11/08/2020

New Silk Road: connectivity for a shared development

The Belt and Road Initiative (BRI) or New Silk Road Initiative, was launched in 2013 by President Xi Jinping as an ambitious project aimed at promoting national development and China's international economic projection. In its original conception, the BRI consists of a land component made up of six corridors that form the so-called Economic Belt of the Silk Road and a maritime component (21st century Maritime Silk Road) that links ocean spaces between the Asia Pacific and the Indian Pacific.

In 2015, and with the main objective of promoting the greater internationalization of firms considered leaders in high technology sectors (robotics, ICTs, telecommunications, aerospace, biotechnologies, among others), a third component was added, called the Digital Silk Road. The mobilization of financial resources, between investments and loans, would exceed a trillion dollars.

The BRI can be considered the heritage of the ancient Silk Road, a means of contact and integration between civilizations that, through centuries, united the vast Chinese Empire, Central Asia, the Arab world, the Hindustani peninsula and Europe.

Among its main objectives, we can name: i) to drive the development of interior regions, particularly those in the northwest which are far from the prosperous east, ii) to geo-spatially integrate the domestic market, iii) through infrastructure projects that contribute to greater connectivity, to increase levels of intra-Asian and global regional interdependence, iv) to reaffirm the Chinese strategy of “peaceful rise” as a provider of “global public goods”, v) to contribute to the realization of the “Chinese dream” of achieving the recovery of its lost status as a predominant power in Asia, vi) to shorten the development gaps with regards to western advanced economies, vi) through foreign investment and financing, to generate business opportunities for their transnational corporations, vii) to re-legitimize the leadership role of the CCP, and viii) to promote and project to the world "values" that are typical of the ancient Chinese culture, applicable to international action, such as cooperation, solidarity and harmony.

Its realization has been favored by the international withdrawal of the United States under the America First vision. In contrast to the rise of economic nationalism and the erosion of the multilateral trading system (WTO), the BRI allows China to boost its economy through cooperative South-South strategies and bi and plurilateral agreements, to link its development with that of less advanced nations, and to promote an ideal of globalization focused on economic openness, reduction of North-South asymmetries, and mutual benefit.

The BRI and the Chinese locomotive

In their specific execution, the projects developed by Chinese state and private companies are destined for economies in Africa, Southeast Asia, Central Asia, Europe, the Middle East and Latin America and the Caribbean. Rail, road, digital and maritime interconnections, intertwine distant markets and reduce costs regarding logistics (including through the Arctic Ocean) by expanding the supply of goods and services in and between developed and developing economies.

Emblematic projects reaffirm the aforementioned: the China-Europe rail route connects the city of Yiwu (close to Shanghai) with Madrid in a 13,000-kilometer stretch; gas and oil pipelines interconnect China with Russia and the Central Asian Republics. Dams in Ethiopia, Egypt, roads in Angola, Djibouti, the Tanzania-Zambia railway, Abuja-Kaduna in Nigeria, are just some of the projects developed in the continent “forgotten by Europe”. Ports in Pakistan, Iran and Sri Lanka and even the Mediterranean (Piraeus), facilitate the movement of goods and energy in the so-called Pearl Necklace.

BRI's financial support resides in powerful state banks that are listed among the most important in the world, such as Eximbank, the Construction Bank of China, Development Bank, Agricultural Bank, Bank of China or the ICBC. They have been joined, in 2014, by the financial institution created by China with the specific purpose of financing projects within the framework of the BRI: the Asian Infrastructure Investment Bank (AIIB), of which Ecuador and Uruguay are non-regional members.

Latin America and the Caribbean: opportunity within the crisis?

For Latin American economies, the BRI expands financing alternatives aimed at reducing regional infrastructure deficiencies, integrating markets, promoting exports and, through bi-oceanic corridors, reducing intra and extra-zone operating costs.

The economic complementarity between China and LAC boosts a broad portfolio of mining, energy, road and production projects, as well as the formation of alliances between technology firms (ZTE, Huawei, Lenovo, Chery) in order to provide services in Latin American economies. Goals and expectations that resulted in the formal inclusion of LAC in the BRI when considering, according to the final Declaration of the Second Ministerial Meeting of the China-CELAC Forum (Santiago de Chile, January 2018) that “...for China, the countries of Latin America and the Caribbean are part of the natural extension of the Maritime Silk Road and are indispensable participants in the international cooperation of the Belt and Road..."

As a result, railway projects (Belgrano Norte), port logistics (Uruguay, Colombia, Peru), routes, telecommunications (Brazil, Argentina, Mexico), bi-oceanic corridors and canals (Argentina - Chile, Brazil-Chile through Bolivia, Panama) , are part of the Sino-Latin American commitment under the auspices of the BRI and, in effect, redesign the Latin American geo-economic space.

Despite this positive general framework, we must not ignore aspects considered questionable about the BRI that have generated criticism at the regional level. Among the main ones, we can highlight: low levels of technological linkages, conditionalities imposed on receiving economies for the granting of credits, increase in levels of regional indebtedness before Chinese financial institutions, deficiencies in transparency in bidding processes, inadequate consideration on environmental impacts, and displacements of native peoples and residents, in areas considered priority for the development of projects.

Conclusions

The post-pandemic economic scenario interrogates about the regional future of the BRI. In this sense, China confirms its commitment to cooperative action with LAC through investments and credits. Therefore, adequate planning at a subregional level of the Mercosur, the Pacific Alliance, and tuning in with programs such as IIRSA, would favor better articulation with BRI projects.

For LAC, the BRI represents an opportunity to reduce serious deficiencies in connectivity, integrating borders that politics does not usually erase. At secondary but synergistic levels of action, the BRI forces the articulation of public-private efforts, between state and non-state actors, labor organizations, business associations, professionals and the academic world in which universities, as training and broadcasting platforms, are essential.

In short, the BRI is a vector that accelerates Sino-Latin American inter-cultural diffusion and cooperation and validates mutual aspirations for the formation of a “society for a shared development”.

Sergio Cesarín is professor of the Master in Economics and Business in Asia Pacific and India. CONICET researcher. Coordinator of the Center for Studies on Asia Pacific and India (CEAPI) at the UNTREF.