By Catalino Hoyos | 2024-10-29

QUITO -- A half-century later, the wisdom of Ecuador's opening to China looks increasingly doubtful.

The purchase of 20,000 tons of bananas marked the beginning of commercial and political relations between China and Ecuador, even though formal diplomatic relations were not yet established.

It was 1973, a year after Quito met Beijing's precondition for such agreements: severing ties with Taiwan.

Major business deals unfolded, but only in 1980 did China open its embassy in Quito. Ecuador reciprocated by establishing its embassy in Beijing.

Thus began a relationship resulting in the signing of 267 international agreements by last year, with 54% of them established during the socialist presidency of Rafael Correa (2007-2017).

However, Sino-Ecuadorian ties raise concerns among analysts and activists who fear that Beijing may seek additional advantages or disregard national laws, particularly those related to the environment and labor.

Diana Castro, a scholar of Latin American studies from the Sustainable Latin America project, attributes the deepening of relations to several key events in Ecuador during the Correa decade.

Among these events are the boom in commodity prices, a feud with the World Bank, the declaration of a debt moratorium and a significant increase in public spending to finance a project aimed at transforming the energy matrix.

A trade deficit

In 2015, Correa and his Chinese counterpart, Xi Jinping, solidified their cooperation.

In 2016, the two sides elevated their relationship to a Comprehensive Strategic Alliance, positioning Ecuador as a key ally for China in the region.

This move also coincided with China strengthening its presence across Latin American countries.

After the "Correísta" era ended in 2017, then-President Lenín Moreno, who initially aimed to continue the leftist model, shifted direction and adopted several positions contrary to Correa's policies, including in the economic sphere.

But he preserved close ties with China and even expanded cooperation into new areas.

This situation occurred as Ecuador continued its primary export pattern: selling raw materials and agricultural products to China while importing manufactured goods and capital equipment, Castro explained.

Under this dynamic, Quito ran a trade deficit with China.

From 2017 to 2022, Ecuadorian exports to China grew by an annualized rate of 99.4%, according to the OEC statistical site.

In 2000, China was the 12th largest buyer of Ecuadorian products. It overtook the United States to become the top buyer in 2022.

In 2023, Ecuador actually recorded a small trade surplus with China.

China's largest purchases from Ecuador are in the mining and oil sectors, but it also imports significant quantities of shrimp, wood, bananas and fish.

Ecuador's main imports from China include machinery, mechanical and electrical devices, vehicles and manufactured goods.

Environmental harm

In 2022, a crucial development occurred in strengthening relations: President Guillermo Lasso, maintaining Correa's positive stance towards China, announced a Free Trade Agreement (FTA).

This agreement added Ecuador to the list of Latin American countries with FTAs with China, joining Chile, Costa Rica and Peru. Later Nicaragua signed an FTA with China as well.

The FTA negotiations occurred without civil society involvement and lacked critical provisions on the environment and labor, said Castro.

This approach aligned well with Chinese interests, as Beijing often is denounced elsewhere for its environmental practices and failure to protect workers' rights.

Environmentalists are concerned about the potential for toxic waste imports, threats to the environmental rights of Indigenous peoples, deforestation and the risk of the FTA undermining the country's food sovereignty.

They also fear it may lead to unrestricted imports of genetically modified seeds and promote excessive exports.

Chinese companies operating abroad "face minimal public oversight," the Political Dialogue think tank in Montevideo, Uruguay, said in February.

"Without the threat of social, economic or legal consequences for their actions, these investors lack the incentive to adopt responsible practices that mitigate the impact of their projects," it said.

'Debt trap'

Over the years, China has also become Ecuador's top lender.

In 2022, Quito reached a debt restructuring agreement with Bejing, but it still owes China almost $5 billion, according to the Wilson Center, a think tank in Washington, DC.

The substantial Chinese economic presence in Ecuador is evident in two main ways: direct investment through Chinese companies and involvement in various concessions.

However, significant concerns exist regarding the potential implications of Chinese behavior in these areas.

"Chinese investments in Ecuador have been concentrated in three sectors that do not contribute to promoting a sustainable and equitable energy transition," Castro warns.

These sectors include the construction and financing of public infrastructure, oil and mining.

Ecuador has seen several changes in its government over the years, with accompanying shifts in ideology.

Those shifts aside, Ecuador tends to view China and its powerful economy favorably, even in light of corruption cases involving Chinese businesses in Ecuador.

Activists, particularly environmentalists, are calling for policies to prevent irreversible damage by Chinese companies.