Chinese Commercial Engagement with Guyana: The Challenges of Physical Presence and Political Change

For the People’s Republic of China, its relationship with Guyana has been one of its longest, most consistently close relationships in Latin America and the Caribbean. Yet, between June and August 2013, Chinese companies lost almost a billion dollars in work in the country, including a hydroelectric dam, the modernization of Guyana’s international airport and a luxury hotel.

The strength and complexity of the Guyana-PRC relationship is little known beyond its South America. The sudden reversals suffered by Chinese businesses are important, not only because of the strong role of Chinese companies and nationals in Guyana’s economy, but also as an illustration of the challenges that PRC-based firms face as they establish a physical presence in the region in sectors ranging from extractive industries to construction to telecommunications to retail. Guyana also illustrates that the Chinese preference to deal exclusively with government leaders can create pitfalls when the political balance changes, as well as how Chinese immigration may be emerging as a contested political issue within the small-population countries of the Caribbean basin.

The PRC has maintained relatively close ties with Guyana since establishing diplomatic relations in 1972, including various development projects. But, like elsewhere in Latin America, Chinese companies only began to establish a significant physical presence in Guyana in the late 2000s, including China Timber Resources and Bai Shan Lin, which by 2013 had accumulated almost a million hectares of forest land in the interior of the country (Stabroek News, July 14), and the Chinese mining company Bosai, which in 2006 purchased a bauxite mine in Linden (Stabroek News, February 14, 2007).

The principal architects of the new Sino-Guyanese commercial partnership were former Guyanese president Bharrat Jagdeo and his cadre of functionaries and businessmen (multiple author’s interviews, Georgetown, Guyana, February 15–22). This group, which continued its work under successor Donald Ramotar, negotiated multiple projects with Chinese companies and banks, including the Skeldon sugar refinery (China Technical Import Export Corporation), improvements to the Cheddi Jagan airport (China Harbour), the electricity infrastructure (CTIEC), a fiber optic cable from Georgetown to the Brazilian border at Latham (Huawei) and a project to donate Haier computers to Guyanese families (the “One Laptop per Family” program).

Initiatives also included the Amaila Falls hydroelectric project, in which the Western project integrator Sythe Global leveraged $500 million from the China Development Bank and China Railway First group to do the work. It also included a new luxury hotel, partly financed by the government’s privatization fund NICIL, with work done by Shanghai Construction Group (Stabroek News, June 16). The government also sold its 20% share in Guyana Telephone and Telegraph (GT&T) to the Chinese company Datang which, a month later in April 2012, contracted with Huawei to help upgrade GT&T’s wireless infrastructure (Kaieteur News, April 13, 2012).

China Harbour is positioning itself to construct a deepwater port facility in Berbice, a hub for Guyana’s bauxite, rice and sugar industries (Author’s interview, August 20).

Businessmen close to former President Jagdeo have also built import networks with the PRC. In December 2011, John Permowl opened a facility in Georgetown to import and assemble Jialing motorcycles (Author’s interview, August 20). Similarly, Jagdeo associate Brian Young is leveraging the One Laptop per Family computer service center to sell Haier products throughout the country. Jason Wong, a 30-year-old Chinese national, has, in less than a decade, built up the largest and most successful import-export business in the country, China Trading (Author’s interviews, Georgetown, Guyana, August 19–20).

In the fall of 2013, the PRC will open its first Confucius Institute in the country at the University of Guyana (Author’s interview, August 19).

Change in Political Dynamics

Following the elections of November 2011, the political dynamics of Guyana fundamentally changed, with important repercussions for projects involving Chinese companies. Prior to the elections, the president’s People’s Progressive Party (PPP) had a majority in parliament, letting it develop projects with the Chinese and others, with little possibility for the opposition to learn the details or to block them.

In the run-up to the elections, the main Afro-Guyanese opposition formed a new coalition, the Alliance for National Unity (APNU), headed by David Granger, a retired military officer seen as “outside politics.” Along with the newly-formed “Alliance for Change” (AFC), the opposition collectively won 33 of 65 seats in Parliament.

Although the change was not immediately recognized by Chinese companies, accustomed to dealing solely with the ruling PPP and its affiliated businessmen, the new parliamentary balance allowed the opposition to demand information from the government about its activities, and block or hinder deals that it found objectionable. However, neither the Chinese Ambassador Zhang nor the companies involved made contact with the new majority parties.

The challenges that were consequently mounted against projects involving Chinese companies include:

Skeldon Sugar Factory: For the newly empowered Guyanese political opposition, Skeldon became a rallying cry for what would not be allowed again: a project contracted out to a Chinese firm with little transparency and, consequently, extra costs and disastrous results. Critics argued that the Chinese firm, CTIEC, lacked the experience to build a factory appropriate to Guyanese conditions (Author’s interviews, Georgetown, Guyana, August 16-18). Nor could the government supply enough sugarcane to feed it, with the result that national sugar production fell far below “pre-modernization” levels (Kaieteur News, July 29).

Cheddi Jagan International Airport: The initiative grew out of an announcement by then-Premier Wen Jiabao at the 2011 China-Caribbean business summit that China Development Bank was establishing a new $1.5 billion dollar investment fund for the Caribbean basin, soliciting the governments of the region to propose projects for that money (Author’s interview, August 16). Guyana submitted what eventually became a $150 million contract with the firm China Harbour to modernize the airport to serve as an international regional hub by lengthening the runway and building a new terminal facility.

The new political environment allowed the parliamentary opposition to obtain troubling details about the contract, most dramatically a line item charging the government for toilet fixtures at over $400,000 per set (Stabroek News, July 4). The opposition and civic activists also questioned whether aspiring to be a regional hub was realistic.

