Guest essay by Eric Worrall
Ecuador is scrambling to find a way out of a financial mess, a large green energy dam project built on a raft of alleged Chinese bribe money and unaffordable repayment terms, in the shadow of the unstable Revantador Volcano.
It Doesn’t Matter if Ecuador Can Afford This Dam. China Still Gets Paid.
By Nicholas Casey and Clifford Krauss
Dec. 24, 2018A giant dam was supposed to help lift Ecuador out of poverty. Instead, it’s part of a national scandal, and a future tethered to China.
REVENTADOR, Ecuador — The dam sits under the glare of an active volcano, with columns of ash spewing toward the sky.
Officials had warned against the dam for decades. Geologists said an earthquake could wipe it away.
Now, only two years after opening, thousands of cracks are splintering the dam’s machinery. Its reservoir is clogged with silt, sand and trees. And the only time engineers tried to throttle up the facility completely, it shook violently and shorted out the national electricity grid.
This giant dam in the jungle, financed and built by China, was supposed to christen Ecuador’s vast ambitions, solve its energy needs and help lift the small South American country out of poverty.
Instead, it has become part of a national scandal engulfing the country in corruption, perilous amounts of debt — and a future tethered to China.
Nearly every top Ecuadorean official involved in the dam’s construction is either imprisoned or sentenced on bribery charges. That includes a former vice president, a former electricity minister and even the former anti-corruption official monitoring the project, who was caught on tape talking about Chinese bribes.
…
To settle the bill, China gets to keep 80 percent of Ecuador’s most valuable export — oil — because many of the contracts are repaid in petroleum, not dollars. In fact, China gets the oil at a discount, then sells it for an additional profit.
Pumping enough oil to repay China has become such an imperative for Ecuador that it is drilling deeper in the Amazon, threatening more deforestation.
…
Read more: https://www.nytimes.com/2018/12/24/world/americas/ecuador-china-dam.html
The original Coca Codo Dam project was cancelled in 1987 because of financial difficulties and a substantial eruption of the nearby Revantor volcano.
What a mess. Normally I’m all for nations living up to their obligations, caveat emptor when it comes to borrowing money for infrastructure projects, but if it can be established the Chinese orchestrated this fiasco through an aggressive bribery campaign, I would be in favour of a judgement which saw China wearing the full cost of this project.
The dam appears to have no real value as an infrastructure project. In my opinion the dam should never have been built in such an unstable area. In my opinion the dam should be carefully demolished before it causes more harm, before an inevitable future earthquake causes catastrophic collapse and downstream flooding.
Video of the 11,686ft Revantador Volcano erupting in 2017.
To paraphrase an ancient saying “Beware of Chinese bearing gifts.”
China has aggressively pursued a policy of turning Asian and African countries into vassal states. Look at the new ‘Silk Road’.
They are learning from the West. Read “Confessions of an Economic Hit Man,” by John Perkins.
Well said.
Mallaby, who spent 13 years writing for the London Economist and wrote a critically well-received biography of World Bank chief James Wolfensohn,[7] holds that Perkins’ conception of international finance is “largely a dream” and that his “basic contentions are flat wrong”.[6] For instance, he points out that Indonesia reduced its infant mortality and illiteracy rates by two-thirds after economists persuaded its leaders to borrow money in 1970
https://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
Numerous complaints about “Confessions” were made by the operators. Perkins, in reply, produced a sequel which is entirely confessions by people who helped him. Denials are futile.
The invasion of Iraq after 9/11 was a jackals operation headed by Rumsfeld. Classic ’70’s punishment of someone who threatened a US interest: proposing to sell oil priced in Euros, not petrodollars.
The experiences of USA in Equador have given them some reason to look for other ‘benefactors’.
It is suspected that at least twice the president of Equador was assassinated:
https://www.mintpressnews.com/ecuadorian-president-says-the-cia-is-attempting-to-overthrow-his-government/203701/
What the heck does that have to do with the topic? It sounds like you just have a beef you want aired.
