By Giselle Alzate | 2024-08-21

BOGOTÁ -- Sixty-three percent of the projects undertaken by Chinese state-owned companies in the Andean region have been found to contain some form of operational irregularity.

The report, titled "Identification and Monitoring of Chinese State-Owned Companies in the Andean Region (2000 - 2023)," was published by the Chinese Latin American Research Center of the Andrés Bello Foundation in July.

María Micolta, the report's author, analyzed 147 Chinese projects across Bolivia, Colombia, Ecuador, Peru and Venezuela, conducted between 2000 and 2023, with a total value of $46 billion.

Out of the 147 projects analyzed, 93 -- accounting for 63% and valued at approximately $41.8 billion -- exhibited some form of irregularity.

In 35 projects (24%), no setbacks were identified in their execution and development. Additionally, 19 projects (13%) showed signs of irregularities, though these could not be definitively confirmed during the investigation.

The research highlights the nine major Chinese state-owned enterprises active in the Andean region.

In mining and energy, key players include China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (Sinopec), Sinochem Holdings Corporation, China National Offshore Oil Corporation (CNOOC) and Zijin Mining Group.

In the infrastructure sector, the leading firms are China Communication Construction Company (CCCC), China Railway Construction Corporation (CRCC), China Railway Group Limited (CREC) and China National Machinery Industry Corporation Limited (Sinomach).

Micolta's analysis considered both the investments by these Chinese state-owned companies and the deficiencies encountered, such as corruption, cost overruns and delivery delays.

"The most prevalent issue was information opacity, affecting 44 projects, with Ecuador reporting 20 cases and Bolivia 18," the report states.

Next in frequency are delays and setbacks, affecting 32 projects predominantly in Bolivia, followed by 19 projects with unfinished or halted work, particularly in Venezuela.

Sinomach, a Chinese state-owned manufacturer of geological, agricultural and forestry equipment, has the most projects with irregularities, accounting for 28% of the total, the report found.

The report identified 20 projects with claims of environmental damage, evenly distributed among Bolivia, Colombia, Ecuador and Peru.

The report notes, "In Venezuela, there were strong indications of environmental violations, but these were not supported by verifiable data."

Groups and organizations slammed 21 projects for environmental harm, with the most in Bolivia (11), Colombia (5) and Peru (5).

Labor-related issues were noted in 18 projects, primarily in Bolivia, which had 14 cases.

Widespread corruption

The Andrés Bello Foundation uncovered "numerous corruption cases linked to projects undertaken by selected Chinese state-owned companies in the Andean region."

The report highlights problems like misappropriation of funds, influence peddling, illegal profiteering, fraud, embezzlement and bribery.

"Among the key findings… the investigation revealed that out of 147 projects, 14 (9%) -- totaling approximately $3.05 billion -- exhibited at least one category of corruption," according to the investigation.

Another 41 projects (28%), costing approximately $7.5 billion in all, were categorized under "no data," with the majority in Bolivia, Peru and Venezuela.

In these countries, several projects exhibited a "high degree of irregularities," suggesting potential criminal activities that have not been prosecuted.

Among the 14 projects where corruption was proven, influence peddling was the most common grievance, found in 8 projects. It was followed by bribery in 5 projects and embezzlement or misappropriation of funds in 2 projects.

Overall, the lack of transparency in Chinese financing, combined with weak local institutions, has hindered effective oversight and development of numerous projects, the report notes.