Candidate Colmenares should tell the Ecuador dam story
Credit to Author: MARLEN V. RONQUILLO| Date: Sat, 23 Mar 2019 17:24:43 +0000
There is nothing wrong with foreign borrowing for developmental projects. The P8 trillion or so funding requirement by the ambitious “Build, Build, Build“ program of the Duterte administration cannot be internally generated, even with the expanded revenue base. And even with bond float after bond float.
On top of the seemingly insatiable public appetite for government-issued bonds, the infrastructure build-up has to have a foreign borrowing component. Emerging economies normally borrow to pay for their developmental projects.
But as senatorial candidate Neri Colmenares had stressed, there should be options other than what he described as the “onerous” and “one-sided“ loans from China.
Exhibit A, Colmenares said in a recent exposé, was the estimated P3.2 billion loan borrowed for funding the Chico River Pump Irrigation Project in the Cordilleras.
“Can’t we have other funding sources than China?” asked Colmenares. That question was perfectly valid, given the carved-in-stone conditionalities of the Chico River Dam project, which are, indeed, onerous once compared with the conditions imposed on loans granted by Japan and the richer countries within the European Union. The conditions cited by Colmenares were:
— Guaranteed repayment (the state provides the guarantee)
— High interest rates
— Preference for Chinese contractors.
With those terms uncontested, the Chico project would go to China CAMC Engineering Co., with repayment set at 2 percent a year, which is higher than what ordinary savings accounts of Filipinos earn from the local banks. Some Shylocks-cum-banks even have time deposit rates of just about 2 percent a year. The 2 percent a year is not a concessional rate by any standard, given that China’s supposed magnanimity was implied in the Chico River Project deal. To be fair, it is also not as high as what China charges for loans granted to African and South American countries.
There will be other costs on top of the 2 percent a year rate. A commitment fee of 0.3 percent and a management fee of 0.3 percent will add up to the levies of the China loan for Chico. The levies will add up to almost 3 percent a year, which is just a little bit lower than the unsecured car loans given to car-hungry Filipinos by the local banks, which are seguristas by nature.
The almost 3 percent rate, the state guarantees, and the Chinese contractor are not the most worrisome and troubling terms of the Chico River Dam loan. It was what Colmenares described as the “patrimonial property“ clause of the loan terms. Should the Philippines fail to pay the loan, China has the right to grab a piece of Philippine property to get payment. This is a troubling thing, given the experience of countries that obtained loans from China and failed to make payment. One of these prostrate countries is Ecuador, which a few years back obtained — let this sink in — a loan to build a dam in a remote jungle area near a place called Reventador.
It should have been Colmenares’s follow-through story after the initial exposé. The Coca Codo Sinclair Dam project in remote Ecuador should have been the red flag on the perils of contracting dam loans from China with the “patrimonial property“ rights cause .
This is story of the Coca Codo Sinclair Dam project in the jungles of Ecuador, according to public and news accounts on the project.
The China-financed and China-constructed Ecuador hydroelectric dam was made operational two years ago amid very high and hopeful expectations.
“The giant dam in the jungle, financed and built by China, was supposed to christen Ecuador’s vast ambitions, solve its energy needs and help lift the small South American country out of poverty,” reportage from the New York Times said.
Today, the report said , “ thousands or cracks are splintering the dam’s machinery. Its reservoir is clogged with silt and trees. And the only time engineers tried to throttle up the facility completely, it shook violently and shorted out the national electricity grid.”
It is also interesting to know which Chinese financing institution supplied the $1.7 billion loan for the Ecuador Dam — China’s Export -Import Bank.
The hoped-for hydroelectric marvel is now a useless piece of architecture, and it has buried Ecuador deep in debt. Just two years after its opening.
So what did China do to get payment for the useless, multi-billion dollar dam project high up in the Ecuador jungles? China now gets 80 percent of the most valuable export of Ecuador — oil. The pressure to supply China with Ecuador oil is now so intense for the small country that it is digging deep into the Amazon just to supply China with oil — the environment as a collateral damage for a major loan folly.
This is the story that Colmenares should now tell. China is free to grab a crown jewel of Philippine patrimony should the Chico River Dam project fail to pay for itself and payment to China comes due. It can grab anything, from the Malampaya to the Benham Rise.
Because China can. Under the “patrimonial property” clause of the Chico River Dam project, failure to repay allows China to get a piece of Philippine patrimony as repayment.
And what if the Chico Dam project suffers the fate of Pantabangan Dam, where the spire of the old church shows up during the dry months, the season the dam is rendered inutile? It will be a failed project, and we are used to such kinds of failure.
But what is carved in stone is this: China will demand payment. And if the government fails to pay, China can just expropriate one of our crown jewels as repayment.
This fact is worth noting. All the government leaders who brokered and pushed for the Ecuador Dam project during the time of former President Rafael Correa are now in jail, for extortion, corruption and other forms of malevolence.
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