Will China invest $30 billion in Haiti?

The People’s Republic of China is preparing to carry through with plans to invest a massive US$30 billion in developing Haiti’s infrastructure, including power plants, sanitation works, water systems, railways, affordable housing, and marketplaces, in an agreement that is expected to have a major social, economic, and developmental impact.

This week, workers have started to be contacted for the approximately 20,000 jobs needed to carry out the ambitious initiative, Haitian press has reported.

Here is further information.  To put the sum in perspective, Haitian gdp is about $8 billion at market exchange rates.

Comments

'To put the sum in perspective, Haitian gdp is about $8 billion'

But a Chinese presence in the Caribbean? Priceless.

Well...maybe.

I'm not sure how this actually serves their interests. They clearly aim to be a global superpower, and investing in Haiti is aligned with that is some vague sense, but what is the actual concrete benefit they get from a presence there?

I think it's quite likely that a lot of this Chinese investment, particularly in far-flung places, is going to looking pretty foolish in ten or twenty years. Here's hoping that the people of Haiti can benefit from the folly in the meantime.

My understanding is that the Chinese growth engine needs to build stuff, and this is stuff. Comparing it to Haitian GDP is completely wrong. Compare it to Total Chinese infrastructure spending worldwide.

Why don't they just break some windows and then fix them, then?

The idea of doing "stuff" as a driver of growth, where the "stuff" doesn't actually have to be useful in itself, is utterly discredited.

Note that I didn't make any comparison to Haitian GDP, either. A huge investment in Haiti relative to their GDP makes sense and in fact is needed...for Haiti. But I don't see the strategic interest for China here.

I don't pretend to know how China works, and who will ultimately prevail, perma-bulls or perma-bears.

But I think I can say that out of $2T, a $30B project is chump change.

1.5% of China's GDP is chump change? 1.5% of all the value 1.4 billion people produced in a year?

OK, maybe I went overboard with "chump change." Would you accept "minor allocation?"

"The idea of doing “stuff” as a driver of growth, where the “stuff” doesn’t actually have to be useful in itself, is utterly discredited."

I think you misread this situation. They aren't doing useless "stuff". The article doesn't say it's a gift, it says investment. It's quite possible that the Chinese are working a deal where there is a low but positive return to the investment.

From the article: "Last week, the Municipality of Port-au-Prince formally accepted the project's initial phase, which will begin with an investment of US4.711 billion targeting the country's capital, where Chinese investment will partner with Haitian companies to develop clean water and drainage systems, road infrastructure, sanitation projects, communications infrastructure, and a restoration of Port-au-Prince's old city."

@JWatts, with those words I was responding to Anonymous saying "the Chinese growth engine needs to build stuff, and this is stuff."

I doubt it's useless stuff, but it seems clear that the Chinese government is pouring more money into it than private investors would based on the expected return. As such, it amounts to a subsidy, probably for perceived strategic reasons, and I'm skeptical that the Chinese will realize the benefit.

"As such, it amounts to a subsidy, probably for perceived strategic reasons, and I’m skeptical that the Chinese will realize the benefit."

I agree, though it would depend on the size of the subsidy. China has a large amount of US treasuries earning around 2%. So the rate of return doesn't have to be very high to hit that benchmark.

Although, to your point, the risk is insanely higher.

"China Plans To Spend $2 Trillion On Transportation, Infrastructure By 2020"

https://www.chinamoneynetwork.com/2017/03/01/china-plans-to-spend-2-trillion-on-transportation-infrastructure-before-2020

Compassion, perhaps? The Chinese put a lot of money into poor countries and expect only good will in exchange.

If they are doing it out of charity, then great.

I don't think that should be underrated.

Or to buy votes in miscellaneous international organizations? They've used "investment" for that re: Taiwan. Or maybe not. Either way, I'm happy for Haiti.

The Caribbean basin is a fantastic source of bauxite/aluminum and some other basic minerals that China will need to sustain and extend its development.

They can buy everything they need on the market.

In a real crisis with the US, the supply would be cut off in any event.

