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- In 2008, Ecuador, led by President Rafael Correa, approved a new constitution based upon Buen Vivir (the ”Good Life”), committing the nation to indigenous rights, environmental sustainability and state sovereignty. However, Correa quickly aligned the nation with China, a partnership that many critics say undermined the promises of the constitution.
- Under Correa, China became Ecuador’s primary creditor and Chinese investment, both public and private, resulted in an infrastructure boom in new dams, mines, oilrigs, roads, power transmission lines, telecommunications systems and schools.
- During Correa’s administration, eight major dams were built, including Coca Coda Sinclair (CCS) constructed by Chinese state corporation Sinohydro. While CCS promised local prosperity, residents of surrounding communities say the government provided them with no say in the project, which has created serious environmental problems.
- In May, a new president, Lenin Moreno, was elected. He has so far not followed in Correa’s footsteps, and his administration seems set on deemphasizing the relationship with China, with few major infrastructure projects currently in the works. However a power struggle in the ruling Alianza País Party has made Ecuador’s political path forward less than clear.
This article was first published on Mongabay on 22 November 2017. You can read the original here.
I n November 2016, the Coca Codo Sinclair (CSS) dam began operation. The hydroelectric project, built by Chinese state corporation Sinohydro at a cost of $2.24 billion and managed by the Ecuadorian state electric company (CELEC), is the largest infrastructure project in Ecuadorian history, as well as being one of its most environmentally and socially controversial.
The Ecuadorian Ministry of Electricity and Renewable Resources says that CCS has an operating capacity of 1,500 megawatts (MW), and is projected to produce roughly 8,734 gigawatt hours (GWh) of electricity per year — 30 percent of the country’s annual electricity needs. The government claims $600 million in oil imports will be saved each year as a result of the dam’s construction, and the country aims to become a net electricity exporter.
CCS is the largest of a series of Ecuadorian development projects financed and constructed by Chinese actors in the past decade. China has become the country’s primary creditor and Chinese investment, both public and private, has resulted in an infrastructure boom in new dams, mines, oilrigs, roads, power transmission lines, telecommunications systems and schools.
While scattered across Ecuador, Chinese infrastructure projects are predominantly concentrated in the Amazonian half of the country. These projects embody contemporary Ecuadorian development: bold, yet mired in conflict and secrecy. So how did the nation get here under the leadership of President Rafael Correa, and where does the future lie under President Lenin Moreno — and will China continue to play an outsized role?
Buen Vivir: A bold model for sustainable development?
In 2008, Ecuador’s governing Alianza País Party, following the election of Rafael Correa to the presidency, wrote a new constitution predicated upon Buen Vivir (the ”Good Life”) committing the country to indigenous rights, environmental sustainability and state sovereignty.
Correa praised the codification of indigenous and environmental values into law as the defining features of Ecuadorian development, nationhood and identity, and proclaimed that a “Citizen’s Revolution” was underway.
Central to the Correa Administration’s development plans (called the National Plans for Buen Vivir) was a realignment of the energy matrix. Through energy diversification, the country sought to reduce dependency on both Western creditors and on a petro economy that Correa felt was bleeding state revenue for the advantage of foreign transnationals.
The benefits of clean energy development were marketed as transformative. Building megaprojects would create quality jobs and generate profits that could be used to fund massive social and poverty-alleviating education, health and cash transfer programs.
The Correa Administration promoted a conception of dams as bringers of prosperity and industrialization, and then-Minister of Energy and Mining Alberto Acosta lauded the proposed CCS dam for the role it would play in ensuring Ecuador’s “energy sovereignty.” In 2012 the government released a nine-year Master Plan for Electrification detailing large-scale investments in hydropower, including the construction of eight hydroelectric dams in the Ecuadorian Amazon – all of which have been built.
“Ecuador was being robbed on two fronts before Correa was elected,” a local communities leader near CCS (and a former CELEC employee) said, speaking on condition of anonymity. “The state was subsidizing hydroelectric projects to pay for oil debts, while at the same time subsidizing energy imports. Gaining more energy independence was the best thing the Correa government did.”
The good life gone wrong
Observers, looking back, note how Alianza País coopted Buen Vivir’s optimistic ideology to strengthen the party’s ruling position. In reality, Correa consolidated power and initiated an elite-led industrial planning process that short circuited many constitutional provisions guaranteeing local community participation and consent in development projects.
“In the party, Correa effectively created a new political-economic elite protected by law through his new constitution,” said a former Petroecuador executive who also spoke on condition of anonymity. “Correa didn’t try to create a development strategy for four, eight, or even 12 years. He wanted the party to be in power for a hundred.”
