SUMMARY
As of May 30, Chinese construction firm, Gezhouba Group, acquired Brazilian water supply company Sistema Productor São Lourenço as part of the expansive the Belt and Road Initiative. The project is expected to help alleviate water shortage problems in Sao Paulo. Some experts are concerned that China is trying to expand its renewable energy influence in international markets by buying up foreign utility firms. This is just the latest in South American hydroelectric project acquisitions, which also includes the recent purchases of the Ecuadorian Sopladora hydro-power station as well as the nearly $6 billion project on Argentina’s Santa Cruz River. Under the Belt and Road Initiative, Chinese private and state backed firms increased investment & acquisitions of renewable energy and infrastructure companies in South America and Europe. In December 2017, plans to build major hydroelectric plants as part of China’s Belt and Road Initiative (BRI) in Pakistan, Nepal, and Myanmar were cancelled. Some experts believe this might in part be in response to a growing discomfort with what some are calling “China’s economic imperialism.”
FAO GLOBAL ASSESSMENT
As illustrated by the failure of the projects in Pakistan, Nepal, and Myanmar, these types of projects are less than guaranteed and pose a increased risk to local communities who are wary of taken on Chinese funds. An opportunity for western financial companies may develop as more and more countries sign on to China’s infrastructure projects and begin facing the extensive debt that follows completion of the project. Governments wanting investment but are wary of Chinese influence may be more interested in partnering that offer more sustainable packages without the worry of undue influence. The downside is that profitability and Return on Investment are often not attractive enough for Western firms to jump on, in addition to the various logistic and cultural challenges these firms face. If countries are interested to attract Foreign Direct Investment they should also be proactive in ensuring their business and regulatory environment are suitable for investment.
Related Links
- Asia Times: Gezhouba Group buys up Brazilian water project
- China Economy: 中国能建葛洲坝集团完成巴西大型供水项目股权收购 (China Gezhouba Group acquired Brazilian water groups)
- Xinhua: 综述：中国与巴西经贸合作面向 (China and Brazil’s economic and trade cooperation is developing)
- The Epoch Times: Takeover of Portuguese Utility Firm Latest Power Grab by China
- RFi: 歐美擔憂中國三峽集團併購葡萄牙電力公司 (United States and Europe worried that China Three Gorges Corporation will acquire Energias de Portugal (EDP))
- SOFREP: Major Chinese hydroelectricity projects cancelled by Pakistan, Nepal, and Myanmar
Analyst Bio
Ziqing Zhang- International Policy Associate
Ziqing “Sunny” Zhang is an international policy intern and a Masters student in the Elliott School of International Affairs at George Washington where she is majoring in Asian Studies with a concentration in international development and focusing on East Asia and development in Southeast Asia. A native Chinese speaker, Ziqing is fluent in both Mandarin and Cantonese as well as English. She has previously interned at the U.S.-China Education Trust, the Japan-American Society of Washington, DC, and is an alum of American University in Washington, DC.
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