TT’s debt to China may move from $2.2 to $8.4 BILLION
On September 7 2018, Prime Minister Dr Keith Rowley agreed on a deal with China Harbour Engineering Company Ltd to build a transhipment port and dry-docking facility at La Brea in south-west Trinidad. The project will cost $3.4 billion, China will have 30 per cent equity of the port and will work alongside locals to run the facility. China Harbour’s master plan says the finished port will have two dry docks and 15 births, built on around 200 hectares of claimed land.
This is not a new project of the PNM government. The deal was first agreed on in 2014 under the UNC-lead Peoples Partnership, when the then Trade Minister, Vasant Bharath, signed two agreements for two Chinese companies to develop a La Brea port, dry-docking facilities and seven industrial parks throughout Trinidad. The 2014 agreement said that $5.1 billion would be accessed from the Export-Import (EXIM) Bank of China, $3.4 billion for the port and dry dock and the remainder for the parks.
It isn’t exactly known whether or not the seven industrial parks will still be built. Currently, government seems focused on the construction of the drydock and port valued at $3.4 billion, the same figure set aside for the port by the previous administration.
Bharath was asked by 868 Media as to whether or not the current government is bound by the original 2014 agreement to build the seven parks, but he gave no answer.
Why should questions be asked?
The port to be built, financed and partly owned by China is not unique to TT. Chinese port developments across the globe continue to grow as a part of the Belt and Road Initiative, which China will use to expand its markets in the Western hemisphere. According to China’s ministry of transport, Chinese companies have invested in 42 ports in 34 countries. Others put the number of ports closer to 70.
In many of those countries, China financed ports and once the borrowing nations failed to pay the lenders, Chinese shipping companies took hold of majority equity of the ports, this has come to be known as the Chinese debt trap. In most cases, Chinese companies take equity on a 100-year lease basis.
It should also be noted that it is also unknown if in the La Brea port agreements a deal was made as to what would happen if TT fails to pay China back within a certain time frame.
Chinese debt traps in effect
When China takes majority equity in ports it normally happens through one of two state-owned Chinese companies: China Ocean Shipping Company (COSCO) and China Merchants Port Holdings Company Ltd (CM Ports).
After the initial 2014 announcement of the La Brea port deal the Official Journal of the Caribbean Maritime Association published various concerns about the potential port on their website. One main concern mentioned was that the development “could affect the growth and potential of the nation’s existing ports” by diverting existing shipping traffic to the new port.
The concern that the La Brea port could slow down the growth of existing ports takes on a new dimension when one considers that it may eventually be operated entirely by the Chinese for their own profits as has happened in other regions.
Despite the apparent risk and evidence, developing CARICOM nations continue to accept loads of Chinese investments.
The state-owned firm building the La Brea port is preparing to build a similar port in Jamaica and it recently built a highway there valued at US$730 million, the company was also given land alongside the highway which they will use to develop residential and commercial buildings.
The Chinese government gifted a new national stadium to the Bahamas and has since invested nearly US$3 billion through EXIM Bank of China to put up the Baha Mar Resort.
In 2016 the then St Lucian prime minister Allen Chastanet was forced under public pressure to defend multi-billion-dollar deals with the Chinese government.
TT’s debt to China may take a $6 Billion leap
TT’s dept to China jumped an extra $4 billion with the addition of the La Brea port deal. Prior to the 2019 budget, debt to China was $2.2 billion that figure will sit at $6.2 billion with the port’s construction. If the $1.7 billion which is due to go toward the seven industrial parks is also added TT’s debt to China would jump a whopping $5.1 billion meaning TT would be $7.3 billion in debt to China. Another addition would still be necessary since in February 2019 it was announced that Chinese state-owned firm Shanghai Construction would be building a new hospital block for the Port of Spain general hospital valued at $1.1 billion. Another Chinese firm, China Railway will be making upgrades to the St James general hospital valued at $53 million. This puts TT debt to China at an estimated $8.4 billion.
TT’s economy ready for all that debt?
The state of TT’s economy is currently largely up for debate, UNCs are emphasising its weakness and PNMs stressing its strength, it is hard to decipher the truth. Yet, the fact that the main driver of TT’s economy, oil and gas, is in an unstable state and that the reserves are steadily decreasing rapidly cannot be ignored.
TT has already been warned by various experts about accepting Chinese loans, especially since they are using taxpayers money to pay them back. The taxpayers also have little to know information about the details of these said loans.