World Bank Finds Violations in Bolivia by Previously Blacklisted Chinese Company

A World Bank (WB) investigation into a 200-kilometer highway project in Bolivia, valued at $230 million, found numerous violations by state-owned China State Construction Engineering Corporation (CSCEC), a key player in Beijing’s Belt and Road Initiative, reported international nonprofit organization Business and Human Rights Resource Center (BHRRC).

CSCEC, once blacklisted by the WB, operates in more than 100 countries and carries out infrastructure projects such as highways, airports, ports, and energy distribution. In 2018, the company won a contract to build the San José de Chiquitos-San Ignacio de Velasco Road, in the Santa Cruz department, with financial backing from the WB, news outlet Noticias del Mundo reported.

The project seeks to widen and pave an existing road to improve traffic along the corridor, benefiting some 125,000 residents, 62 percent of whom are indigenous. However, the indigenous people denounced that there was no free, prior, and informed consultation about the project on their land, environmental news site Red Ambiental de Información reported. The road also crosses the Chiquitano dry forests, a unique and biodiverse ecosystem.

China is Bolivia’s main bilateral creditor. Most Chinese financing has gone to road infrastructure, especially export corridors, and the exploitation of raw materials for Beijing. China-backed projects worldwide create significant social and environmental problems, including displaced local populations, negatively affected water quality, polluted adjacent land, and spoiled fragile ecosystems, among others, experts say.

Project violations

On May 16, the WB’s executive board reviewed its Inspection Panel Investigation Report on the Santa Cruz Road Corridor Connection Project, following a request for inspection organizations of the indigenous Chiquitano people submitted in March 2023.

According to the BHRRC, the indigenous people claim that the project threatens their lands and livelihoods, facilitating illegal activities and colonization. They allege that the road improvement increases illegal occupation and complicates the titling of their lands, as well as increases unregulated logging and forest fires. They claim that the Chinese company manipulated local people into signing unfavorable land concession contracts to use their “borrow pits,” i.e., excavations from which gravel, clay, earth, or sand is extracted for a construction project.

The image shows a section of the San José de Chiquitos-San Ignacio de Velasco Highway, in the Santa Cruz department, Bolivia, August 31, 2023. CSCEC, once blacklisted by the World Bank, won a contract to build the road in 2018 and was to have the work completed by 2021. (Photo: Bolivian Highway Administration)

CSCEC is accused of deceiving locals to obtain land use permits at very low prices, taking advantage of their vulnerability, BHRRC said. In several documented cases, payments offered for land use were below market value, without the indigenous communities being aware of the discrepancy.

The WB panel found that the project lacked adequate social assessment and violated the right of the Chiquitano communities by failing to consult them in a free, prior, and informed manner. Other findings include damage to water sources, resettlement problems, deficiencies in grievance management, poor labor conditions, and lack of protective equipment for workers, the BHRRC said.

Those affected denounced that the houses built by the Chinese state-owned company as compensation were uninhabitable. They also said that the company did not comply with their agreements and threatened those who claimed their rights.

Mario Paniagua, indigenous peoples’ advisor for nongovernmental organization Fundación Tierra and one of the complainants, told Noticias del Mundo on May 30 that “the contract did not specify the duration of the work or the amount of material to be extracted. The terms focused on the obligations of the communities toward the Chinese company, which continues with its operations.”

When the contract with CSCEC was signed, the Chinese company was to complete the project in 36 months, that is, by 2021. However, progress has been slow, and construction continues. In total, 16 indigenous communities are already directly affected by the project, investigative journalism platform Dialogue Earth reported.

“These violations are common in many projects developed by Chinese companies in the region. It’s important to remember that these companies are state-owned, which means that the Chinese government is behind them,” Sergio Cesarin, coordinator of the Center for Asia-Pacific and India Studies at the National University of Tres de Febrero, in Argentina, told Diálogo on August 12. “In any litigation, problem, controversy, or conflict, it is known that the top authority is not the company or its directors, but the Chinese government.”

Cesarin also said that the administrations of Evo Morales and Luis Arce generated great controversy by signing agreements with Chinese companies, allowing the latter to control important infrastructure and lithium exploitation projects. “Many Bolivians reject these agreements, arguing that too much control of strategic resources has been ceded to China.”

Multi-million-dollar projects

Notably, in 2009, the WB blacklisted the CSCEC for six years following corrupt practices on a road project in the Philippines. In addition, the state-owned company has also carried out multi-million-dollar projects in countries with high corruption rates.

In June, CSCEC and the Daniel Ortega-Rosario Murillo regime in Nicaragua signed a new agreement to finance the construction of phase II of the coastal highway. According to pro-regime daily El 19 Digital, the investment, which amounts to more than $292 million, will build 97 kilometers of road.

“It is paradoxical that, despite the anti-democratic speeches of some regional figures, there have been no significant protests against the agreements that grant Chinese companies broad freedoms to operate,” Cesarin said. “These companies, subject to an oligarchic regime, in many cases act to the detriment of human rights, the environment, and the interests of indigenous communities, generating growing social unrest.”

He also considers it unlikely that the WB will sanction CSCEC for irregularities in the Bolivian road project. “The deep relationship between Bolivia and China, characterized by an asymmetry of power, creates an environment for Chinese companies to operate with relative impunity; limiting the country’s room to maneuver to make autonomous decisions.”

Transparency and accountability

“To improve transparency and accountability in Chinese projects in Latin America, it is critical that governments establish equitable contracts, promote social and technical control of projects, and ensure that regulatory bodies act independently,” Cesarin concluded. “It is necessary to overcome the tendency to prioritize political relations with China over national interests and the need for transparency.”

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