Legal Manual on Chinese Environmental and Social Guidelines for Foreign Loans and Investments: A Guide for Local Communities

This resource is a manual from the Centro de Derechos Económicos y Sociales (CDES) in Ecuador explores Chinese environmental and social guidelines for foreign investments with a focus on local communities in Latin America.

While in Latin America the relevance of traditional financiers, such as the World Bank (WB) and the International Monetary Fund (IMF), and regional financial institutions, such as the InterAmerican Development Bank (IDB) and the Development Bank of Latin America (CAF), is decreasing, the influence of China is rapidly increasing. This change, under the scrutiny of “structural adjustment,” could be considered promising. In fact, several leaders have called Chinese investment a “win-win” strategy with no conditions, which has resulted in “South-South strategic alliances.” However, while China does not dictate budgetary allocations, China does often dictate how borrowing governments should use the loans from Chinese banks. For example, Chinese financing policy indicates that borrowers must hire Chinese companies, use Chinese equipment, and hire Chinese laborers.

The impacts of Chinese investment in Latin America also go far beyond the economic sphere; most notably, they have serious environmental and social implications given the nature of the sectors to which such investments are directed. Many projects present an immediate and serious threat to the rights and quality of life of thousands of people, principally to indigenous and rural populations who live in areas where projects for the construction of dams, mining, and oil operations are developed. The majority of these projects are aimed at the aggressive exploitation of primary natural resources. Such exploitation follows a typical model in which the foreign investor is the dominant economic beneficiary and the natural capital of the borrowing countries is rapidly depleted.

Chinese investments have taken local communities and social organizations by surprise. Very little has been done to demand accountability from Chinese banks and companies due to a lack of knowledge about Chinese standards for operations and investments abroad, the architecture of Chinese institutions, and Chinese regulators.

To fill these gaps, research was conducted that resulted in the “Legal Manual on Chinese Environmental and Social Guidelines for Foreign Loans and Investments: A Guide for Local Communities.” Its aim is to provide communities and social organizations with a practical tool that can be integrated into their broader advocacy and planning strategies around Chinese state banks and companies.

The Manual is framed around twelve “Key Questions” for understanding the origin, relevance, and applicability of Chinese guidelines. Regarding the guidelines themselves, included is a summary of seventeen Chinese guidelines: ten that apply to Chinese state companies, and seven that apply to Chinese state banks. In addition, there is a table for each guideline that explains its contents and suggests some practical ideas for its use. It is worth noting that both translations from Chinese to Spanish and Spanish to English are not meant to be verbatim translations. LEGAL MANUAL ON CHINESE ENVIRONMENTAL AND SOCIAL GUIDELINES FOR FOREIGN LOANS AND INVESTMENTS A GUDE FOR LOCAL COMMUNITIES.

This second edition of the Manual does not contain all guidelines that apply to Chinese investments and loans abroad. We have chosen the most relevant standards in order to introduce the Chinese regulatory system to an audience that has not had the opportunity to become familiar with it. The selected guidelines cover environmental protection, corporate social responsibility, and the cycle of loan approval for development projects, as well as mechanisms for ensuring access to information, consultation, and participation. However, as is known, the existence of guidelines does not guarantee implementation. Effective systems and institutions are required to monitor implementation and to sanction and demand compliance.

To help understand the Chinese “institutional architecture” for monitoring and accountability of Chinese investment abroad, the Manual includes a summary of major Chinese public institutions and their functions. Finally, the Manual provides an Address Book with contact information for relevant Chinese institutions, media, and NGOs; as well as international NGOs and media interested in Chinese investments in Latin America.

It is difficult to predict what the results of using these new tools will be, especially in the short term, as there has been very little demand for the application of the guidelines and consequently Chinese authorities have not yet been held accountable for complying with them. But, as experience has shown, respect for rights and the law only improves when those affected know them and demand their enforcement. On the other hand, the most effective advocacy strategies to protect peoples’ rights are not limited to the use of regulatory instruments, but are combined with educational and enforcement campaigns at local, national, and international levels. This Manual is intended to provide communities with the tools and information necessary to pursue such strategies.

This resource is also available in Spanish and Portuguese.