Researchers at the University of Amsterdam have discussed how, through its use and branding of Buen Vivir, the government equated infrastructure construction and resource extraction with nationhood, or “la patria.” Correa created an environment where opposition to projects that the government dubbed “strategic” to national development was equivalent to opposing the nation itself.
While Correa’s first years saw improvements in health, education and literacy indicators, a sharp drop in commodity prices and recession in 2013 revealed the shaky foundation of Ecuador’s economy: a twin reliance on oil and Chinese finance.
A 2015 study by the International Renewable Energy Agency found that — despite the stated rhetoric of “changes to the productive matrix,” including a 60 percent renewables target by 2017, and proposed exploration of biomass, geothermal solar and wind energy generation — the percentage of oil production comprising Ecuador’s power supply, electricity generation, and total energy consumption actually increased between 2000 and 2012.
China dominates lending and investment in Ecuador
Correa’s daring development proposals were popular but not without negative consequences. Upon assuming office, the president declared $3.2 billion of Ecuador’s foreign debt “illegitimate,” saying the time had come for Western “monsters” to stop oppressing the country.
While this move turned out to be somewhat successful in alleviating Ecuador’s foreign debt obligations, international markets and creditors did not respond kindly. Correa was labeled a pariah by many international policymakers and financiers, and Ecuador faced a shortage of credit from its traditional lenders.
Following the debt cancellation, China presented itself as a lender of last resort.
The two countries found common ground ideologically, under their shared self-identification as “21st century socialist” developing countries. They also served each other’s economic needs, with China providing the seemingly endless lines of credit that Ecuador so badly required, and with Ecuador offering a potentially profitable outlet for Chinese state enterprises and domestic industrial overcapacity.
Many authorities attribute the close China/Ecuador ties to China’s enormous population and thirst for natural resources. However, revelations that Chinese state-owned oil companies were simply rerouting Ecuadorian oil to the United States cast doubt on that narrative. Instead of using Ecuadorian oil to fuel the Chinese economic machine, Petrochina sold it in regional markets for profit.
The Sino-Ecuadorian blueprint: Amazon megaprojects
In practice, Ecuador’s Buen Vivir plans revolved largely around the development of hydropower and “responsible mining” in the Amazon region. These projects were mostly funded through a combination of Chinese capital and oil proceeds.
Ecuador’s attraction to top-down infrastructure construction mirrors that of China, which has long made it state policy to equate large-scale infrastructure investment with economic growth. This approach has roots in modernization theory, where major government-driven infrastructure projects are touted widely as symbols of economic development and human manipulation of nature. Such a mindset can be found in government propaganda enshrining the U.S. dams of the Tennessee Valley Authority during the Great Depression, as well as in the monumental infrastructure projects of Stalin’s Soviet Union.
China’s infrastructure boom in recent decades has been dazzling yet costly in environmental, financial and social terms. In 2016, Oxford researchers concluded that “poorly managed infrastructure investments are a main explanation of surfacing economic and financial problems in China.” Those analysts concluded that “China’s infrastructure investment model is not one to follow for other countries but one to avoid.”
In a similar vein, Amazonian hydropower megaprojects, especially in Brazil, have been shown to have dire environmental, social and fiscal consequences. Even recent claims that tropical hydropower provides a green improvement on fossil fuels has been debunked. Philip Fearnside, a leading hydropower expert, stated in 2016 that “tropical dams are often falsely portrayed as ‘clean’ [carbon] emissions-free energy sources. Calculations… show that emissions from storage hydroelectric dams would exceed those from electricity generation based on fossil fuels.”
In a study of more than a hundred existing hydropower dams in the Amazon published in Nature, an international team of 16 academics asserted that “the accumulated negative environmental effects of existing dams and proposed dams, if constructed, will trigger massive hydrophysical and biotic disturbances that will affect the Amazon basin’s floodplains, estuary and sediment plume.” They also note that, “the social and environmental impacts of large dams are severe, disruptive and characteristically irreversible.”
CCS: Correa’s idea of “sustainable development”
Carolina Viola Reyes, professor at the Pontifical Catholic University of Ecuador, wrote that projects like CCS “open a series of questions about [their] real impacts: on one side, about the country’s [economic] development, and on the other, concerning the territories and populations located in the area influenced by the projects.”
The communities leader quoted earlier in this story told Mongabay that local communities surrounding the CCS construction site were opposed to it during the planning period, but were too small to challenge the power of the Correa Administration, which approved the environmental impact assessment for the CELEC Coca Codo Sinclair project through its Environment Ministry. “It would have been David versus Goliath,” said the leader.
