't come as a surprise that Ecuador has already hired a law firm to enter into negotiations with the Chinese National Petroleum Corporation (CNPC) to drill the ITT Block nor that CNPC is looking to operate in Block 31.
Just as troubling as China's inroads into Yasuní are its attempts to drill in the heart of the south central Ecuadorian Amazon. Ecuador only received three bids in its latest oil round, and two of them came from Chinese state conglomerate Andes Petroleum. While Ecuador and Andes have not yet announced a formal agreement, Ecuador has accepted Andes' offer to lease Blocks 79 and 83 in the middle of the Amazon. The area is home to the Sápara people, a UNESCO-recognized cultural patrimony, and pressure from the Ecuadorian government on behalf of Andes has served to divide communities and create tension among the Sápara. That situation is reaching a boiling point, and with increased pressure could result in lost lives if these troubling trends continue to grow.
While we do not seek to speculate nor make accusations here, the death of land defenders is a phenomenon that is becoming too common in Ecuador and one should not ignore the potential impact of Ecuador-China relations. Recently Amazon Watch and 13 other environmental and human rights organizations urged the Ecuadorian government to ensure a just, transparent, and expeditious investigation into the murder of indigenous Shuar leader and anti-mining activist José Tendetza. Tendetza was killed just four days before he was slated to travel to the UN climate conference (COP20) in Lima, Perú to denounce the operations of Chinese mining company Ecuacorriente in his territory. In 2012 the company reportedly burned down his house and crops, and this year the company's lawyers and sixty masked men are said to have ransacked the local church and school in Tendetza's community. Instead of asking Ecuacorriente to postpone operations while the government investigates what it has deemed a murder, on Friday it signed an additional mining deal with another Chinese mining company.
President Correa can continue to say that Ecuador's relationship with China is not "about submission, like Latin America has long had to suffer," but I doubt the communities on the front lines of Chinese mines and oil wells will believe him.