Analysis: Ecuador’s insecure dam and unpayable debt – another of Xi Jinping’s questionable deals

RIO DE JANEIRO, BRAZIL – While China’s Xi Jinping’s foreign policy is becoming increasingly nationalistic, he is maintaining unchanged his aggressive economic strategy in Latin America, particularly in countries like Ecuador with shaky accounts and little infrastructure.

Since 2010 -when this strategy was stepped up- Beijing has granted loans worth tens of billions of dollars. That year alone, disbursements were as tempting as they were overwhelming for Latin rulers: US$35 billion. This flood of “investments” was interrupted last year, as a result of the pandemic which originated in China itself.

Over that period, the regime displayed a close, almost fraternal relationship with the region. It reached out whenever a government was in trouble and needed fresh contributions to its coffers. The most frequent cases were Venezuela and Argentina, which even have Chinese currency in their central banks that beg to be renewed at each maturity.

At that time, one of the men very close to Xi – and his seductive bag of money – was former Ecuadorian President Rafael Correa, who directly granted a monumental energy project to a Chinese corporation to build the country’s largest hydroelectric plant: Coca Codo Sinclair.

It was located on the Coca River, in the province of Napo, 150 kilometers from Quito. This dam had been a dream for years and had already been discarded by other Ecuadorian administrations. But the US-trained representative of so-called 21st Century Socialism thought it was time to make it a reality.

The name Coca Codo Sinclair became synonymous of corruption, shady deals, inefficiency, substandard materials and environmental crisis in Ecuador. In total -and beyond the power plant-, the South American country’s debt with the Asian nation is estimated at US$18 billion.

The plan announced by the ex-president and the Chinese representatives was ambitious: it would meet the demand of 30% of the country’s electricity for half a century. They also pledged another key point to seduce those concerned with the consequences for the environment: the 1,500 megawatts of energy would be “clean and renewable.”

Finally, in June 2010, the works began, the tender for which had been “won” by the company Sinohydro Corporation – courtesy of Correa’s influence. There was never an international public tender to assign it, but rather a simple instruction from the Carondelet Palace. Irregularities were already in the genesis of Coca Codo Sinclair’s ideology. Part of the money for its construction was contributed by Correa’s government, although most of it came from the generous interests of a Chinese bank: the Export-Import Bank of China.

Both Asian companies – the construction company and the financial institution – are state-owned and answer to the central power of the regime. Beijing was both creditor and builder of Ecuador’s largest dam, whose initial US$1.6 billion debt began to swell over the years.

Over five years later, on November 18th, 2016, Xi crossed the Pacific Ocean to see how the hydroelectric plant would be put into operation. He was welcomed by the Ecuadorian president, happy to have the head of the Chinese Communist Party (CCP) in his land. He felt it was a defiance to the United States, to the empire.

At the time of its inauguration, the Chinese leader must have grinned inwardly at the thought of the great deal he had achieved and how much it would demand from the Latin American nation to pay its debt. Today, over four years after its inauguration, the plant is operating at half capacity. It is in the hands of the Corporación Eléctrica del Ecuador (CELEC) and there are no longer any Chinese executives on its board of directors or management.

Jeannine Cruz Vaca, member of the National Assembly for the province of Loja and one of the referents within the CREO Movement party, recalled the Comptroller’s report and the landslide and course diversion recorded in the San Rafael waterfall -the highest in Ecuador- are warnings of what the dam is causing to the area.

“The much-vaunted change in the productive matrix announced by Rafael Correa and Jorge Glas went down the drain,” Cruz Vaca said in indignation. “Since 2018, the Comptroller General’s Office has reported several findings that show structural damage, what happened recently with the landslide in the San Rafael waterfall is an example of the impact that this mega work has caused in the region and the country.”

“The Comptroller General of the State, in a draft report of more than 165 pages, read on November 14th, 2018, found 12 critical flaws in the construction process and evidences the risks of an infrastructure that cost US$ 3.2 billion,” concludes the legislator during a break in a palace session.

The Comptroller General’s final report to which Cruz Vaca refers was conclusive. It showed that Sinohydro Corp. did not comply with the contract and that as a consequence there were “cracks in the power plant unit distributors.” “The basic material used to manufacture the distributors corresponds to a GB Q500D plate that is not listed,” the 253 document cautions, among other issues. Not even what the builders had planned was complied with. In total there were 7,648 cracks.

The list of flaws found by the CGE authorities goes on: the experts found excessive wear in turbine wheels, delays in the contract, unresolved defects, breach of contract, deficiencies in the system’s performance, operation and efficiency tests, poorly trained operation and maintenance personnel, environmental impact all around.

