“Can Latin America’s first AIIB member learn from past mistakes?”, 9 March 2020

In a first for Latin America, on 1 November Ecuador became a fully-fledged member of the AIIB…

Whether or not Ecuador can properly take advantage of its AIIB membership will depend on managing new resources in such a way that promotes good practices, tempers social conflict and encourages better transparency and environmental standards…

Paulina Garzón, director of the China-Latin America Sustainable Investment Initiative (CLASII) at the American University in Washington, says it’s important for Ecuador that financial authorities learn lessons from failed Chinese-funded projects promoted under the government of Rafael Correa. These include the notorious Coca Codo Sinclair hydroelectric plant in eastern Ecuador, which ran some US$2 billion over budget…

To make things worse, Garzón said, contractor Sinohydro is facing a corruption investigation by the Attorney General’s Office.

In the past decade, China has become Ecuador’s main source of finance…

Several loans were conditional on the exclusive hiring of Chinese contractors and even special dispensation to bring engineers and other staff from China.

“We end up paying twice,” says economist Jorge Calderón Salazar, dean of the Arcos Technological Education Institute in Guayaquil.

“Firstly, the money must be paid back with interest, and secondly, we are explicitly obliged to hire Chinese companies. The money does not create the desired multiplier effect that should generate labour and technology transfer.”

… the arrival of the AIIB as a new lender raised fears about a “race to the bottom” in terms of social and environmental standards in project planning and execution, especially in Ecuador.

Communities have criticised the effect of dams altering water courses and Chinese-backed mining projects have been associated with the displacement of families and the intimidation of community leaders.

The El Mirador mine in the Cóndor mountain range in the Ecuadorean Amazon displaced families and generated an ongoing conflict, while the Rio Blanco mine in Nankints experienced similar problems…

“National governments and international financiers should prioritise water and forest corridor connectivity and ecosystem integrity over infrastructure connectivity,” said Garzón…

“I think it’s time to stop calling the railways and big dams a clean means of transport and power generation. A railroad crossing the Amazon is a huge threat to the integrity of Amazon ecosystems,” she added, referring to massive Chinese funding of hydroelectric projects in Ecuador and the proposed railroad that would bisect the sub-continent through Brazil, Bolivia and Perú…

AIIB-funded projects have high standards of transparency in procurement that can serve as an effective shield against corruption…

“Let everything be transparent, starting with the bidding process,” says Alberto Acosta Burneo, editor of economics publication Análisis Semanal. “Many of the funding contracts were tied to the hiring of certain operators and builders, without necessarily holding a competition to see which operator had the best offer,” he added.

Acosta also said that projects must comply with laws on accountability so that citizens can access details of the hiring process and complete documentation in order to avoid making the same mistakes…

Garzón said there should be “broad and participatory oversight” of projects by Ecuadorean civil society, along with Chinese regulatory bodies...

In such a situation, any AIIB-funded project with its first Latin American partner would meet the highest social, environmental and good governance standards.

Unlike other Chinese institutions whose lending criteria is somewhat secretive, the AIIB prides itself on operating under a policy of greater openness…

The AIIB also has a mechanism for receiving complaints from people who claim to be affected by one of its projects, or who know of irregularities…

[Also referred to Inter-American Development Bank, International Monetary Fund]