Transforming the economy of one of the world's poorer nations, in the US backyard, is at the very least an interesting statement, which might make one or two other nations reconsider which of the US and China provides the better partner ?

Cuba helped bankrupt the Soviet Union.

Good luck with Haiti, China.

Haiti is smaller. And China is richer than the soviets ever were.

Cuba was a highly charged annoyance -- akin to a wasp nest 60 feet off your deck but not actually on your property so legally you can't do anything to remove it -- for decades, if not still. Just think of the bandwidth it took, the Op-Eds devoted to Cuba from '60 to '15 alone.

I highly doubt China gives a tinkers cuss for poor Haitians. You buy to get stuff you need, you buy to establish a presence (Qatar has PSG and now Neymar and Mbappe), and/or you buy for strategic reasons. Taiwan wants a weapons system, hey Haiti wants a used destroyer. Or maybe I'm cynical.

I don't know what they're looking to get from Haiti, I hope they really trying to help that country but for all the fuss about Chinese built infra-structure in Africa very little is said about how fragile those structures actually are. Chinese billions have poured into Angola in the last decade with the same purpose and a significant number of roads, rail-roads, hospitals, schools, bridges, housing projects and so on have very poor quality, a Chinese built hospital in Luanda actually collapsed when only 4 years old and to save face the Chinese government gifted Angola with a shiny new hospital "free of charge".

When you spend billions to build roads and schools that need to be rebuilt 2 years later you are not investing, it's a scam.

"a significant number of roads, rail-roads, hospitals, schools, bridges, housing projects and so on have very poor quality". Really? Where's your evidence?

a Chinese built hospital in Luanda actually collapsed when only 4 years old and to save face the Chinese government gifted Angola with a shiny new hospital “free of charge”. The government insisted that the structure be completed in time for elections. The Chinese never made that mistake again..

I live in Luanda.

Couldn't the US just sell its own basket case in the region, Puerto Rico, to China instead?

I'd pay China $30 billion to take Puerto Rico off our hands.

Nice timing, boys.

"Hurricane Irma carved a merciless path of destruction through the Caribbean, killing at least 12 people, leaving thousands of others homeless and plunging more than 1 million residents of Puerto Rico into darkness."

"killing at least 12 people": so about as bad as one serious pile-up on the roads.

Agreed. To dump PR now would be selling low. Wait a year or two until they get the lights back on.

I suspect 1 million PR residents are in the dark on any given day.

All the more reason to let China start pouring money into that bottomless pit rather than the U.S. And yes, "merciless" nature is classist, ableist, racist, sexist, etc.

Remember, most of China's massive "investments" in these developing countries will take the form of loans, not grants or equity purchases. For the most part, the projects will be required to use only Chinese outside contractors. Rather than address pressing current needs, they usually take the "if you build it, they will come" Field of Dreams approach to infrastructure, assuming future growth without study - which puts the ability of the governments of these poor nations to ever repay. This is how Russian "investment" led to a controlling interest in Venezuela's national oil company.

OBOR is mainly an attempt to buy both influence & assets with poor countries' own money. The only difference between it & a classic con game is the con artist leaves you alone once he cashes in.

"... which puts IN DOUBT the ability..." etc

What's the downside from Haiti's point of view? If the investments work then they pay China back. If they don't then they default. China can hardly take the Haitian assets back to China in that eventuality, and even if they did take over the governance of Haiti how will that be worse for Haitians than their current government. I guess the more worrying trend would be for the US if the Chinese did decide to put a navel base on the island, but in reality, given the trade between China and the US, I doubt they would want to cause such troubles.

If you default, we get the port and port facilities.

Maybe "the more worrying trend" is that this sort of top-down market socialism works over a long term and provides a viable alternative to capitalism.

I guarantee that taking money from one country and giving to another is good for that second country, regardless of whether it is capitalism or communism that is doing the taking and giving, so I doubt that is proof of anything.

Like the Marshall Plan?

"What’s the downside from Haiti’s point of view? "

This:

" For the most part, the projects will be required to use only Chinese outside contractors."

So, the Haitians don't have the locals to support and maintain the infrastructure improvements, let alone build new ones. At the end of the day, poor Haitians pay the Chinese government to pay Chinese workers to build something that generates a 30+ liability. If the Haitians had other work and this was a comparative advantage it would be just fine, but they don't.