Basic geology puts that approval in question: the CCS dam sits within a highly seismically active zone beneath the El Reventador Volcano, an area that scientists have advised against developing since the 1970s.
A 1998 proposal to construct on the current site was rejected because it failed to meet required environmental regulations.
The former Petroecuador executive related how earthquakes in 1986, 2010 and 2012 caused significant damage to properties, homes and businesses surrounding the CCS site, an area containing a population of roughly 2,000 people.
Concerns over the dam’s vulnerability to seismic activity persist. “If there was another earthquake, or a significant eruption, it would be catastrophic,” a CELEC employee told Mongabay.
Observed environmental impacts of the CCS dam include increased sedimentation above the dam, and significantly lowered water flows in the Napo and Coca Rivers below the site, which has threatened fish supplies and led to the likely severe diminishing of the San Rafael Waterfall, one of Ecuador’s primary tourist attractions. One section of the Coca River has vanished directly downstream from a subterranean tunnel drilled 25 kilometers (15.5 miles) through the bedrock, a tunnel through which the river’s water is routed to the project’s turbines.
An independent study of the environmental impact assessment submitted for CCS (and prepared by Sinohydro) enumerated a variety of adverse affects, including deforestation; improper waste removal impacting domestic water supplies; changes in subterranean runoff; fluctuations in water flows, sediment levels, and flood patterns; and threats to flora and fauna in the surrounding Cayambe-Coca National Park and Sumaco Natural Reserve.
Multiple senior state officials have recounted how the government purposefully did not enforce labor and safety regulations during CCS construction at the behest of Chinese officials running the project, a situation that not only eroded local labor relations but also resulted in 13 deaths during construction. These regulatory lapses caused a nine-month delay in construction.
On a tour of the CCS power generators, inserted deep into the side of a mountain, this reporter observed leaks springing out of the walls all around the turbines, while small streams of water ran beneath the feet of workers attending to electrical panels – a potential work hazard. When asked about the source of the leaks, the CELEC guide laughed, saying: “it’s a dam – there’s water everywhere!”
CELEC and the Ecuadorian Environment Ministry told Mongabay that all relevant environmental and social regulations were followed in the planning and construction of CCS. Sinohydro did not respond to requests for comment.
The CCS legacy
The CELEC guide listed CCS benefits to nearby communities, including the building of 50 kilometers (31 miles) of paved roads and the employment of “many” Ecuadorians. The new roads do have economic benefits, with the local government expanding the road network and adding new side roads that allow farmers in rural area to get their goods to market more easily.
With regard to employment, locals say that during the seven years of dam construction there were anywhere from five to ten thousand workers in the CCS area. This number was split between Chinese and Ecuadorian laborers, with most Ecuadorians being engineers from Quito. Almost none of this labor came from local communities, however, and the workforce lived in special camps built near the dam site.
CELEC’s and Sinohydro’s contribution to nearby communities was a soccer field and a school. According to a local resident, a boarded-up building near one of the abandoned camps had been used as a brothel for Chinese laborers. “It was always a good time at ‘The University,’” he told Mongabay.
The way forward under Moreno
While the construction of large dams like CCS often can result in a tradeoff between national development and socio-environmental welfare, alternative energy solutions exist. A CELEC official noted that the current Lenin Moreno led government is exploring the country’s significant geothermal potential with the aid of an $8 million Japanese loan. However, the same official then followed up with an excited pitch for a new 5,000 MW dam (more than three times the size of CCS) in the final stages of planning by Sinohydro on the Zamora River in Ecuador’s southern Amazon region.
Other than the Zamora River dam, there is little to point to in terms of concrete infrastructure policy since President Moreno’s election in May; most of his energy to date has gone into distancing himself from Correa and those loyal to the ex-president in the Alianza País Party. Observers believe the most likely Chinese investments under Moreno will come in the form of acquisitions, not through the development of new projects. However, steps made so far by the administration have been secretive and shrouded in a cloud of rumor.
Multiple government officials told Mongabay that the Moreno administration is trying to find ways to diversify away from Chinese investment, including new attempts at debt renegotiation. Additionally and not trivially, Moreno is facing a serious challenge to his leadership within the party, having been removed from his position as party leader (filled by former Foreign Minister Ricardo Patiño). Some experts even believe that Correa could be back in power in some form very soon.
In conclusion, Chinese investment and large infrastructure development seem likely to be limited for the near future. It also remains difficult to know whether the Correa administration’s close relationship with Chinese banks is now being threatened by Moreno’s attempt to shift the country’s political trajectory. What seems clear to critics is that Correa’s single-minded infatuation with Chinese-built infrastructure projects helped put Ecuador in the current uncertain political, fiscal and environmental bind that it finds itself today.