Can the G7’s B3W compete with China’s Belt and Road in Latin America?
In September 2021, a U.S. diplomatic delegation led by Deputy National Security Adviser Daleep Singh traveled to Colombia, Panama, and Ecuador as part of a “global listening tour” aimed at better understanding how the Build Back Better World (B3W) initiative can support local authorities. infrastructure needs.
Launched last year at the G7 summit in the UK in June, B3W claims to be “a values-driven, high-level and transparent infrastructure partnership”, with a focus on energy investments. renewables, digital technology, healthcare and women. run business.
In Latin America – one of the regions most affected by the Covid-19 pandemic, both in terms of health and economics – the initiative could provide a welcome boost. But with finer financial details about the program yet to be released and a likelihood of tighter conditions on its loans and investments, it’s still hard to see how B3W can provide the “strategic competition with China.” desired.
Chinese sovereign loans to Latin America and the Caribbean have totaled $137 billion since 2005, according to The Dialogue and Boston University’s China-Latin America Financial Database, and Chinese banks have backed dozens of infrastructure projects in the region through commercial loans and pooled funds.
“It is obvious that B3W is an initiative to counter the influence China has built as a result of the Belt and Road Initiative. [BRI]says Katherin Galindo Ortiz, analyst at Colombia Risk Analysis, a Bogotá-based consultancy. “But B3W remains in debate, we don’t know if and when it will become a reality.”
Old wine, new bottle?
No funding has yet been announced for B3W, but the intention is to use the US Development Finance Corporation (DFC), USAID and EXIM Bank to stimulate much broader private investment from G7 countries. In this regard, it bears a strong similarity to the América Crece initiative launched in December 2019 – and now presumably defunct – although it focuses more on issues of sustainability and social equity.
“América Crece isn’t a thing anymore,” says Eric Farnsworth, vice president of the Council of the Americas, a US-based trade association. “There was no time for it to be implemented, and the Biden administration was never going to undertake anything developed under the Trump administration. But B3W is trying to use the same tools, like the DFC, to mobilize more private investment.
The September diplomatic visits resulted in some modest agreements. In Colombia, the DFC announced a US$26 million assistance package for Venezuelan agricultural workers and migrants, and discussed building local vaccine capacity. In December, the Canadian company Providence Therapeutics signed a memorandum of understanding with the Colombian company VaxThera to develop vaccine production facilities in Medellín, with the first doses scheduled for June 2022. In Ecuador, the DFC granted a loan of US$150 million to small businesses impacted by the Covid-19 pandemic.
However, B3W does not yet seem to offer solutions to at least two long-standing problems: the reluctance of some Latin American governments to accept loan and investment terms and the inability of private capital to compete on price. Chinese state-backed enterprises. For risk-averse investors in the US and other G7 countries, “the question is what changes B3W can make to improve cost-benefit analysis,” says Galindo Ortiz.
Transparency at the center of concerns
The B3W emphasizes the development of transparent, sustainable and responsible infrastructure based on the Blue Dot Network certification program, launched by the United States, Japan and Australia and supported by the Organization for Cooperation and (OECD) in November 2019. As such, B3W appears to be inherently limited in terms of the countries in which it can operate, given that some governments such as Venezuela and Nicaragua – both BRI signatories – are unlikely to accept such conditions.
Of the three countries Singh’s delegation visited in September, two – Colombia and Panama – could be considered historic US allies, but both have seen significant Chinese investment in recent years. In Colombia, Chinese companies have acquired the country’s largest gold mine and won tenders for the construction of Bogotá’s metro system.
“For the moment, Colombia does not need to decide whether it is more aligned with the United States or China,” says Galindo Ortiz. “The United States will continue to be the most important trading partner, but it’s also clear that Colombia needs to diversify its partners to rebuild the economy, and China is providing the capital flows needed to do that.”
Will DFC funding really incentivize private investors to overcome their apprehensions about political risk in the region? Guillermo Lasso’s pro-market presidency in Ecuador makes the country a contender for foreign investment today, but a return to government in future elections for the Alianza PAIS party (now renamed MOVER) – which held power from 2007 to 2021 and hosted opaque Chinese infrastructure funding – would likely mean a shift in diplomatic strategy. In January, current front-runner for Brazil’s 2022 elections, Luiz Inácio Lula de Silva, repeated his longstanding criticisms of US influence in the region, following Biden’s description of Latin America as the “front yard” of the United States.
Furthermore, investments in human infrastructure, such as education and the environment, could strengthen US soft power, but are unlikely to attract private funds to larger projects.
“Private sector companies won’t pay above market price for strategic assets, but China will pay whatever it takes,” Farnsworth said. “The United States can try to compete on values - transparency, workers’ rights, the environment – but it’s not an easy program to sell.”
Competition and Complement
Ultimately, for some commentators, issues of strategic competition may be of secondary importance for nations facing real and gigantic infrastructure gaps. With infrastructure spending estimated at US$2.2 trillion needed by 2030 for countries in Latin America and the Caribbean to meet the United Nations Sustainable Development Goals, B3W could provide a much-needed complement to the BRI. . “In order to rebuild a better world after the Covid-19 pandemic, B3W and BIS must work together,” American academic Keren Zhu wrote in The Diplomat.
In China, officials seem to have welcomed B3W. “China believes that there is a broad space for cooperation in the field of global infrastructure, rather than various initiatives that compete with or replace each other,” said Wang Wenbin, spokesperson for the Chinese Ministry of Foreign Affairs, during the meeting. a press conference in November. . Its deputy foreign minister, Le Yucheng, also tentatively welcomed the B3W announcement, saying the nation “won’t rule out good cooperation plans from other countries.”
The United States must show partnership on key issues in the region and redevelop the trade agenda, otherwise competing with the BRI is a fantasy
“It is hoped that the United States and Western countries can really implement their infrastructure plans, build more roads and bridges for developing countries, and create more jobs and welfare for them,” Le said, “rather than wanting to interfere in the internal affairs of other countries and forcibly export Western values.
Such a barbed welcome suggests that any direct cooperation between the BRI and B3W initiatives would be unlikely, although healthy competition with well-run projects could still benefit Latin American nations. To be effective, the B3W would first have to drastically increase its resources and diplomatic clout at a time when its international aid budgets are shrinking and the United States is without an ambassador in 11 countries in the region.
“We need to invest more money, the DFC needs to be staffed and make strategic investments, and we need to replenish other institutions like the Inter-American Development Bank,” Farnsworth says. “We need to partner on key issues in the region, including debt relief, health and education, and we need to redevelop the trade agenda with countries like Brazil and Ecuador, otherwise all this talk about competing with the BRI is just a fantasy.”