Webinar Summary – The ‘China Boom’ in the Amazon Basin: Social and Environmental Regulation amid a Commodity Supercycle

By Yudong (Nathan) Liu

On Tuesday, October 11, 2022, the Boston University Global Development Policy (GDP) Center hosted a webinar discussion with Paulo Esteves, Coordinator of the Socio-Environmental Platform and the Global South Unit for Mediation at the BRICS Policy Center of the Pontifícia Universidade Católica do Rio de Janeiro and Rebecca Ray, Senior Academic Researcher at Boston University Global Development Policy Center.

Esteves and Ray presented a new working paper coauthored with Kevin P. Gallagher, Yaxiong Ma and Maria Elena Rodriguez. The paper analyzed the commodity boom and slump in Latin America over the last two decades, focusing on the socio-environmental regulatory responses of four Amazon basin countries (Bolivia, Brazil, Ecuador and Peru) during and after the “China boom” in commodity production during the first decade of this century.

The study sought to answer three research questions. The first was whether these countries shifted their socio-environmental protections in line with commodity export prices. To answer this question, the authors traced socio-environmental reforms that affected environmental licensing, forests and protected areas and Indigenous or traditional communities. Reforms were classified as either baseline, strengthening or relaxing protections. The authors found that the countries strengthened protections as commodity prices rose throughout the 2000s and then relaxed them as prices slumped after 2011.

The study also explored whether Chinese investment grew in number and size or if projects were expedited after these reforms. From a variety of databases, the authors found and gathered information about projects substantially financed or acquired by Chinese financial entities. Each project was verified for the announcement and commencement dates and the dollar amount. It was also geolocated to any associated physical sites. They found that 38 projects totally $26 billion dollars had commenced out of 42 that were announced, with 118 discrete site locations. The size and number of investments rose throughout the commodity boom but then declined and notably did not rebound even as the relaxation of socio-environmental protections took hold across the region. However, 2014 was a notable outlier year during which Chinese state-owned corporations made two very large acquisitions in Peru: a series of oil blocks and a copper mine. Additionally, projects overall were not expedited but rather slowed during the protection-relaxing years. Ray and Esteves both noted that these trends applied to both Chinese foreign direct investment and policy bank finance.

Additionally, the study examined whether the socio-environmental risk profile of Chinese investments changed as Amazon basin countries tightened and then relaxed their standards. To answer this, the authors conducted a spatial analysis of the projects according to three dimensions of risk and impact: risk to nearby Indigenous lands, risk to nearby biodiversity and any acceleration of tree cover loss noticed after the commencement of the projects. Ray and Esteves commented that the variables and methodology underlying this analysis were shaped by policy dialogue within these countries and defined according to best practices in socio-ecological research. Across all three dimensions, there was a general decline of risk as socio-environmental protections were strengthened and then a general flatlining as protections were relaxed. However, 2014 again presented exceptional outliers, including the Sao Manoel Dam in Brazil, which was noted for its high risks to nearby Indigenous land and for having an exceptionally high acceleration of nearby tree cover loss.

In all, relaxing socio-environmental protections did not substantially increase investment or expedite project progress. The high-risk 2014 projects often were associated with mass protests, which may have discouraged future investment. Cases of other Chinese projects in Latin America show that Chinese investors are generally not concerned with short term regulatory costs and are more concerned with the long-term stability of potential projects. The authors’ closing conclusion was that host countries have the policy space to instead adopt socio-environmental protections that are based on their sustainable development goals and the demands of their own citizens.

During the question and answer section, Ray and Esteves fielded questions from the attendees. Both authors explained how their paper tied in with “resource nationalism” literature which studied the strategies countries employ to ensure resource exploitation maximizes benefits to their economies and populations. The decisions to strengthen or relax socio-environmental protections is part of each country’s strategy and elections can be thought of as a referendum on popular support for these strategies.

On the implications for future environmental and foreign investment regulations for the countries studied, Ray and Esteves emphasized that these countries have opportunities to turn from purely extractive to more service-oriented economies that aren’t wholly dependent on export prices for their health. They noted that this trend could be seen both in the positions taken by the slate of candidates for the Inter-American Development Bank as well as in the 2022 Brazilian presidential election. Another attendee asked whether the research looked at the titling of Indigenous lands.

At the end of the discussion, Ray and Esteves were asked for their personal takeaways from the research. Esteves noted that he hoped future research would examine how policies are enforced and whether the protection-relaxing strategies attracted investment from Western countries in the same period. Finally, he was eager to see whether the new election cycles in these countries could lead to the development of economic models that were less reliant on resource extraction. Ray emphasized that the research reinforced the idea that stronger socio-environmental protections were not a barrier to successful investments, but rather helped create more stable investments over the long term. She concluded by noting that the decarbonization of global energy production will require increased exploitation of new resources crucial to alternative energies and that these countries should base their strategies on how to meld socio-environmental protections based on the successes and failures of the “China boom.”

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Yudong (Nathan) Liu is a Research Assistant with the Global China Initiative and a Candidate for Juris Doctor at Boston University School of Law.

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