In August 2013, the APNU, with the support of the AFC, voted to defund the government’s entire transportation budget, freezing the project, and effectively cutting China Harbour out of over $100 million in work (Stabroek News, June 23).

Amaila Falls: The hydropower project had been in the works for a number of years before the respected international firm Sythe Global took it over in 2010. Sythe, in coordination with the government, structured the project with the construction work to be principally done by China Railway First Group, with $500 million in funding to come from China Development Bank, and an additional $100 million from the Interamerican Development Bank (Kaieteur News, August 12).

China Railway First Group began work in 2013 on a long access road to the site, after the Guyanese companies to which the road was originally contracted could not execute the work.

While politicians and civic activists publicly criticized the project’s cost and use of external financing, the critical moment came in August 2013, when the APNU opposition in Parliament voted against a bill to provide environmental reserve lands for the project. For Sythe, the vote confirmed its concern that the power of the opposition could put the project at risk in the future (Author’s interviews, Georgetown, Guyana, August 15-20); it announced that, barring support from all of the country’s major political parties, it was withdrawing its bid. This pull-out killed the project, costing China Railway Road almost a billion dollars’ worth of work, and eliminating for CDB the possibility to loan $500 million at an 8% rate of interest.

Georgetown Luxury Hotel: In June 2010, the Guyanese government announced a public-private partnership to construct a $52 million luxury hotel. Shanghai Construction Group (SCG) was contracted to build the hotel, which used an all-Chinese labor force, housed on the worksite with little contact with the surrounding community. Despite sporadic protests outside the worksite over the use of foreign workers, SCG proceeded with construction, and by September 2013, structural work had been largely completed.

As with other activities involving the Chinese, the new opportunities that the Guyanese opposition had for political oversight enabled them to uncover and criticize the use of funds from the government’s privatization organization, NICIL, for the project, question the economic rationale for a luxury hotel in Georgetown, criticize the secrecy regarding the sources of funding and express concern that the inclusion of a casino would facilitate use of the hotel as a money laundering hub (Author’s interviews, Georgetown, Guyana, August 15, 18).

Parliamentary opponents launched a series of challenges, including a cut-off of public funds from the nation’s “general account,” attempting to block the transfer of land, and a private lawsuit over discriminatory hiring practices for using an entirely Chinese labor force. As of September 2013, however, they had not stopped the project.

Bai Shan Lin: Under the new political balance of 2011, civic activists began to publicly question the legality of Bai Shan Lin’s accumulation of almost a million hectares in timber concessions by purchasing smaller timber countries, with the government agreeing to transfer the timber rights of the acquired companies, without question, to the Chinese (Stabroek News, June 16). Ultimately, the opposition threatened to investigate such holdings when the parliament returns to session in October 2013. Activists have also rallied against Bai Shan Lin’s plan to build a timber processing facility, arguing that the heterogeneity of the Guyanese forest makes the project irrational, and questioning the proposed associated construction of a “city” in the interior of the country to house the 3,000 workers it would employ; opponents claimed that such a “city” would be a Chinese colony or labor camp beyond the easy oversight of Guyanese authorities (Author’s interviews, Georgetown, Guyana, August 16-19).

Bosai Bauxite Mine: Bosai’s operations in Linden were damaged in July 2013, when residents of Linden blocked the main road connecting the mine to the rest of the country (Stabroek News, August 7, 2012).  Bosai, however, was not the target. Rather, protesters rallied against government plans to lower the electricity subsidy provided to the community served by Bosai’s generator. Indeed, Bosai was well regarded by residents of Linden, where it was the principal employer in an area where unemployment was between 40–70% (Author’s interviews, Georgetown, Guyana, August 15-20). Nonetheless, as with the previously mentioned cases, the Chinese company, which had sought to stay out of politics, bore the consequences of actions by Guyanese politicians.

In all of the cases flowing out of the new Guyanese political dynamic, Chinese companies have arguably borne the consequences of not building bridges to the non-official actors on whom their fate increasingly depends. Although Ambassador Zhang reportedly coordinates closely with his counterparts in the Guyanese government, none of the leaders of the political opposition, civic activists, and independent businessmen interviewed for this report indicated having substantial contact with Ambassador Zhang or any of the Chinese companies doing business in the country (Author’s interviews, Georgetown, Guyana, August 15-20).

The Chinese Community

In addition to projects by PRC-based companies, the Chinese population in Guyana has grown substantially in recent years, stimulating discomfort in the surrounding community and political repercussions (Author’s interviews, Georgetown, Guyana, August 16-19). The expansion has primarily been felt in the retail sector in Georgetown and in gold mining in the interior of the country.

Chinese immigration comes from two sources: the PRC province of Guangzhou, and the neighboring country of Suriname. The latter is driven by the fall of Guyanese crime rates, and by the perception that the economic opportunities are better than in Suriname, where shopkeepers from the large Chinese population compete against one another (Author’s interviews, Georgetown, Guyana, August 15-20).

The expansion of the Chinese community has become an issue for opposition politicians who argue that government efforts to expedite visas and citizenship for Chinese workers discriminates against other Guyanese. Ethnic resentment of Chinese in Guyana has not yet produced violence, as it has in Papitam and Maripaston, Suriname. Yet in 2013 in Guyana, community residents ransacked a Chinese shop after its owner beat a young Indo-Guyanese girl whom he accused of theft (Kaieteur News, January 5).

Conclusions

PRC engagement in Guyana is entering a new period in which Chinese companies and the PRC government will be forced to shift to make a greater effort to reach out to the full range of political, business and social groups where they find themselves, or continue to lose business because of actors that they had previously dismissed. If they succeed, they will face the opposite dilemma: how the Chinese government and its companies can be fully engaged in Latin American societies with the PRC policy of non-intervention in the internal affairs of foreign states.