Same with every Chinese investment project in Africa, the locals don't get any jobs/skills training, and the local despot gets a new airport to boost his popularity.

If they are lending Haiti a sum equal to almost four times its GDP, then I think it is indeed a fair bet that it won't be repaid. Not sure who is conning whom here.

There is a tendency to ascribe more rationality to Chinese decisions than we would to a Western investor. It is striking how many people have been impressed at the wisdom of China in buying up land in African countries, for example. Invest in immobile illiquid assets in a state like Madagascar, anyone? Not for me, thanks. Western investments in water and other immobile infrastructure in more advanced countries than Haiti has not always gone well. My guess is that the Chinese are simply the latest 'greater fools': not having yet been burnt enough to factor the default risk into their calculations.

"then I think it is indeed a fair bet that it won’t be repaid. "

At least. I would call it a certainly.

It's an opportunity to employ Chinese labor overseas, offload Chinese steel overproduction, and get another country to hate on Taiwan.

Think about how many schools or earthquake proof buildings could be built in western China with that money. But nah.

This is also an opportunity to bribe local officials, an asset that does not appear on the books, but is of lasting long term value.

So, when the next hurricane comes to Haiti, will the US or China be the one to mount the relief effort.

Hurricanes are more of an infrastructure feature in Haiti than roads.

Will the US be eager to go in and do a clean up of a country that moves in a different orbit. Haiti ought to think twice.

Just read the article. Looks more like a port project and sanitation project for Port au Prince for $5 billion. Looks like the interest is in ports. How's the Nicaragua canal coming.

I think the $30 Billion figure is pure marketing. The $5 billion is the real money and the deal will be structured to pay back a return on investment. Probably a small return, but with a high potential in intangibles.

So, this should be the definitive test for the "Big Push" model of economic development?

Do the Chinese have a naval base in the Atlantic ... yet?

Your first thought is "why would they want one"? But maybe that's the wrong question to ask about a nation looking to be regarded as a GWP (Great World Power).

Let them have one. A base in Haiti is a liability in a crisis with the US, not an asset. 5000 miles from China, within easy range of US power.

US has an alliance with Japan which provides land based protection for fleet units. Who is China going to ally with in this hemisphere?

Yes, as far as a military naval base, this would be a questionable investment. However, maybe it's going to end up as a commercial naval port in a country without onerous regulations.

It may not be the only reason, but Haiti is one of the handful of countries to formally recognize RoC (Taiwain) as the "real" China. I imagine if this investment goes through that will change.

If the U.S.A. isn't going to take care of its back yard, is it surprising that somebody else steps in?

I would have thought all those high-minded NGOs down there would have gotten around to a sewer and water system by this time.

I don't think any NGO is spending billions in haiti, high-minded or not.

the Chinese are expanding their influence... yesterday in African countries, today in Haiti, tomorrow where?
Haiti and oil and minerals, they just are not being exploited, for now...

the Chinese are expanding their influence... yesterday in African countries, today in Haiti, tomorrow where?
Haiti has oil and minerals, they just are not being exploited, for now...

Would Haiti make a good site for a Chinese naval base? Maybe China can claim the Caribbean the way it claims the South China Sea..

And maybe Trump can have The Haitian Missile Crisis.

I don't think there is a single thing that Haiti does or can make that China needs, perhaps except coffee. A military challenge to the US is the only reason. Haiti would need better infrastructure to support a naval base.

I suggest the US install missiles in Taiwan, in addition to a missile defense system in South Korea and Japan.

One outcome: full protectionist trade war with China. Trump is looking for an excuse.

Is Trump interested in a trade war with China. He has gotten much quieter on the subject of China since China has been granting him and his family trademarks.

This guy gets it.

As someone investing in Haiti with an NGO as well as businesses, I know that infrastructure development is vital in attracting nusinesses. Businesses equal jobs. Jobs provide growth and sustainability. I do not know China's motives. But I do know Haiti needs short term jobs as well as long term. This initiative provides both.

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