Another inspection conducted in 2018 and disclosed by the BBC network, noted that “microcracks found should be carefully repaired, control the repair welding parameters and re-examine the repaired areas to ensure that such procedures have been successful.”

The history of Made in China infrastructure of dubious quality in Latin America has several factors in common with what occurred in Ecuador: its tenders are managed by the regime’s embassies in each country, always have state-owned companies as protagonists, are financed by Beijing, are stained with corruption at all levels, leave an unpayable debt trail and do not comply with the signed contracts.

China slowly infiltrated Latin America’s economy and more specifically Ecuador’s. It saw fertile ground in the country’s leaders. It saw fertile ground in leaders free of preconceptions. First it joined as a lender, later as an investor and for some time now as the stellar builder of major public works. Now, it must collect the scandalous total US$18 billion debt that Quito owes Beijing. It will do so in oil barrels. Natural resources are the regime’s eternal obsession in a region where almost 70 million people live in extreme poverty, according to data from the Economic Commission for Latin America and the Caribbean (ECLAC) and the Food and Agriculture Organization of the United Nations (FAO).

Two of the main players and promoters of the birth of the controversial dam talk to attorneys on a regular basis. One is ex-president Correa, who was sentenced to 8 years in prison for corruption. The man who studied in the United States currently lives in Belgium – since 2017, as soon as he left power – and will not return to the country for fear of being arrested.

The other, his vice-president Glas, and tireless promoter of Coca Codo Sinclair, is in jail. He was convicted for diverting public funds in his favor. Both seized their moment in 2016 to take pictures with Xi. Although the plant is not part of the case that led to their conviction, the irregularities in their contracting could become a new legal chapter in Ecuador.

Despite existing for years, none of the warnings were able to stop the Correa government’s compelling need to be seen as close to Xi and ultimately owe him favors for life. Not him, but the Ecuadorian people, of course. The construction of the dam by Sinohydro Corp. was awarded directly with no international tender.

According to an article published by The New York Times in December 2018, the country’s former comptroller, Carlos Polit, was taped talking about “Chinese bribes.” He was convicted of corruption, like most of those involved in the mega-project, but he is not in jail. He lives in Miami.

Regarding the environmental aspect, in which even the country’s landmark waterfall was modified, entire populations were left without access to their most basic food system: fishing. The flow of the Coca River was disrupted by the construction work and the marine fauna is not what it used to be. The community of Playas del Río Tigre, in the Lumbaqui mountain range, is the most affected.

The drama has been felt since 2017, when in statements to Mongabay specialized magazine, Carlos Andi – a descendant of the Kichwa people – denounced: “In the past, this river was very wild. There were plenty of fish, iguañas, hunting, there was everything.” Not anymore.

One of the most renowned researchers in Ecuador, Dr. Carolina Bernal Carrera, professor of the Department of Geology at the School of Geology and Petroleum Engineering of the National Polytechnic School, understands like few others in Ecuador the impacts that this type of power plants have on the ecosystem. “This technology presents numerous problems and is being challenged in other countries because of its impact on the environment. The government should have favored other options such as geothermal energy and above all diversify its energy matrix, thereby preventing it from becoming dependent on a single type of source,” she explained.

“This work led to an alteration in the hydraulic functioning of the river and therefore affected its other functions: geomorphology, physical-chemical conditions of the water and biodiversity,” Bernal Carrera emphasized.

The pipeline rupture on April 7th, 2020 made matters worse: “This directly affected the access to water of the people living in the area and left them without access to fishing. Considering that this erosive process is evolving and that it will take an indefinite time to stabilize, the government must take the necessary precautions within the framework of a risk reduction management strategy to protect communities and infrastructure works.” For Bernal Carrera, the key to the environmental damage caused was “the lack of hydro-sedimentological and risk studies” overlooked by the Chinese consortium, which also failed to consider concerns about a hydroelectric plant on the site dating back to 1990.

But even if the repairs were attended to and the flow of the river restored along with its sediments and the fish would return to their former habitat and the turbines would supply the pledged 1500 megawatts, the forces of nature would be impossible to stop, even by the Chinese regime… which abandoned the site some time ago.

The fact is that the area had already been discarded in the 1980s for fear that a volcano, El Reventador – known to have been erupting since the 16th century, when the Spanish conquistadors first visited the area – would once again erupt. This time, the imperial conquest comes from much farther away. But El Reventador is still on fire and watchful.

Source: Infobae