Adios Panama Canal: PRC's Colombia Railway Plan

♠ Posted by Emmanuel in , at 3/15/2011 12:01:00 AM
It's been a longstanding ambition of many a would-be-conquistador that may finally come true. For, here's an interesting bit of realpolitik that you may have missed of the early Chinese bird catching the Latin American worm. Among Latin American countries, Colombia is regarded as having among the best ties with the United States in recent times. Aside from the Bush-Uribe conservative rapport of years gone by, the two countries also have an FTA-in-waiting.

Yet, we also know that there's a new sheriff in the world economy spreading its largesse far and wide while attempting to win friends and influence people--the PRC. As Washington's megadeficits plunge the US into an infinite abyss, the loaded Chinese are using their coffers runneth over to this end. As it turns out, even the Colombians are hedging their bets. After all, it doesn't take a genius to figure out that it's probably better to catch a rising star than to be dragged down by one that's fading fast.

In this article, mooted plans to build a railway running across Panama to the Pacific stem from a number of things: First, it could well be an easier overland route for commodities to get to the Pacific, from which they journey on to China. Panama remains in the PRC's doghouse [woof-woof] for continuing to recognize the Republic of China or Taiwan as "China," and this diplomatic tussle has marred their trade relations. Second, the wily Colombians are said to be annoyed with American delays in passing the aforementioned FTA, and think pressure can be applied by appearing to side closer with the PRC. Third, on the Chinese side this time, I personally think it would be a huge blow to American prestige if a landmark infrastructure project were to be completed in the United States' backyard by the PRC. Then again, given the pathetic state of modern America, it has little choice but to sit back and watch those that can show those that can't. From TIME:
...Bogot√° and Beijing are in talks to build a multi-billion-dollar railway connecting Colombia's Caribbean and Pacific coasts. Said [Colombian President Juan Manuel] Santos, in a poke at U.S. superpower self-esteem, "Asia is the new motor of the world economy..."

In the past 10 years, annual Latin American exports to China have gone from negligible to more than $40 billion as the Asian giant reaches for commodities like oil, copper and soy beans to fuel its roaring economic growth (10% last year). China is now the top purchaser of exports from Brazil and Chile; and according to the U.N.'s Economic Commission on Latin America & the Caribbean (ECLAC), within five years it should replace the European Union as Latin America's second-largest trading partner after the U.S. In the process, Beijing is lavishing billions of dollars in financing on the region, from hydro-electric projects in Ecuador to development funds in Argentina.

And now, perhaps, a major railway in Colombia to compete with the nearby Panama Canal as an Atlantic-to-Pacific shipping shortcut. Chinese officials confirmed this week that their country has agreed to invest in the $7.6 billion project, which would stretch about 140 miles (220 km) from Colombia's northern Caribbean region, near Cartagena, to an as-yet undesignated site on its western Pacific coast, mainly to ferry Colombia's abundant coal to Asia.

What's less certain, however, is whether a trans-Colombian railway would really be more efficient than using the Panama Canal — especially since that shipping lane is undergoing a $5.25 billion expansion to accommodate more massive cargo ships. (Relations between China and Panama are also cool due to Panama's strong ties with Taiwan.) Ever since the canal was completed in 1914, rail, particularly across southern Nicaragua, has been discussed as an alternative...

Still, both Colombia and China seem to think it's worth the risk. China sees the country "as a good strategic opportunity," says [Inter-American Dialogue President Michael] Shifter, "a good location for conveying a lot of South American commodities but also a place with more sophisticated governance today." The rail partnership is also a pragmatic move for Bogot√°, he says...

Many Colombia watchers believe a key impetus for Santos is to make Washington nervous about China's growing involvement with the U.S.'s top South American ally, in the hopes of getting Congress to expedite the free-trade agreement (FTA). But analysts like Shifter doubt that's a consideration, since the Colombians are well aware that the FTA is being held up mostly because of opposition from U.S. labor unions (based partly on concerns about human rights for Colombian workers). Either way, recently leaked U.S. cables, based on conversations with Colombian diplomats, help explain why Colombia, despite its realization that China is out to exploit its natural resources, is building the partnership. "Colombia is wary of Chinese motives," says a March 2009 message from the U.S. embassy in Beijing, released last month by WikiLeaks. "However, Colombia needs new economic partners, particularly given the lack of progress on a U.S.-Colombia [FTA]."

And particularly because Colombia wants to fuel its own boom. Its economy is expected to grow 5% or more this year and next; the World Bank now rates it the 39th best nation to do business with, up from 76th place just five years ago, and Santos has pledged to put it in the top 20 by 2014. He wants its coal production to increase 70% by then, to 124 million tons a year; its oil output by 75%, to 1.4 million barrels per day; and its value-added products to jump from 29% of total exports to 40%.

It's looking to China to help it get there in large part because the Harvard-educated Santos is said to be especially impressed with Beijing's commitment to getting things done. In other words, the can-do spirit Latin America used to expect from the U.S. — the kind that built the Panama Canal.
That'll show those Yanks up, indeed. It also begs the question, will the ongoing Panama Canal enlargement to accommodate larger vessels pay off if the Chinese decide to route their business elsewhere? The answer is likely yes because it's large oil tankers that'd more easily pass through, but still, it demonstrates how the world has moved on.