By Jin Wan and Yuchen Ge
As the largest creditor of Ecuador, China provides around 60 percent of this South American country’s financing and funds numerous loan deals, which are usually underwritten and paid back using the proceeds made from the support given to the development of the country’s extractive industries. Along with financial deals, today there are a variety of Chinese companies operating in Ecuador, active in sectors such as oil, mining, and engineering. In terms of data, it has been reported that by the end of 2017, China and Ecuador had signed more than 12.32 billion dollars’ worth of project contracts. Behind this boom in economic activity, however, Chinese companies are facing serious challenges to their work. Public media such as The Nation, one of the oldest magazines in the United States, have often criticized the Ecuadorian government for selling the country’s environmental and economic future to China. And locally, NGOs and indigenous groups have regularly reacted in public in opposition to this type of engagement.
Facing these difficulties and pressures, Chinese companies in Ecuador are now relying on the Ecuadorian government for help. During the course of our research, for example, a leading representative of Andes Petroleum explained that they “have a good relationship with the government. But not with the NGOs.” The source also explained that they choose to handle most conflicts by employing the power of government authority. However, depending solely on government support may not be appropriate for a country such as Ecuador where civil society and NGOs are noteworthy players who are both active and influential.
As prominent social stakeholders, NGOs have strong appeal among the Ecuadorian public. Moreover, their protests against oil and mining programs usually have a remarkable impact on Chinese enterprises. In 2013, NGOs including Amazon Watch and Pachamama along with other environmental and indigenous rights activists gathered outside the Oil and Energy Conference in Quito to protest against the 11th Round, an oil-licensing auction for petroleum blocks in Ecuador’s Southern Amazonian area. The contradiction between the oil auction and the constitutional commitment to protect the environment and indigenous groups received public concern and international attention, resulting in the unsatisfactory outcome for both the government and oil firms: Eight out of the twenty-one original blocks for auction were removed and only four blocks gained bids by the end.
Historically, this situation is not without example or precedent. In fact, long before Chinese involvement, many other international companies also did not initially engage with local NGOs during their global expansion and it was only later that they learned the value of such an approach. For example, in 2006, Apple received global criticism for the poor working conditions found in the manufacturing facilities of its partner Foxconn. This led the company to form a collaboration with partner firms and NGOs to launch a project in Malaysia to help local companies improve the management of foreign employees and provide legal and educational aid to workers.
Chinese companies have been learning this as well. In 2011, under the objection of various environmental NGOs in Yangon, the Burmese government decided to suspend the Myitsone Dam project. China Power Investment Corporation, one of the project’s main stakeholders suffered a loss of more than 2 billion dollars. Since this incident, Chinese companies began to realize the necessity of communicating with local NGOs.
In Ecuador, Chinese companies should probably adopt such a new model of business development and learn to engage in civil society and people-to-people exchange. This may include addressing the following issues:
First, they need to realize that many NGOs are not “anti-China,” nor “anti-development,” but are simply concerned about finding solutions to specific issues. Therefore, there is room for achieving mutually beneficial outcomes through dialogue and engagement. Community development, for instance, is something Chinese companies should address in Ecuador. Harmony with local communities can help corporate projects advance more smoothly, and this is an issue that indigenous groups and other types of Ecuadorian NGOs regularly pursue. Based on this commonality, there is potential for dialogue between the two sides and if the right approaches are taken, it is foreseeable that the well-being of indigenous communities can be promoted by Chinese companies in Ecuador.
In terms of practice, Chinese companies should set up dedicated departments in their corporate structures to facilitate conversation with NGOs. Having a contact person within the company whose role is to interact with NGOs would enable those who are interested in communicating with Chinese companies to do so trouble-free, which is something local NGOs currently struggle to achieve. “Maybe we sent five or six letters to the embassy, the state, and also enterprises. But it’s really, really difficult to have directions about these actors,” said a worker of the Center of Economic and Social Rights (CDES), an Ecuador-based human rights NGO.
Finally, actions should be taken to address the lack of trust toward Chinese companies in the country. Building legitimacy and good relations could be achieved through meaningful conversations and cooperation with domestic and international NGOs. Take China House for example. It is a Chinese NGO aimed at helping Chinese have dialogue and maintain a good relationship with developing countries. For Chinese enterprises which have already had a place in business but fail to gain trust from local communities in Africa, China House helps them conduct research and organize activities concerning corporate social responsibility, such as programs of poverty alleviation and wildlife conservation. There is a possibility for such firms to integrate into local communities with the assistance of China House.
China and Ecuador could benefit from each other through cooperation. Dialogues at a people-to-people level could better ensure that the development gained is for both and for all.