Yea, yea. If it’s bad, somehow the US is responsible. Even if we have to make up the evidence.
Exactly what I was going to write, this is how we’ve been doing business for a long time.
After all, that was the purpose of the original silk road, orchestrated by Genghis Khan. It would have worked too but for the advent of the plague.
China is just following in the standard Communist economic plan. Suck the lifeblood from any country you can get your teeth into, to prop up your own. National Vampirism.
And like the Soviet Union, they’ll do reasonably well for themselves (at least those at the top will) until they run out of ONM (Other Nations Money)
~¿~
One other factor the Soviets discovered, is that the larger your empire becomes, the more it costs to maintain it.
As you mention, the economic benefit of colonizing decreases over time, even as the costs to hold onto it increase. Eventually, you reach the point where you are beggaring your own people just to hold onto your empire.
The Brits discovered this well before the Russians.
And the Romans and many more before them
America has gone far astray from its core principles when we got in bed with the ChiComs back in the 90’s. Time to re-orient.
Labor and environmental arbitrage props up GDP, compensates for inflated asset prices through artificially low consumer costs, and, along with immigration reform (e.g. mass emigration, refugee crises), fills in the gap left by planned parenthood, selective-child, and other dysfunctional orientations. Just do it… what feels good.
Not sure how this comment got past the moderation. This has nothing to do with the Ecuadorian dam and is peddling some pretty outrageous conspiracy theories popular with the fringe right-wing. We don’t need gay-bashing and immigrant-bashing at WUWT.
Wharfplank
Re-Orienting America will require a long series of deliberate (non-Occidental) behavior. And, ever since the Clintons sold the White House and American marketplaces to WalMart and their cheap, low-quality Chinese suppliers …
So your solution is to force everyone to buy expensive, low-quality American products?
Straw Man Argument alert! That is NOT what he said. And where is your documentation that American Products are expensive & low quality? Do you have some experience in making low-quality products? That sounds like a moral issue to me.
The documentation is that people buy foreign products when given the chance. Which is why they must not be given that option.
BTW, in your opinion, it is only possible to recognize low quality products while making them? If not why insert the strawman/ad hominem. Were you that worried about the quality of your argument that you needed the buttress them with bad logic as well?
MarkW
The documentation is that people buy cheaper foreign products when given the chance.
And that has been true ever since good could be transported more cheaply than they can be locally made, or the goods are done without. The first trade with the American and Canadian colonies by the English, Dutch, French, Russian and Spanish was exported (cheaper!) raw material from the animals and fish, mines, woodlands and fields of the Caribbean, American, South American, and Canadian colonies; and imported goods from the home countries. Manufacturing locally was restricted by law and exporting manufacturing goods mandated by the tariffs.
When goods could be made locally, they were – even if illegally made. Then lumber and whaling and manufacturing and cloth production moved overseas (to the colonies) when “home” (English and French and Dutch) costs got too high. (And war and death rates of the whales sometimes those costs to rise.) When US manufacturing and production costs got too high on the north East coast using imported (southern) cotton and linen, the mills and factories moved inland and to the south. When those costs got too high, the southern mills and cloth production and clothing fabrication moved to India, Indonesia, Vietnam, etc.
When whaling and timber “costs” got too high near New England, whaling moved south, then to south Atlantic, then then the Pacific, then to the far north. Fortunately, petroleum was discovered and produced before they became extinct. Timber moved inland, then to the Northwest, then to the southern hills, then the west coast forest. But always, the economic “need” for low cost supplies drove the search to ever-higher cost resources further away.
Straw Man because you didn’t respond to his point but put words in his mouth to which you responded. a sign of inability to respond or lazinlaziness.
Follow the money whenever something really stupid happens. The only plus is that some of the thieves were caught.
China is all over the Eastern Caribbean where we are cruising. They install infrastructure for future favor. Most require massive future promise to buy Chinese products and materials without negotiation on price.
I suspect we’ll be talking about this dam sometime in the future. Something along the lines of “Yea, too bad the dam collapsed & killed thousands of people. They knew it could happen back in 2018 and did nothing”.
