A huge fireworks display, along with pyrotechnic flower blooms and multi-coloured streamers were the crowning glory of a party which boasted Lenny Kravitz as a headliner and featured a speech by the Prime Minister. The party was to open the Bahamas’ biggest resort – Baha Mar, 1000 acres in size, with 2,200 hotel rooms, and a 100,000 square foot casino, the development has boosted the island’s GDP and directly led to the expansion of the country’s international airport. Behind the scenes of the party preparations workers from the China State Construction Company were adding the finishing touches to the buildings. Who provided the money for the construction? It was China’s EXIM bank. The Bank is second only to the mighty China Development Bank in terms of backing Chinese companies overseas. The resort was built for US tourists, but very much represents China’s expansion into that country’s backyard.
Aside from Baha Mar China has visibly stepped up its presence across the Caribbean region in recent years, for a region economically dominated by the USA, Chinese interest is an intriguing development. One motivation could be the fact that the region has a large number of countries such as Haiti, St Kitts-Nevis, St Lucia and St Vincent which recognise Taiwan, not the PRC. However China and Taiwan have had an informal agreement not to “poach” each other’s countries. President Xi reportedly offered nations in the region $3 billion in loans (although this pales into comparison to the $40 billion lent to neighbouring Venezuela – which I will examine more closely in the future). However, there are few strategic resources China requires and the regions’ markets are tiny in comparison to other parts of the world, but perhaps this all underlines the fact that the Chinese are truly global in their reach.
Jamaica recently signed a $340 million deal with the Chinese EXIM bank to fund the Jamaica Development Infrastructure Programme (JDIP). The JDIP was set up to rehabilitate the country’s roads and bridges, but there have been accusations that the funds have been misused and the programme cost a lot more than it should have done. The Chinese EXIM bank have also been active in Guyana, financing $130 million to extend the country’s only international airport, which is seeing increasing demand thanks to the island’s gold and diamond industries and increasing tourist numbers
One country that does have resources that interest China is Trinidad and Tobago. The country has proven reserves of 13,257 billion cubic feet of natural gas and potentially double that in another basin. The US has been the main purchaser of this gas, but as it has discovered its own ample shale gas reserves, Trinidad and Tobago’s reserves will become less important, making China the perfect replacement customer. Indeed the China Investment Corporation recently purchased 10% of GDF Suez’s share of an offshore gas field.
Despite Cuba being initially hostile to a China which turned away from Communism, the two countries have developed strong trade ties, and under the leadership of Raul Castro the country is “updating” its economic model, to allow market reforms. China is of course the obvious country to take lessons from in this regard. Cuba is no export powerhouse, but China buys the island’s sugar and nickel and in return receives electronic goods and construction materials. However China seems slightly embarrassed by Cuba’s old fashioned socialism, perhaps a reminder of its own recent history.
Perhaps the most significant relationship is between China and the British Virgin Islands (BVI). Around 10% of all Chinese investment overseas originates from the BVI. The BVI has become the favoured jurisdiction for Chinese companies to “rest” their money for a period, before sending it home under the guise that it was a foreign investment, thus avoiding tax. Offshore shell companies (the BVI has 900,000 and counting), helps companies to hide assets and tax. The practice of using offshore entities makes it very different to measure China’s true level of FDI, as so many funds are funnelled through BVI and other “treasure islands”.
Caribbean countries are keen on Chinese interest in the hope it will bring investment, trade and aid, all of which is in major demand at time of budgetary constraints and when US interest in the region is perceived to be waning. Although China cannot supplant years of US domination of the region overnight, it can certainly provide some interesting competition.