China’s engagement with Trinidad and Tobago
posted by R. Evan Ellis on March 25, 2019 - 12:00am
This report is originally published at the Global Americans.
From March 18-22, with the help of the U.S. State Department, I had the opportunity to travel to Trinidad and Tobago to speak with businessmen, academics and others regarding Chinese activities in Trinidad and Tobago. My visit coincided with an important meeting on Venezuela between President Trump and Caribbean leaders working to bring a peaceful end to the repressive Maduro regime. Trinidad and Tobago’s Prime Minister Keith Rowley, who strongly objects to international efforts to ensure a democratic outcome in Venezuela’s spiraling crisis, was notably not on the guest list.
The increasingly negative tone of the once-close relationship between the U.S. and Trinidad and Tobago coincides with an expansion of the Caribbean country’s economic, political, and security relationship with the People’s Republic of China (PRC), including numerous ongoing Chinese works projects. These include a $500 million Chinese-built drydock and $102 million industrial park in La Brea, significant Chinese positions in the telecommunications sector, gifts of hundreds of police motorcycles, purchases of Chinese buses, and rumors of the PRC acquiring the defunct Petrotrin refinery in Trinidad and Tobago. While the nation is still a functioning democracy, the Rowley regime’s embrace of easy Chinese money, as well as the increasingly dangerous and unpredictable regime in neighboring Venezuela, raises concerns about oil-rich Trinidad and Tobago, strategically located at the entrance of the lesser Antilles. If unchecked, China’s expanding engagement in the country risks leaving a series of economic white elephants and leaving the country under a heavy debt burden. But there are steps the U.S. can take to help.
The PRC-Trinidad and Tobago relationship
For more than half a century, Trinidad and Tobago has been a center of Chinese attention in the Caribbean. In June 1974, it became one of the first nations of the region to diplomatically recognize the PRC. It was also one of the first to embrace multiple Chinese construction projects, including the Brian Lara cricket stadium (built by Shanghai Construction Group, initially for the 2007 cricket world cup, but not fully completed until a decade later, in May 2017), the refurbishment of the St. James police station, the landmark National Academy of the Performing Arts in Port of Spain, the accompanying Southern Academy of the Performing Arts in San Fernando, the Shanghai Construction-built velodrome and aquatics center, the South terminal of the Piarco International Airport (renovated for the Summit of the Americas, which Trinidad and Tobago hosted in 2009), and the Couva Children’s Hospital (whose completed shell remains unused).
In the energy sector, in 2011, China Investment Corporation (the PRC sovereign wealth fund), invested $850 million to acquire a 10 percent interest in Atlantic LNG.
Beyond business dealings, the PRC established its second Confucius institute in the region at the University of the West Indies St. Augustine campus. Such institutes, of which there are currently six in the Caribbean, are the official PRC vehicle for the teaching of the Chinese language and the promotion of Chinese culture, employing PRC professors funded by the Chinese government. Trinidad and Tobago was also the first government in the region to buy a major China-built military ship. Its capital, Port of Spain, was chosen by the Chinese government to host bilateral meetings with nine Caribbean leaders, including the country’s Prime Minister, when then newly-elected President Xi Jinping traveled to the region in June 2013.
Building on this strong base, PRC political and business ties with Trinidad and Tobago have continued to expand over the past two decades, even with alternation in power between the country’s two major political parties. Today’s numerous PRC-built public buildings and other infrastructure projects are generally considered to have started with Prime Minister Patrick Manning and his People’s National Movement (PNM) government (2001-2010). They continued to expand when the PNM was replaced by the United National Congress (UNC) coalition of Kamla Persad-Bissessar in 2010, and grew even more when the PNM returned to power under current Prime Minister Keith Rowley.
Although far removed from trade routes to Asia, in May 2018, Trinidad and Tobago became one of the first nations in the Caribbean to join the PRC “Belt and Road Initiative,” signing a memorandum of understanding whose content and commitments were never made known, presumably to strengthen the nation’s tenuous ties to Chinese markets, loans, and investments. During Prime Minister Rowley’s May 2018 trip to the PRC, where he signed the agreement, he secured a commitment from the Chinese to purchase a symbolically important albeit unspecified quantity of paving material from the local Lake Asphalt corporation to pave the runways of the new Beijing airport.
Since late 2018, the pressures on the Rowley government to work with Chinese firms have grown through the closure of the Petrotrin refinery. The closure put approximately 5,200 people directly employed by the facility out of work in the vicinity of country’s third major city, San Fernando, and indirectly affected thousands of others.
In the context of the government’s scramble to find jobs for the thousands put out of work by the closure of Petrotrin, it has made a commitment to China Harbour Engineering Corporation to build a $500 million dry-dock facility in La Brea, part of the area affected by the Petrotrin closure. Although China Harbour already has a major presence throughout the Caribbean and representatives in Port of Spain, the drydock would be its first major project and opportunity to establish a foothold in the country.