The Chinese won’t be saying that,thousands of lost lives is getting off cheap in the minds of the chinese,they willingly destroyed there own dams during ww2 sacrificing there own people 200 to 1 just to kill a few Japanese..off point here but the Chinese aren’t real good at being the first to engineer something,copying is more theire specialty!.considering no two dams are alike,p personally I wouldn’t purchase a Chinese made dam.
Sounds like the hydro “deal” Newfoundland has with Quebec.
Not even close.
Newfoundland is getting ripped off for sure. link
The Ecuador deal is an outright disaster.
Oh the irony!
Ecuador was heavily involved in the Steven Donziger lawsuit against Chevron, as the successor to Texaco, former operating partner with state-owned Petroecuador from 1964 to 1992 in oil exploration and production. Ecuador signed off on a final release of Texico for environmental remediation in 1998, but Donziger crafted a suit in Ecuadorian courts which set aside that release and eventually resulted in a judgment of $9.5 billion.
The suit was fraud from the word go and in 2014 Chevron obtained a ruling that Donziger at. al. violated the RICO statute:
The bribery included enlisting officials in the government of Ecuador (IIRC their Attorney General), who were promised a cut of the settlement.
In May of this year Chevron was awarded a $38 million judgment against some of Donzigers co-conspirators by the Gibraltar Supreme Court:
So apparently Ecuador decided to terminate their partnership with Texaco, then went into debt to China to build an ill-sited hydro dam, which they have to pay off by producing more oil! No wonder they were so willing to go along with Donziger’s extortion scheme.
With a record like that, who’s going to be willing to partner with them now?
Just renege on the loan. What are the Chinese gonna do? Invade?
Considering all the mischief done in Third World countries by Marxists advocating expropriation and reneging on foreign debts, it would be interesting in a sick way to see the Chinese reaction.
Do you think they wouldn’t? Who would stop them?
No they would not. There’s no profit in it.
They didn’t make any money out of North Korea either. They’re trying to enlarge their influence and/or territory, they’re not fussy exactly how they do it.
“This giant dam in the jungle, financed and built by China”
Isn’t there a contact of performance or something there?
No need. They’ll just move in. They now have more than 10 police stations in S. Africa which they control and operate.
So what happens if they just say screw you to China because of the corruption.
“China gets the oil at a discount, then sells it for an additional profit.” They got a signed contract; probably not very ethically. But shouldn’t they get paid?
In most countries, if you can prove to the courts that a contract was obtained through fraud or extortion, the contract can be voided.
This is my expertise in my former career I have a M.Eng in Geotechnical and used to specialize in slope stability and wrote my thesis in that subject.
Normally, one does not opine on these matters without a good site inspection. However:
IF the project is showing cracks in the dam (and related concrete structures?) the reservoir should probably be drained now and the dam safely breached and abandoned. It sounds like remediation will be difficult, and huge risks will remain.
IF the project is close to an active volcano there is also the risk of a tsunami overtopping the dam, should a large volume of material slide into the reservoir – for reference see this case in Italy where over 1900 people were killed in 1963.
https://en.wikipedia.org/wiki/Vajont_Dam
My response to China would be to tell them the deal is off – no more cheap oil – because the dam they built was fatally flawed and is irreparable.
End of story.
blockquote>“This giant dam in the jungle, financed and built by China, was supposed to christen Ecuador’s vast ambitions, solve its energy needs and help ….. yada, yada ”
“HA”, ….. nothing new or unrealistic there,
The giant flim-flam scams of dozens of “corn-to-methanol” distilleries, …… tens-of-thousands of wind turbines …….. and a zillion acres of solar panels, ….. mostly all financed and built by extorted taxpayer money, …… was supposed to christen the US’s vast ambitions to solve its energy needs and prevent the deadly effects of CAGW Climate Change.
So, which is the greatest idiotic blunder with a perpetual increasing debt, ….. Ecuador’s power generating dam or US’s anti-CAGW flim-flam scams?
Samuel C Cogar
Excellent comment.
