The Caribbean Journal, By Zhivargo Laing – CJ Contributor, June 10, 2013
ON A recent radio show in the Bahamas, the topic of China’s $8 million loan to the country was being discussed.
A curious caller asked, “what do the Chinese want for these loans anyway?” Her question is probably repeated in the minds of many Caribbean people and it deserves an answer.
Of course, only China can say definitively what it wants in return for its generosity. But in the absence of a clear reply from Beijing, one can offer plausible reasons for the Chinese loans.
Many do not want to hear it, but it is true that Caribbean countries have to borrow significant sums of money for the foreseeable future. Since we have to do it to pay our bills, borrowing at the lowest possible cost is an important fiscal goal of any prudent government.
Low interest rates over extended periods of time are a cash-poor Caribbean government’s dream come true. Lower borrowing costs mean lower negative cash flow impact. Who could ask for anything more when borrowing?
But what fairy tale lender would offer such largesse to Caribbean governments, a number of whom have high debt-to-GDP ratios, some exceeding 100 percent?
With those ratios, commercial borrowing becomes near impossible or exacts a prohibitive cost and multilateral institutions such as the International Monetary Fund (IMF) will only lend or bailout under restrictive fiscal terms as some of our countries already are experiencing.
Enter the Chinese.
China is a world power and in a few decades has become a global economic force with which to reckon. The country’s GDP per capita at $9,100 remains relatively low, much lower than that of say the United States, at about $49,900.
However, by opening its economy to a dynamic form of capitalism while continuing to govern itself as a communist state, China has enriched itself enormously.
The Chinese government is now awash with cash, even if the Chinese people still have some ways to go to experience a better quality of life.
Wise owners of large sums of cash know it is better to put it to safe and productive use, so you can continue to grow it. Renting money to those who demonstrate a capacity to pay it back is the best known form of using capital. No means of using cash has proven more productive over time. Look at the financial institutions now occupying the top spots on the Fortune 500 list of most profitable companies.
Despite the recent well-publicized near-collapses and last-minute bail-outs following the global economic and financial crisis, no lending bet has been safer than lending to governments. This is why treasury bills remain among the lowest interest bearing and safest of all investments.
It is also helpful to be able to lend to those who might use your labour and products to implement projects being funded by your lending.
This is one of the things the Chinese want: lend their excess cash to governments which will employ significant Chinese labour and products, both of which come less expensive than can be found at home or elsewhere abroad, and then earn money on that cash for the long haul.
On top of all this, the idea is to lend to those in need and you show yourself helpful and friendly in the process. Like other global powers have done throughout history, the Chinese are using their generosity to make friends and friends tend to look out for friends.
Both international relations and diplomacy operate on the principle of consensus, and consensus means that many must agree together on a point. If a country would be a genuine global power, it needs to have wide acceptance and respect in the community of nations.
It is good to have a consensus that one is a genuine global power.
It is one thing to have power and wealth, but it is entirely another thing, indeed an enviable thing, to have power, wealth and respect.
China is winning respect and many friends by its helpfulness to developing countries across the globe.
In the Caribbean, it is making some $3 billion available in lower-interest loans and in Africa, it is lending billions more. This is not simply generous – it is timely financial support to countries crippled by economic hardship and heavy indebtedness and in need of such finances to promote growth and development.
For many decades, the United States of America was to the developing world what China seeks now to be.
Indeed, many developing countries continue to benefit from US generosity.
But China is the new player on the block, and she is not hiding her light under a bushel. Whether she will match America’s success in global influence remains up for debate, but if she does not, it will not be for a lack of trying.
What do the Chinese want for all their financial and technical generosity? They want jobs for their citizens, markets for their products, earnings for their excess cash, and friends in the international community as they move their national vision and mission forward.
In the end, I guess it is safe to say the Chinese want what every nation on the planet wants, only they seem better positioned to get it than most. And the Caribbean and others benefit in the process.
Zhivargo S. Laing, former Minister of State for Finance with the Government of The Bahamas, is an economist, consultant and motivational speaker.
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The Community of Latin American and Caribbean States (CELAC) states and Russia will create a mechanism for political dialogue, said in a statement issued at the end of a meeting in Moscow of the foreign ministers of the “expanded troika” of CELAC (Cuba, Chile, Costa Rica and Haiti) and Russia.