Expanding engagement and dangerous precedent
As has occurred with other governments which have hastily agreed to incur debt in contracting Chinese firms to build public works projects—most famously the Sri Lankan port of Hambantota—it is not clear whether the location and other characteristics of the drydock will be sufficiently attractive for shipping companies to do major repairs at the new facility. On the other hand, the China Harbour commitment to fund 30 percent of the project with its own resources raises the prospect whether it has a plan in coordination with the Chinese shipping line COSCO or others to do their work there.
Beyond the drydock, the Rowley government is also discussing work with Beijing Construction and Engineering Group (BCEG) (already involved in the Curepe highway interchange project), to build an industrial park, “Phoenix Park Industrial Estate,” at nearby Point Lisas. In exchange for the government’s payment of approximately $104 million to BCEG to develop the site, financed by China’s Import-Export Bank, BCEG has suggested that it could attract 10 major PRC-based companies to set up operations at the site, and possibly bring as many as 60 Chinese firms to the site over the long term, generating up to 4,500 jobs. It is not clear, however, that after BCEG completes the work and the Trinidad and Tobago government incurs the debt, the promised Chinese investors will materialize, or whether they will require the government to grant them special tax incentives and exemptions from labor and other laws to come to the country.
The Trinidad and Tobago government has previously tried to attract Chinese industrial investments, and such attempts have ended badly. In 2008, it secured a $400 million financing commitment from China Ex-Im bank for the $600 million project to establish an aluminum smelting operation, Alutrint, and the Chinese brought on 200 workers to advance the operation. The project was cancelled in 2010, however, when the incoming UNC government did not find that the project complied with environmental requirements. While the Rowley government has suggested that some kind of Chinese aluminum operation may still be possible, the Chinese have a $100 million possible claim for damagesarising from the prior ill-fated project.
If the proposed Phoenix Park industrial park does succeed in attracting the hoped-for Chinese companies, they would likely use the nearby port of Point Lisas to import factor inputs and export products. The expanded volume of port throughput, and its use by Chinese firms, in turn, could tempt the Chinese state-owned shipping company COSCO to consider expanding the service it currently offers to Port of Spain to also make a stop in Point Lisas, competing for the new business with CMA-CGM and smaller shipping companies currently servicing the port.
Beyond these two key projects, the Rowley government has also committed to contract Shanghai Construction Group (responsible for many of the previously mentioned buildings and infrastructure projects), to build a new 540-bed wing for the Port of Spain General Hospital, to replace one damaged by a recent earthquake. Work on the new wing is scheduled to begin in September 2019. Shanghai Construction is currently in the midst of constructing its new regional headquarters in Port of Spain, conveniently located next door to a U.S. Embassy residence.
As has occurred elsewhere in the Caribbean, the Trinidad and Tobago government also hoped to contract the Chinese firm HNA, or other Chinese companies, to build a 5-star, 750-bed resort in the Golden Grove area of Tobago. The project was seen as particularly important to attract tourism in the less-developed island of Tobago, where one government-built hotel, the Magdalena, has languished for years after losing its brand-sponsor, Hilton. While the Trinidad and Tobago government signed a Memorandum of Understanding with the luxury hotel brand Sandals to guide development of the hotel, the latter decided in early 2019 to withdraw from the project, citing negative publicity.
With respect to the petroleum sector, the shutdown of the Petrotrin refinery has also created the possibility that the government may reach out to Chinese banks to help secure $1.4 billion in loans to refinance looming bond payments for the refinery, including an $850 million bond coming due in 2019, and a $750 million bond coming due in 2021. There have also been rumors of Chinese interest in acquiring the refinery itself, which has some sophisticated capabilities, important for fully refining the heavy, high-sulfur oil produced in neighboring Venezuela. Senior oil industry executives consulted for this work could not, however, confirm that the Chinese were exploring that possibility.
In the telecommunications sector, the Chinese firm Huawei, as well as its Chinese rival ZTE, has established a strong position in the Trinidad and Tobago market. Huawei performs infrastructure work for the Irish telecommunications provider Digicel, as well as for TSTT, in which the Trinidad and Tobago government is the majority (51 percent) partner. Huawei has also been successful in selling its smartphones and other telecommunications devices in the local market. Thus, in terms of both phones and the lines that carry their data, virtually all sensitive, proprietary and personal data transmitted by Trinidad and Tobago government personnel, local and foreign businessmen, and others in the country, passes through Huawei hardware at some point in its journey.
In the transportation sector, beyond the COSCO shipping service to Port of Spain, and the 2009 modernization of the Piarco airport, the government and Caribbean Airlines have signed a cooperation agreement with China’s Hainan Airlines, which would make Trinidad and Tobago more accessible from the PRC for Chinese officials, businessmen, and tourists.