Whilst we are all willing to blame China for everything, oughtn’t we be better looking at our own backyard before pointing the finger elsewhere.
But there is another aspect to this. The inference is that China has deliberately entered into a business deal with another country to deliberately create a national commercial failure in return for oil rights. So China wrecks an entire country then walks in and seizes their oil as payment of the debt. Please.
Who on earth in their right mind would thereafter deal with China? What country would invite them in to create a national project when the object of the exercise is to fail.
Forgive me if I’m wrong but almost every product in western homes now has some association with China. Your PC is probably made there, your mobile phone, cosmetics, furnishings, cars etc. etc. and they have achieved success by delivering quality goods on an equitable business relationship which benefits both participants be that individuals, conglomerates, or countries.
And they deliberately screw up all that goodwill for Ecuador.
I mean, seriously, Ecuador?
Who in their right mind would deal with China? Easy. Corrupt officials who can pocket some of the loot. China happily destroys a country in order to acquire its assets. Corrupt officials in the target country are happy to help if the price is right.
As others have pointed out, it’s not just China doing this. Everywhere in the western world has had the same thing going on for years. Windmills.
Look at GM, GE, and Sears. Companies that have been in business for decades have been taken over by people who will destroy and bankrupt them by making business decisions that maximize quarterly profits in favor of long term (or even short term) good. All so they can justify giving themselves multi-million dollar bonuses.
For almost 20 years I worked for a company that did delivery and installation for Sears. After the Kmart merger we could all see where it was going. 4 years ago when our contract was up for renewal, we decided to just walk away. The current boss moved to Key West to become a ‘beach bum’. 😉
For longer then I’ve been alive Sears was one of the Kings of catalog sales. But the current managers couldn’t manage to effectively use that expertise to develop online sales. They were to busy moving capital and resources into ‘independent ‘ offshoot companies that they can then sell off for personal profit or at least keep for themselves when the inevitable bankruptcy happens.
~¿~
Sears was the 1st retailer to install Intelligent Terminals (electronic cash registers) ….. for in-store accounting and inventory control …….. but failed to develop a nationwide “inventory control” system via use of those “smart” cash registers.
But Walmart “seen the light” and developed a satellite based “nationwide” accounting/inventory control system that keeps track of every item sold and automatically replenishes the in-store stock.
If ya snooze …… ya lose, ….. in the business of retail sales.
“Forgive me if I’m wrong but almost every product in western homes now has some association with China. Your PC is probably made there, your mobile phone, cosmetics, furnishings, cars etc. etc. and they have achieved success by delivering quality goods on an equitable business relationship which benefits both participants be that individuals, conglomerates, or countries.”
15 years ago my sister and brother in law decided to boycott all Chinese products. They gave up their boycott because it ended up being to difficult to find certain things they wanted that were not produced in China.
Too true. The short-sightedness of American business is coming back to haunt them. Short term gains instead of long-term prosperity. They sold their souls (and industrial secrets) to their competitor to gain short-term profits. Now they are paying the price.
Our Canadian Prime Minister has embraced China and it owns many resources and properties here.
I don’t like that.
Hi Murphy,
You will like it even less when you read this story. The foreign owners of Mazeppa were Chinese. They pillaged this asset and left Alberta with $200 million in reclamation liabilities. Another Chinese company did the same and left us with another $400 million or so in reclamation costs. But the first group were worse – to save a few dollars, they put the lives of about 300,000 Calgarians at risk.
And yes, Justin likes the Chinese political control model – he wants to be king, and rules with all the madness of King George III. His combination of incompetence, economic sabotage and corruption is reminiscent of his father Pierre, and Pierre’s minion Jean Chretien.
Regards, Allan
THE MAZEPPA SOUR GAS STORY
I received an award in March 2018 from the Society of Petroleum Engineers (SPE) for averting a potential major sour gas disaster in SE Calgary.
The new foreign owners of the Mazeppa project were running 40% H2S critical sour gas within one mile of populous SE Calgary suburbs and had ceased the required monthly injection of anti-corrosion chemicals into the pipelines seven months earlier, which was extremely dangerous.
