Play the global economic game for Caribbean citizens

The Chinese government will provide a preferential loan to Jamaica for construction of the 14-kilometer bypass for Montego Bay.  This headline in the Jamaican Gleaner led me to look at China’s interests in the Caribbean.

I visited Dominica a couple of years ago and noted that there was a significant Chinese presence on the island.  They were building a huge seawall and had other projects.  I wondered: are the Chinese the new colonizers?

Further investigations made me realize that the Chinese were pioneering a new approach to investing in the Caribbean and Africa.  They had determined in 2009 that sending Chinese laborers to Africa would create 100 million more jobs and assist in solving the problem of Chinese unemployment.
It is only natural that they would deploy the same logic to the Caribbean and Latin America.

I recalled that the Patrick Manning-Trinidad and Tobago government had entered into many Government-to-Government contracts with China.  These contracts and all contracts in the Caribbean had one thing in common.

The Chinese used turnkey contracts to supply the labor, materials and management for the projects.  These are agreement under which a contractor completes a project, then hands it over in fully operational form to the client.

In this arrangement the country gets the facility, but it does not develop any managerial knowledge, its labor force does not gain expertise in construction methods and it does not supply any materials for the project.  However, the country owes the Chinese government for the project and will be paying off the loan to China, with interest.

There are few employment benefits to the country or development of the people.  This is committing national suicide.

It is obvious that our Caribbean leaders, having sold off their national assets are totally dependent on foreign investments. But because of our small size, we are not the ideal investment profile.

Since we are not the ideal profile, we are seen as consumers.  We must become producers of products and services if we wish to survive in this new global economy.

Falling commodity prices, government debt, crime because of rising poverty and corruption have made these governments grateful for any investment, even when the investment does not intrinsically help the country.

Given the relative negotiating strength of the parties, it is evident that the Caribbean leaders and lawyers believe that they do not have the leverage to extract better contractual terms with the Chinese, or any other investor.   The inevitable result is that construction contracts are skewed in favor of the Chinese contractors or other investors.

The Chinese government has largely directed its investments toward securing supplies of raw materials and developing infrastructure, including the construction of buildings, stadiums and roads.  This approach guarantees that China will be able to compete with the United States of America and its western allies.

It also enables China to develop and improve its expertise in large construction projects and utilize its labor force to reduce unemployment. Caribbean leaders must begin to question any investment that does not reduce its unemployment, nordevelop its people and its knowledge base.

China, recently invested $600 million in the ‘Beijing Highway’ to be built across Jamaica and has pledged $1.5 billion in investment to create a deep-water container port in the country.  If the Jamaican people are not participating in the management, labor and supplying any local materials for these projects, then they need to renegotiate the deal.

The Chinese company Bosai Minerals group purchased a controlling 70 percent stake in Omai Bauxite Mining, Inc. in Linden, Guyana, in December 2006 for $100m. The government of Guyana retained 30 percent ownership.My position is that the government should not have sold its control of the company.

Oil production is scheduled to start in 2020, the natural gas from this venture could have been used to make the mining company a national success story.  Instead, the 30 percent ownership will be insignificant, since Bosai will link Guyanese operations to its annual production of 400,000 tons of refractory bauxite, making Bosai the largest bauxite producer in the world.

Another Chinese company, Complant International acquired three sugar factories and leased 30,000 hectares of cane fields. In August 2011, Complant began injecting a proposed $156m over four years into improvements in fields and factories.

If a Chinese company, usually backed by the Chinese government, can purchase our resources, why can’t we use government financed companies to purchase and manage theses enterprises for our own benefit? A total of $156 million over four years is $39 million a year.

Are we so mentally bankrupt that we cannot do for ourselves?  Have we bought into the nonsense that companies do not lose money sometimes?  Don’t we understand that we are borrowing money to pay foreigners to reduce their underutilized service companies?

A Chinese Communications Construction Company is involved in harbor construction in Jamaica and the Shipbuilding Industry in Guyana. China, using its Export-Import Bank, gave a $2.5b loan to state-owned China State Construction Engineering, as primary contractor, to build the Baha Mar resort in the Bahamas.

The loan agreement included provisions that the company could import Chinese construction workers, despite the Bahamas’ double-digit unemployment.  In addition, Baha Mar could not fire the contractor for any reason.

The Baha Mar project alone has employed some 5,000 Chinese construction workers. Some percentage of these should have been Bahamian citizens, but the use of Chinese construction firms is often stipulated as a condition of financing.

We could employ our own people to build our projects. We could organize workers cooperatives or workers stock ownership plans to finance these developments.  We can do it because these projects will create revenue in the future and our citizens will have a stake in the companies.

This incentive will encourage employees to ensure that the companies are profitable since their futures are interwoven in its success.  Success is not having foreigners build things for you, it is about you building things for yourselves.

The Chinese government and Chinese private firms have decided that it is in their best interest to secure access to raw materials and seek lucrative construction contracts. They have decided to loan you money to deploy these-income producing projects.
In effect, they have decided that the project is viable,you are a good economic risk and that you will repay the loans. It is time you decide that you are a good economic risk and make loans to yourself and your citizens.

There is no free lunch.When you sell your land and bauxite to foreigners, they control you.When you owe foreigners for building harbors and other infrastructure projects, using their labor and materials, you have impoverished your citizens.

Later, when you inevitably return to the IMF, they will force you to sell the harbor and any other infrastructure project that foreign capitalists want to purchase. Like the old people used to say, “you spinning top in mud”.

It’s time to stop seeing ourselves as impotent. While we may never be a world economic power, we are obligated to improve our citizens’ standard of living.  We must seek our own interest, while participating in the global economic game.

If the rules of the game predetermine that we will be losers, we need to modify the rules to gain the winning edge.  Only fools participate in a game they are sure to lose.