» $10 billion spending spree will improve transit in Cordoba and improve branch railway lines. China expects to improve trade relations and open access to natural resources.
Expanding its effort to use infrastructure investments to spread its influence, the Chinese government has agreed to a $10 billion commitment to upgrade a series of intercity rail lines in Argentina and improve urban transit systems in Buenos Aires and Cordoba. Funds come from the China Development Bank and will require a 15% match from the Argentinian government.
This money will not contribute to to the construction of the Buenos Aires-Rosario high-speed line, a separate and currently delayed project.
The effort suggests not only that China is willing and able to contribute its national funds to foreign projects, but also that it intends to structure its investments as an alternative to the World Bank, a grant-making institution that since World War II has sponsored infrastructure in underdeveloped countries with the general aim of spreading Western economic interests. China announced in March that it was planning to invest in a series of transcontinental high-speed rail lines throughout Asia and Europe; in addition, the Eastern superpower has been upping its spending in Africa far above the engagement of any other country. China clearly hopes that new infrastructure abroad will help speed goods to its rapidly expanding domestic market and encourage the expansion of its own international business.
Thanks to talks between Presidents Cristina Fernández de Kirchner and Hu Jintao, Argentina will receive $4.35 billion to renovate three freight railroad lines, including $1.85 billion to improve conditions on the Belgrano Line, which links the country to Bolivia and is an important link for the nation’s agricultural producers. China undoubtedly wants to expand its access to Argentina’s productive farmland, and rail transport is significantly cheaper than road movements.
But China has also agreed to more than four billion dollars for the improvement of the Buenos Aires Subway and the creation of a four-corridor Metro in Cordoba — projects that provide no clear economic benefit to the latter country. This suggests that Argentina has agreed to giving China preferential trade treatment above and beyond the improved access to the country’s agricultural resources.
China, of course, does not have infinite resources so it won’t be able to promise similar spending in every country around the world. That said, its own extensive investment in its high-speed rail and urban rapid transit suggests that similar American projects could potentially find funding in Chinese hands. If U.S. companies aren’t able to provide adequate private sector support for construction programs, and if neither the federal government nor states themselves are able to develop infrastructure banks to advance such funding, foreign aid could be a realistic possibility.
This could be seen as a significant let-down for Americans used to thinking that we should be able to fund our infrastructure using our own funds. But the opportunity for expanded global trade could be an excellent opportunity for improvements in the U.S.; there’s no reason to be worried about direct investment from abroad if it makes possible the construction of resources that we couldn’t otherwise build.
Image above: Cordoba, Argentina, from Flickr user Javier de Cordoba
20 replies on “China Agrees to Major Investments in Argentina’s Rail and Metro Lines”
Is it known if this is an “investment” in the tradition sense (in which Chinese investment will be repaid, with interest)? It sounds more like some combination of foreign aid and international relations/trade promotion. If we knew exactly what is motivating the Chinese government in its overseas infrastructure investments, then perhaps we (i.e., the U.S) could figure out if we have projects that fit that model. Starting with Yonah’s suppositions about what is motivating China, should that give the US hopes for substantial Chinese investment in US transport infrastructure?
Well, seeing as no one has taken the bait, I’ll try to answer my own question. My guess is that China has both foreign relations (“economic imperialism,” to put it in stark, and somewhat unfair, terms) and traditional “investment return” motivations. In the U.S., there may be some toll road, seaport, freight rail, and high speed rail projects that could provide a reasonable rate of return and hence could attract Chinese capital. Of course, they’d be equally appealing to any other major infrastructure investor, unless there’s also another benefit to China (maybe promoting a Chinese industry such as high speed rail manufacture), so maybe China would make a larger investment or take a lower interest rate than some other investor. But probably only at the margin; they’re not stupid and they’re not going to rain money down on American projects just because we have a “need” for money. So I guess I don’t see Chinese investment being a game changer for the U.S.
It *would* be a game changer if the US would freaking *commit* to public trasnportation. China’s happy to provide, shall we say, “builder-financed loans” for constructing mass transit, probably at slightly-below-market rates, but we in the US still have to provide the long-term revenue source, get the projects approved for eminent domain and regulatory purposes, and *agree* to borrow the money from China. All hurdles which have not yet been passed by California (whose HSR China is quite interested in building), let alone anywhere else.
USA is said to be the most powerful country in every aspects including economy and military in the world, but now it has to beg for fund from China, a third world country, to build its transportation system?