Fortunately, I was familiar with the project from decades ago (I was GM of Engineering for a company that formerly owned this project and about 20 others), and someone called me with this vital information. The remarkable coincidence is my confidential informant did not know of my history with this project – he just wanted to talk to someone about his concerns.
The staff at the project were afraid to report the dangerous situation because they feared physical retaliation from the foreign owners, who they believed were violent thugs.
H2S is heavier than air and hugs the ground, and less than 0.1% is instantly fatal. I investigated, reported the matter, followed-up and it was made safe. I later learned that some of the critical sour gas pipelines had already experienced minor perforations and leaks.
Potential loss of life in a major discharge of H2S could have totaled up to 250,000 people, wiping out the SE quadrant of Calgary.
The reprimand by the Alberta Energy Regulator against the foreign owners is the most severe in Alberta history.
– Allan MacRae, P.Eng.
____________________________________________
Selected References to the Mazeppa Sour Gas Threat
a. AER Suspends Mazeppa Plant Operations Amid Concerns
High River Times, August 27, 2016
Previously at http://www.highrivertimes.com/2016/08/25/aer-suspends-mazeppa-plant-operations-amid-concerns
[excerpt]
AER suspends Mazeppa plant operations amid concerns
By Paul Krajewski , Saturday, August 27, 2016 5:33:46 MDT PM
Months before the Alberta Energy Regulator (AER) ordered the suspension of all operations at the Mazeppa sour gas processing plant on Aug. 9, it was a former company engineer who informed the regulator about serious safety concerns he had regarding the facility and infrastructure.
Allan MacRae, member of the Association of Professional Engineers and Geoscientists of Alberta (APEGA), reached out to the regulator about what he referred to as potentially “disastrous” safety risks the plant’s operation posed to the public and environment in the months leading up to the AER order.
b. Watchdog Takes Unprecedented Step Of Forcing Oil And Gas Producer Into Receivership
Calgary Herald, March 21, 2017
http://calgaryherald.com/business/energy/watchdog-takes-unprecedented-step-of-forcing-oil-and-gas-producer-into-receivership
c. Lexin Resources and the Dark Side of Alberta’s Downturn
CBC, April 24, 2017
http://www.cbc.ca/news/canada/calgary/lexin-resources-what-went-wrong-1.4038838
d. In Reversal, Lexin Admits to Breaking Environmental, Industry Rules
Calgary Herald. July 10, 2017
http://calgaryherald.com/business/energy/lexin-agrees-it-breached-environmental-industry-rules
e. ERCB Decision 2005-060 Re Compton Petroleum Corp. Application to drill
six critical sour gas wells – SE Calgary area 22 June 2001)
http://elc.ab.ca/Content_Files/Files/NewsBriefs/EUBgiveconditionalgreenlight-Vol20-3.pdf
[excerpt}
For Compton’s well applications, the calculated EPZ radius was 11.94 km during the drilling phase and 14.97 km during the completion phase. It was estimated that more than 250,000 people lived and worked within the calculated 14.97 km EPZ.
_________________________________
“Now, 7,648 cracks have developed in the dam’s machinery, according to the government, because of substandard steel and inadequate welding by Sinohydro.”
Would that be the same steel that was shipped to Canada….relabeled as “made in Canada”…and sold to the US?
…that Trump was fussing about?
….why yes, yes it would
Ah. If only…
Ha ha, I know what you’re thinking 😉
If you are thinking of who I’m thinking of, that yahoo was almost President.
No sweat, Ecuador has had a lot of practice just kicking investors out even the good ones. They will declare they were defrauded and will sue China through a ‘competent’ Ecuadoran court. China will be the big loser if it doesnt deal with it since they put their Latin American resources at risk. Ecuador doesnt need China.
They got screwed by the AGW nonsense and propaganda, then screwed by the Chinese and bribery. They also tried to screw unto others by suing Chevron.
Renewables, the gift that keeps on screwing. Rescrewables.