With respect to consumer products, the Chinese automobile and truck company Great Wall has long had a presence in the country, while auto and truck makers Foton and JAC have, more recently, established very large facilities south of Port of Spain. Despite such advances, however, Chinese cars and trucks have not yet begun appearing on the streets of the country in significant numbers. In parallel, the Chinese bus manufacturer Higer has sold a limited number of vehicles to Trinidad and Tobago, with an order for 300 more Higer busesreportedly in the works.
In the defense and security sector, the Trinidad and Tobago Defense Force was the first in all of the Western Hemisphere to purchase a Chinese-made military ship, an Offshore Patrol Vessel. In November 2018, the Trinidad and Tobago Police Force received a gift of 250 Chinese motorcycles, although it is unclear where or how they are being used.
Growing PRC-Trinidad and Tobago state-to-state and business ties are affected by the sizeable ethnic Chinese community whose roots in the country go back more than a century. As with elsewhere in the Caribbean, that community is generally respected, but has limited engagement with other components of Trinidad and Tobago society beyond the contact with the non-Chinese community through its restaurants and shops, known for their long operating hours and reasonable prices. Indeed, a public event that I attended in San Fernando, sponsored by the local Chamber of Commerce, was not attended by a single businessman of Chinese descent, even though Chinese Trinidadians reportedly make up approximately 20 percent of the greater San Fernando population.
As has occurred elsewhere in the Caribbean, the importation of Chinese workers by PRC-based construction companies on temporary work visas to support their projects appears to have contributed to a substantial increase in the number of Chinese in the country, with many incorporated into relatively enclosed Chinese communities into which the Trinidad and Tobago authorities have almost no visibility. Trinidad and Tobago-based analysts with whom I spoke during this and prior visits expressed concern over gambling and other illicit activities that occur in some Chinese establishments. Illicit activities within the Trinidad and Tobago Chinese community also include extra-official versions of the national lottery draw game Play Whe (with money collected by, and paid out of Chinese shops without paying the associated national taxes), as well as the character-based Chinese game-of-chance “Wei Wei.” Some consulted for this work suggest that such gambling plays an important role in laundering money (particularly U.S. dollars). Perhaps even more troubling, the February 2019 discovery of a prostitution ring involving 19 Venezuelan womenrun out of a high-end Chinese establishment suggests that Chinese criminal groups, previously isolated from non-Chinese Trinidadian society, may be entering new areas of illicit business, such as the exploitation of the estimated 60,000 Venezuelan refugees currently in the country, through prostitution and other activities.
Implications for the U.S.
Trinidad and Tobago’s deepening engagement with the PRC needs to be on the radar of U.S. policymakers in Washington, particularly as the incumbent Rowley government engages in increasingly bombastic rhetoric and positions increasingly unhelpful to the maintenance of security and rule of law in the region—particularly the Maduro regime and its associated criminal actors and armed groups in Venezuela.
It would be fruitless and counterproductive for the U.S. to prevent Trinidad and Tobago or other countries from doing business with the PRC. The U.S. can, however, expand the attention given to this strategically important Caribbean country. The U.S. can also help strengthen the country’s capacity to negotiate effectively with the Chinese (and others), and to make smart and financially well-grounded decisions that help the Trinidad and Tobago government leverage the opportunities that loans and investment from and China and others can provide, to ensure that the projects contracted most effectively advance national development objectives.
U.S. help, if respectfully offered and accepted by the Rowley government, could include expanded support for programs to help the country most rationally plan a logical series of investments, grounded in sound business cases and objective value analysis. The U.S. government can also expand programs to help the Trinidad and Tobago government more effectively conduct open competitive procurement, including the evaluation of the legal and technical aspects of proposals and contracts by Chinese and other companies.
Beyond such initiatives, the U.S. should continue to encourage the Trinidad and Tobago government to maintain transparency in its negotiations, to ensure that the terms of the deals that it makes reflect the best interests of the people of the country, without side benefits to persons affiliated with the negotiators. The U.S. can strengthen the capabilities of the Trinidad and Tobago government to monitor compliance with the agreements achieved, including the greatest possible number of jobs for residents of the country, adherence to national labor laws, and compliance with environmental regulations and the technical terms of agreements to ensure that the performance of the contract produces the expected benefits to the country.
Finally, at the political level, the U.S. and Trinidad and Tobago may wish to consider a reset of their increasingly tense relationship. A visit to the country by senior U.S. officials such as Secretary of State Mike Pompeo, or U.S. Trade Representative Robert Lighthizer, accompanied by respectful, but frank dialogue, could be an effective way to start.
The U.S. is not only strongly connected to Trinidad and Tobago by ties of geography, commerce and family; it has been a close partner to the country for far too long for the relationship to degenerate through escalating populist rhetoric and recriminations that might push Trinidad and Tobago to deepen its embrace of the PRC in ways that would neither be beneficial to the United States, nor for the people of Trinidad and Tobago.