China dominates the world in its overseas development finance into power plants, mines, dams, and other infrastructure. However, while many projects sail through, a good many get stalled. The results have less to do with Beijing and more with the strength of the host country partners. There is a complex dance between governments, elites, and bureaucrats to win the best “deal” with China, including Belt and Road Initiative (BRI) projects. These deals may benefit not just the economy, but also may empower one of these three actors. 

One project that has “crashed” is Peru’s Amazon Waterway Project, now in limbo due to community concerns about its environmental impact. This opposition arose even before China’s inclusion in the project in 2017. But its importance to Peru’s development vision at the time pushed the Peruvian leadership to expedite its implementation. It is a reminder that, despite the government and China’s support for the project, there are no guarantees for its success.   

A successful multi-partner game was the Jakarta-Bandung High-Speed Railway (JBHSR) in Indonesia. The JBHSR project was temporarily delayed because Jokowi Widodo’s government played Japan’s and China’s financing offer against each other. However, once Chinese financing flowed, it proved to be a favorable deal for the Indonesian government.

Navigating host country interests

The global expansion of BRI has increased the attention placed to the implementation and financing capacity of Chinese firms abroad. Yet there has been less discussion of how different actors in the host countries — state agencies, firms, political elite, and bureaucracies — compete to influence project parameters and implementation. Political and economic leaders in the host country need to first agree with the type, costs, and selection of contractors. The host country’s needs and its leadership’s interests determine how its bureaucracy negotiates with Chinese firms and financiers to determine the project’s construction and financing structure. 

While China’s economic weight can influence the decision-making process, host country policymakers and elites will attempt to negotiate for their nation’s welfare or for personal gain. When these actors push too far in pursuing their goals and refuse any demands from their Chinese counterparts, it can lead to a breakdown in the negotiations, leading to a lose-lose situation. Thus, Chinese firms must work with host country actors to procure licenses, acquire local know-how, and sometimes even protect themselves from local opposition.

Central government balancing act

When Peru joined BRI in 2019, Edgar Vasquez, the Minister of Foreign Trade and Tourism, touted the decision as one that would increase the country’s infrastructure and technological capacity. Given Peru and China’s strong commercial ties, joining BRI was the obvious next step for the Peruvian government to tighten its relationship with the Asian giant. 

In the 2017 China Belt and Road Forum for International Cooperation, Peru’s ministers and economic elites promoted the importance of the BRI for Peru. This enthusiasm for Chinese financing led to China’s inclusion in some existing mega-infrastructure projects, such as the controversial Amazon Waterway project, which involves dredging four rivers (Marañon, Ucayali, Huallaga, and the Amazon). This waterway project is led by Cohidro — a joint venture consortium between China’s Sinohydro and Peru’s Construcción y Administración SA. However, the project is currently on hold as it awaits environmental clearance and a required consultation process with at least a dozen of affected indigenous communities. 

While the Peruvian government, like other BRI host governments, is the public face in striking deals with China, it must first negotiate with its ministries, subnational governments, and other agencies who ultimately will shape the project’s outcome.

Within Peru and the rest of Latin America, national interests and domestic dynamics have shaped how governments have responded to BRI, ranging from cautious enthusiasm to complete hesitancy and even rejection. These negotiation dynamics can shape the national government’s choices and how much debt it may potentially owe to China, including whether China’s offer is the best alternative at hand.  

Political elites flex their muscles 

Another important set of actors is the elected officials or autocratic leaders in the host country. Compared to economic elites, who are most interested in accumulating wealth, political elites are primarily concerned with maintaining their political positions and advancing their agendas.

One example of how elites influenced interactions with China is the JBHSR in Indonesia. During the negotiations for the high-speed rail, the Jokowi government was intent on playing China and Japan against one another. China catered to the government’s demands, offering “business-to-business” instead of development loans. This was a win for Indonesia, giving Indonesian companies strong participation and co-ownership of the project. Had the HSR been acquired as a development loan, it would have affected the country’s debt-to-GDP ratio, limiting the Indonesian government’s capacity to borrow further. 

However, by making the Chinese firms a co-owner of the HSR, they will still take a long-term role in the country, generating a semi-permanent presence. But as AidData recently noted, China imposes a hidden debt as it lends to host country firms in the HSR. There is an implicit condition that Jokowi would continue to financially support the project should problems occur. 

Bureaucracies grease the wheels or block projects   

While economic and political elites can close a deal, the host country’s bureaucracy is crucial for successful (or failed) implementation of Chinese projects. In the Global South, political elites usually appoint bureaucrats to forward their own agenda, but in practice, bureaucrats work with Chinese state officials and firms, and answer to both the political elites in power and to the public. Thus, bureaucracies may demand accountability from firms or they can also turn a blind eye to allow a project to move forward.  

In the Amazon Waterway project, Cohidro requested a postponement of the project in 2020 because it claimed they had never received the necessary documents from the Ministry of Transportation and Communications (MTC) to address concerns from previous environmental assessments — something the MTC denies. Caught between the concerns from civil society, lack of clarity from the MTC, and Cohidro’s inability to satisfy environmental demands, Peru’s National Service of Environmental Certification for Sustainable Investments granted the request. The waterway project remains in limbo and neither the Peruvian state nor the Sino-Peruvian consortium is assuming responsibility for its failure.

Watching the Dance 

The “dance” among the state, the elites, and the bureaucracy in BRI host countries are major determinants in the success of Chinese projects. The contradictory priorities among these groups and with the Chinese firms help academic and other China watchers better understand the success and failure of overseas Chinese projects, and derive implications of how BRI and other Chinersecan indeed benefit host countries.