“Ministers have proposed to set up a permanent mechanism for political dialogue and cooperation Russia-CELAC to discuss and coordinate positions on issues of common interest in international politics,” reads the document.
According to the text, such cooperation will include promoting the principles of international law and the Charter of the UN, “to strengthen democracy and to ensure that all human rights, the fight against international terrorism in all its forms and in all its manifestations, including its funding to suppress drug trafficking and arms trafficking in the legalization of criminal proceeds and transnational organized crime. “This will be subject to the review and approval of other members of the Community at the next meeting of Foreign Ministers.
Founded in late 2011, the CELAC has 33 member states. It includes the countries of the Americas except Canada and the United States, and is a kind of alternative to the Organization of American States (OAS).
Source: http://www.windpower2010.com/celac-russia-towards-a-mechanism-for-political-dialogue/
Source: http://www.windpower2010.com/celac-russia-towards-a-mechanism-for-political-dialogue/
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By Ivan Castro
MANAGUA | Thu Jun 13, 2013 7:30pm EDT
MANAGUA (Reuters) - Nicaraguan lawmakers granted a 50-year concession to a Chinese company on Thursday for it to design, build and manage a shipping channel across the Central American nation that would compete with the Panama Canal.
The $40 billion proposal by HK Nicaragua Canal Development Investment Co Ltd's (HKND Group) calls for linking Nicaragua's Caribbean and Pacific coasts and includes plans for two free-trade zones, a railway, an oil pipeline and airports.
The government says the canal, which has been discussed for decades, could boost the country's gross domestic product by up to 15 percent.
"Today is a day of hope for the poor of this country," said Edwin Castro, a lawmaker in President Daniel Ortega's ruling party, before the vote marking final legislative approval of the deal.
The Hong Kong-based HKND group is headed by Chinese lawyer Wang Jing. He also leads Chinese company Xinwei Telecom Enterprise Group, which last year received a cellphone concession in Nicaragua.
"Central America is at the center of North-South and East-West global trade flows, and we believe Nicaragua provides the perfect location for a new international shipping and logistics hub," Jing said in a statement after the plan's approval.
"We have a lot of work ahead, but we want to be clear that we intend this to be a world-class effort that creates economic opportunity, serves the global trade community, and also protects the local environment, heritage, and culture of Nicaragua."
Critics of the plan have railed against selling out state assets to the Chinese. After Thursday's vote, a group of opposition lawmakers left the chamber singing Nicaragua's national anthem before unfurling a banner that read, "Ortega: traitor."
About 100 people gathered outside the assembly to protest the decision, but there were no reported incidents.
TIMING RIGHT?
Last week Ortega said the government was going ahead with feasibility studies that should be done by 2015, when work on the canal could begin.
Those studies will define what route the canal will cut through the country. Any design would almost certainly bisect Lake Nicaragua, which at 3,191 square miles (8,265 sq km) is Central America's largest lake.
Advocates say the proposal plays to Nicaragua's natural strengths, which include low-lying land and the lake.
Still, the channel would likely be three times longer than the 48-mile (77-km) Panama Canal, which took the United States a decade to build at the narrowest part of the isthmus. It was completed in 1914.
The idea of a Nicaraguan shipping canal is almost as old as the country itself. The United States has eyed a trade route there since the 19th century, around the same time work began on the Panama Canal.
But for the project's Chinese backers, the timing appears right. China is the world's second-largesteconomy and one of the region's top consumers, snapping up Latin American commodities to drive domestic growth.
"We believe that by 2030 - just over 16 years from now - the volume of trade addressable by the Nicaragua Canal will have grown by 240 percent from today," the company said in a statement.
"The total value of goods transiting the combined Nicaragua and Panama canals could exceed $1.4 trillion, making this one of the most important trade routes in the world," it said.
Panama Canal officials said it was too early to speculate on the viability of the Nicaraguan waterway or how it could affect trade.
"We get questions of hypotheticals every day, 'What happens if the Arctic melts, if manufacturing is moved from China to Mexico,'" said Rodolfo Sabonge, vice president of market research at the Panama Canal Authority.
"Until we really see the plans and understand the investment, all we know is that they talk about $40 billion," he said. "It's very, very early."
(Reporting by Ivan Castro; Additional reporting by Lomi Kriel in Panama City; Writing by Gabriel Stargardter; Editing by Simon Gardner and Xavier Briand)
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