Trade and Investment

Anger over Chinese aqueducts in Argentina

Environmental groups and politicians question irrigation project and deal with Chinese bank

Argentina is seeking to push ahead with the construction of two aqueducts to irrigate crop plantations in the province of Entre Ríos despite widespread opposition from political parties and environmental organisations. Concerns have been raised about the lack of transparency and environmental risks associated with the projects, which will be fully financed by Chinese banks.

In January this year, the provincial parliament passed a law authorising a loan of US$430 million for the construction of the Mandisoví Chico and La Paz–Estacas aqueducts. The Industrial and Commercial Bank of China (ICBC) will provide credit with the construction contract awarded to China State Construction Engineering Corporation.

The aqueducts aim to serve Entre Rios’ agriculture industry, one of its main economic activities, but will hoard water and encourage the expansion of the agricultural frontier into protected forests, according to Jorge Daneri, a lawyer at citizen environmental group M’Bigua.

“The people who need [water] are elsewhere in Argentina, not in Entre Ríos,” Daneri said, adding; “this project will increase the concentration of land in the hands of fewer people. Building the aqueduct means more soya, more rice and more deforestation.”

The aqueducts, which are the first projects in Entre Rios to be financed by Chinese investors, were opposed by the majority of opposition political parties when first proposed five years ago. Even some agricultural producers set to benefit from the aqueducts question them.

Entre Ríos is Argentina’s largest producer of rice, accounting for 750,000 tonnes a year. The region’s fertile soils mean it is also the largest producer of citrus fruits, such as oranges and grapefruits. Production is concentrated in the north west of the province, where the aqueducts will be located.

Work for the first aqueduct, Mandisoví Chico, has yet to begin but it’s estimated it will take three years. According to estimates from the provincial government, it will irrigate 26,700 hectares of rice plantations and 3,336 hectares of citrus fruit orchards. Sergio Urribarri, the former governor of Entre Rios first announced Mandisoví Chico, the oldest of the two projects, in 2011.

The aqueduct was originally set to be financed by the Inter-American Development Bank (IDB) but the bank failed to authorise funds leading the provincial government to turn to China. The new deal included the La Paz–Estacas aqueduct, which has attracted greatest concern from environmental organisations.

According to Daneri, the aqueducts will be built in one of the few spaces in the province where native forests are protected under Argentina’s Forest Law.

“Entre Ríos has a large amount of fertile land and availability of potable water. This is not a priority project for the province,” Daneri told Diálogo Chino.

Cristian Gietz, head of water resources at Entre Rios’ provincial government, disagrees: “The site for the aqueduct does not have underground water for irrigation, which means its construction is necessary,” he said.

“The Mandisoví project is more advanced and has already obtained environmental certification. People talked about cutting down native forests, but that’s not true. Only a small part of the canal passes through the forest,” Gietz said.

No transparency

The environment is not the only source of opposition to the project. Opposition parties and various organisations have questioned the lack of transparency surrounding the Chinese loan, warning of secret clauses in the contract and the lack of time to debate the project in parliament.

Gietz said that there was no direct tender, with the contract directly awarded to China. “It was the only way to obtain funding, which attracted considerable attention,” he said, adding that the loan will be rapid over five years at an interest rate of 4.5%.

Daneri added that the lack of public participation on the project’s impacts generated considerable anger.

“The whole project has been cloaked in secrecy,” he told Diálogo Chino. “Opposition legislators were given the bill on the same day as the vote. It violates the basic values of the republic. This could result in a huge corruption scandal.”

The aqueducts are yet another example of Chinese-funded projects attracting criticism due to a lack of transparency. Under the administration of former president Cristina Kirchner, the two countries signed over 20 treaties and upgraded the diplomatic status of their relationship to a strategic integral alliance. The deals have been questioned on the basis of alleged secret clauses.

“The lack of transparency has become the norm in contracts between China and Latin America. The situation is worst in Argentina and Venezuela,” said Andrés López, a researcher at think tank the Centre for Research for Transformation (CENIT).  “China is guaranteeing a market for its companies by providing cheap loans to governments that have limited access to finance. Countries negotiate individually, not as a block, which diminishes our negotiating power,” López added.

Projects include the US$4.7 billion project for the Néstor Kirchner and Jorge Cepernic dams in the province of Santa Cruz. The project is currently under review by the government of Mauricio Macri, who has criticised the details of the contract signed by his predecessor.

Another controversial project is the space station in the province of Neuquén, which is suspected of serving the Chinese military, although this has been consistently denied by China.

“The framework agreement between Argentina and China is full of annexes and secret components. Just a small part of the agreement is publicly known,” said López, adding that the problem lies in asymmetric power relations between China, which has the resources, and Latin America, which needs finance.

“Clauses are included that make it possible to avoid tenders and open competition, ensuring projects are directly awarded to Chinese companies,” López said.