Gives some hint that perhaps the USA’s reputation wtihin the US isn’t entirely accurate?
A more accurate assessment is that the US spends gajillions of dollars on military stuff and somehow can’t quite get its act together to do anything else right. Probably ’cause of the US Senate’s insane supermajority rules (see Krugman’s “We Are Poland” blog entry).
Dear China,
Send us somma that money for 30/10.
Sincerely,
Los Angeles
This is nothing new. The 1880s railway boom in Argentina was financed by British money; the 1900-1914 boom by French money. I hope China doesn’t expect to see their money come back. The British and French didn’t.
I see no facts that show proof of Jim’s comment. Most railways laid in Argentina were paid with grains sales to Britain and France. Although I am no friend of Peron’s economic policies, he realized more than the fair share had been paid, he decided to buy the railroad system at a huge deficit to the argentine state. Respectfully, Jim get your facts right before you comment on any other country’s affairs.
The rail line leading into Bolivia might one day head to the part in Bolivia that contains 50% of the world’s Lithium Reserives which is a very important part in high millage eletric car batteries and other high power battery powered things like camras and cell phones which China makes a ton of so it’s a fairly smart idea. Also they would be more willing to give China Lithium in return for this big investment instead of money which would work out better in the long run then short run.
We pay enought in taxes why can’t the US pay for it’s own roads and rail lines they did in the 1930’s and the 1950’s? I don’t think we should let China try to own anymore of our things they already own trillions in our monsterous debet.
“We pay enought in taxes why can’t the US pay for it’s own roads and rail lines they did in the 1930′s and the 1950′s? ”
A lot of it is going to pointless military spending. The US now spends more on its military than the ENTIRE REST OF THE WORLD COMBINED. For real.
I think that natural resources and access to them is behind China’s moves. It’s the raison de etre for their massive investments in Afghanistan right now as well.
This while the World Bank (and other development banks) are funding large scale programs of both intercity and urban rail in China. Interesting.
the US railroads were, in large part, financed by Europeans. some got their money back and then some, some didn’t. While the US pays a lot in taxes, it has no money. We spent it wars, failed social programs, and bailouts.
Actually, we didn’t spend it on “failed social programs”. The US spends damn near nothing on social programs, except for Social Security and Medicare. Social Security certainly hasn’t failed. Medicare certainly hasn’t failed.
Ocean Railroader, you hit the nail on the head, we don’t pay anywhere near the same amount in taxes today that we did in the 30s and 50s. Especially the mega-wealthy, whose tax rate has been cut in half. Want better infrastructure on par with the world’s great nations? Encourage your representatives in Washington to raise taxes on the upper class.
http://www.heritage.org/Research/Reports/2007/01/~/media/Images/Reports/bg2001/bg2001chart4_lg_1.ashx
If you think we are somehow less able to pay for infrastructure because tax rates are lower, you are wrong. Individual tax rates have a virtually meaningless contribution to how much government revenue is raised over the long term.
Rates are only part of the picture. If we have a 90% rate on people who earn more than a billion dollars per year, then we wouldn’t be making more revenues than if we had a 45% rate on people who make more than a million dollars per year. In other words, the general wealth of the nation…not just the mega rich, determine the more significant aspect of how much money the government has.
Heritage Foundation is not a legitimate research organization — it’s an agitprop organization run by, you guessed it, very wealthy Republicans. Their claims regarding tax rates are self-serving bullshit.
It is true that the general wealth of the nation is more important to government revenues than the tax rates on the megarich. It’s also true that 90% taxes on the megarich would provide many billions of dollars of revenue.
It’s also true that the megarich *spend less of their money* percentage-wise than poorer people. It’s also true that the faster money is spent, the richer the country is (this is the “velocity of money” concept in economics), because the money is getting used to make *real things* more often. It’s also, therefore, true that taking the the money of the mega-rich and giving it to the poor *increases the general wealth of the nation*.
And this effect is *huge*. This effect, in fact, may be large enough to be the primary determiner of whether the country is in recession or not — high tax rates on the rich == healthy economy. There’s a strong correlation.
I think it’s a mater of where the existing taxes are going to such as we are funneling tens of billons a month to the Middle East Wars which if we cut one of those fronts and diverted it to roads and railroads then we could fund our new transporation with the existing taxes.
This year’s war budget is $500 billion. Tell me you couldn’t do the same 10% cut on that budget that counties and states are doing all across the country this year.
China is a builder not a chaos initiator. Saddam Hussein, Bin Laden and Iran’s leader were all put into power by the USA.