On July 25, four U.S. senators introduced bipartisan legislation meant to clear the mist surrounding China’s covert use of the Inter-American Development Bank (IDB) to exert influence over governments in other countries.
The bill was introduced by Sens. Bill Hagerty (R-Tenn.), Marco Rubio (R-Fla.), Bob Menendez (D-N.J.), and Tim Kaine (D-Va.), and an accompanying statement pointed to the IDB as the “most important development institution in the Western Hemisphere,” distributing more than $23 billion in financing last year.
Beyond loans, the IDB represents a vehicle for wielding power and control over developing countries. It’s an area in which the CCP is familiar because of its widespread use of “debt trap diplomacy.” The CCP’s influence through loans that poor nations can’t afford to repay is especially prevalent in regions such as Latin America and the Caribbean.
Yet big loans still require big financial institutions. Consequently, the IDB is caught in the web of CCP meddling in U.S. governments, but to what level remains unclear. That’s the crux of the issue the IDB Transparency Act aims to resolve, according to its supporters.
“The U.S. is the IDB’s largest shareholder, but the PRC has leveraged the IDB to enhance its growing, nefarious influence in Latin America. I’m pleased to introduce this bipartisan legislation that will help put an end to the CCP’s attempts to use the IDB to advance its goals in Latin America,” Mr. Hagerty said.
“The U.S. is the IDB’s largest shareholder. Yet China’s genocidal regime continues to enhance and grow its leverage throughout our region, thanks to its debt trap diplomacy and Belt and Road Initiative,” Mr. Rubio said. “We must have a comprehensive action plan to reduce Beijing’s coercive and anti-democratic influence at the IDB.”
The Highlights
The IDB Transparency Act requires a public report from the Treasury every two years itemizing all CCP projects. This will include how the IDB has directly benefited and all projects China has a hand in. It also includes a list of IDB projects near U.S. military bases within the region and greater transparency on the amount of CCP tech subject to U.S. export controls used in IDB projects.The report will also require a plan to reduce China’s influence within the IDB and is a call to action for the United States to leverage its influence to stop projects “that threaten national interests.”
And in Latin America, China is doing this primarily with money.
In countries struggling with high unemployment and limited infrastructure growth, the arrival of China’s giant checkbook is viewed through rose-colored glasses.
Big, flashy projects and loans are the source of China’s power as a key influencer in the region, Evan Ellis, a Latin America research professor at the U.S. Army War College Strategic Studies Institute, told The Epoch Times.
But then, the CCP takes it a step further. They get involved with what Mr. Ellis called “people-to-people” diplomacy.
“China casts their net very, very broad. They engage at every level,” he said.
This includes academia, local politics, medicine, communications, media, and energy. Once Beijing’s money slips under the door, they promptly branch out to widen their web of influence.
Some of these projects, such as the CCP’s push for more countries to start using the yuan, directly threaten U.S. interests.
Mr. Ellis noted that China is making careful progress toward its goal of dethroning the dollar in the United States’ own backyard this year. The long-term effects could mean losing footing on the geopolitical stage.
A Bigger Picture
China owns a tiny fraction of shares in the IDB. Yet with less than 0.1 percent ownership, Beijing consistently ranks near the top of the list of countries awarded IDB contracts. They even took the No. 1 spot in 2019.Many of these projects are happening in Latin America and the Caribbean, where investment of any kind—from anyone—is welcomed with open arms.
But there’s a dark side to China’s famous “mega projects” in the Americas. They’re plagued with corruption, rampant pollution, and poor craftsmanship.
A poignant example is the $2.7 billion Coca Codo Sinclair hydroelectric plant in Ecuador. Built in 2016, the project was the largest of its kind ever constructed in the South American nation. Even China’s President Xi Jinping reveled in its accomplishment.
Barely seven years later, the plant suffers from cracks and structural concerns. Local engineers now fret that a catastrophic breakdown could be imminent.
“We could lose everything,“ Fabricio Yépez, an engineer at the University of San Francisco in Quito, told reporters. “And we don’t know if it could be tomorrow or in six months.”
China’s supporters have asserted that the country’s infrastructure projects aren’t riddled with questionable workmanship, but the Coca Codo Sinclair project isn’t the first to have such problems. Not even close.
It’s just a single domino within a growing chain of CCP projects in Latin America that have started to topple. Many countries in the region are struggling with poorly built “mega projects” that local governments can’t afford to fix.
Nevertheless, Chinese influence at the IDB is already well established. Mr. Ellis said it’s not just about the number of “votes” gained through ownership shares, but it’s how you leverage your seat at the table.
“The Chinese are exceptional bureaucrats ... there are a lot of ways they’ve been able to maneuver,” he said.
Mr. Ellis also applauded the bipartisan bill introduced on July 25: “It’s something that’s needed.”