Apparently Ecuador needed Julian Assange, on similar grounds to the dam, with apparently similar results.
Once you get the Chinese in, you can’t get rid of them.. ahum!
Couldn’t happen to nicer people!
An interesting related article:
Six Ways China Uses Economic Villainy to Edge Out Competitors
https://www.breitbart.com/national-security/2018/12/25/six-ways-china-uses-economic-villainy-to-edge-out-competitors/
Obvious answer for Ecucador is to try the Chinese who bribed the officials and fine the Chinese government equal to the amount the Ecuadorians owe. Debt canceled.
China colonizing South America. Who would have thought it. I can see the deployment of the US Pacific fleet in five years time to prevent a wholesale takeover.
I was reading this and thinking what natural resource are the Chinese looking for, have secure mining rights to or have free access to it. The answer;
“To settle the bill, China gets to keep 80 percent of Ecuador’s most valuable export — oil — because many of the contracts are repaid in petroleum, not dollars. In fact, China gets the oil at a discount, then sells it for an additional profit.”
As far as I can tell, this happens all over the world, esp poor countries in South America and Africa (Ethiopia).
“esp poor countries in South America and Africa (Ethiopia)”
Perhaps we can also say esp. African Countries with Marxist-friendly governments. e.g. South Africa, with gold, platinum, chrome, iron etc. etc is not poor, in spite of being poorly run.
Not all Chinese hook-line-and-sinker projects are “Green”; just look how Sri Lanka and Pakistan are struggling with their debts to Xi. The common angle is sure profit for China, question marks for the host country. One secret contract for Pakistan’s Gwadar port project showed that 91% of any income goes to China, 9% to Pakistan. Next is strategic value: surround India and access the Persian Gulf easily.
The Chinese are also building coal power stations in Pakistan openly.
Red China is about as Green as Red.
I don’t believe that environmentalism played any part in this project. Indeed many self-proclaimed environmentalists are against hydro.
This is a straight case of fraud by China aided by corrupt Ecuadorian officials.
As I see it Ecuador has 2 grounds for declaring the contract void:
1. It was obtained by bribery, witness the convictions of the Ecuadoreans involved.
2. The dam is defective.
China cannot contradict either of those grounds and there is little it could do if Ecuador voided the contract.
Ecuador is a beautiful, potentially prosperous and self-sustaining country ruled since attaining independent sovereignty in 1820 – 1830 by the usual Latin American cabal of hidalgo creeps-and-thugs.
Unless and until Ecuador’s long-suppressed population of mixed genomic heritage (average 52.96% aboriginal, 41.77% Southern European, 5.26% Sub-Saharan African), reigning oligarchs doom the country to false-promise collectivist immiseration. If ChiCom debt-peonage doesn’t spark radical repudiation of Quito’s festering backroom deals, it’s hard to think what will.
check this out
https://www.zerohedge.com/news/2018-12-24/us-navy-could-abandon-major-israeli-port-after-chinese-takeover
usa mega mill per yr to israel mustnt be enough? tsk tsk
“check this out”
Once upon a time, back in the good old days, communists (you can call them Marxists etc. if you prefer) hated ‘capitalists’ and would, when they could, hold a revolution, kill as many people as possible, seize all private companies and properties and then proceed to run the entire economy with central planning, into the ground.
Now, all of a sudden, the communists have ‘embraced’ capitalism and things are now run on business lines so we’re all good, right?
Well superficially it certainly looks like it. Lots of shiny new buildings etc. However, the central government still owns the means of production. In essence it is a holding company that owns all the companies in the state.
So anyone contracting with a company owned by a communist state is in effect doing business with that state’s government.
Of course, such negotiations would be greatly facilitated if the negotiating company just happened to have on its team one or two true believers in the Marxist cause. (And if they didn’t realise they had them, so much the better.)
At least that’s how it seems to me.
No court would hold a company liable for a contract that was entered into as a result of bribes given by the counter-party to the contract. Ecuador’s courts should nullify the contract.
Oh boy; always trust the NYTimes; they never lie or have an ax to grind.