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Doing business with China requires tight, transparent rules – US War College Professor

Research Professor of Latin American Studies at the US War College Strategic Studies Institute, Dr Evan Ellis delivering his lecture on “Transnational organised Crime and Regional Security Dynamics in Guyana and the Caribbean” at the Education Lecture Theatre, University of Guyana.

Guyana should ensure there are tight regulatory frameworks when dealing with Chinese investors to minimise the possible bribery of public officials, Research Professor of Latin American Studies at the US War College Strategic Studies Institute, Dr Evan Ellis stated recently.

Delivering the 11th Vice Chancellor’s Renaissance Lecture on the topic “Transnational Organised Crime and Regional Security Dynamics in Guyana and the Caribbean”, Dr Ellis noted that while there is still “enormous influence” of US-based multinational corporations in Latin America there is also an “enormous amount of commerce, loans and, increasingly, investments” from China.

“What I worry about is that as countries engage with China, which is inherently not a bad thing, … you have to have …transparency because what transparency allows is that when the leaders, as they are inherently tempted to do, want to sign the deals that benefit them either through side payments or because their brother-in-law actually gets the concession to run the deal to support or to supply the Chinese company with food or whatever, that those who see the deal and are not part of it tend to politically elevate their judgements,” Dr Ellis said.

He said the state-controlled and Chinese-influenced companies recognise the importance of dominating the value-added chain and creating structures through institutionalised partners to ensure power, money and capital to flow to them.

Saying that transparency operates as a “brake” on corrupt benefits, Dr Ellis recommended that Guyana put in place “strong processes” instead of merely one man travelling to China and making key, binding decisions. “If you have an open competitive bidding with a good technical review of the provisions of the deal and you are not signing these government-to-government deals after a few drinks of rice wine and a good meal some place in Shanghai, then you maximise your chances that you are going to advance the interest of your country out of the deal,” he said.

He noted that Guyana has seen the presence of China Harbour Engineering (CHEC) in the expansion of the Cheddi Jagan International Airport and the Pegasus Hotel expansion, Shanghai Construction Group that built the Marriott-branded hotel, Huawei in Information Communications Technology and other entities for the importation of goods.

Dr Ellis said the increasing presence of Chinese is impacting the political dynamics of other aspects of the society such as the relationship with Chinese-Guyanese companies and challenges and language barriers that law enforcement agents face. “You’ve seen some of the ways in which other types of concern over crime or challenges for the Guyanese Police Force to understand and penetrate those Chinese communities and some of those illicit activities or money laundering that may be occurring within these communities,” he said.

Apart from an estimated 3,000 Venezuelans and 20,000 Guyanese-Venezuelan migrants who had fled the worsening humanitarian and political crisis in that South American nation, Dr Ellis said the Chinese construction projects have also been major sources for human trafficking. He said Trans-Pacific organised crime was emerging as a result of increasing illicit Chinese commerce, financial ties, people-to-people ties and new flows of container traffic to the Caribbean.

“One thing that’s happened with that is that you have illicit flows that go along with that and so we have Chinese construction projects and migration, you have more Chinese human trafficking, for example, that come in through the Caribbean and other places. You have (an) expanded role of China as a supplier of precursor chemicals,” he said.  They include precursors for methamphetamine as well as fetanyl.

Also flagged are Chinese involvement in illegal mining and logging as well as money laundering possibly through the China Construction Bank and the Industrial and Commercial Bank of China Limited that have been doing a lot of branch banking, trade and money changing in Latin America, Dr Ellis said. “Those financial ties make it easier for those who want to launder money to use Asian banks to launder money and if you think that your police forces and others are already overwhelmed trying to track money within Latin America, trying giving them the capabilities to reach out to the technical colleges in China to follow the money when it goes into an uncooperative continental China-based bank in which everything is done in Chinese,” said the US War College professor.

He noted that UnionPay International, a Chinese provider of bank card services, is available in Guyana.

Dr Evan Ellis

He remarked that in Guyana there is an “interplay” with not only the Chinese but also the Russians through the bauxite company, Russian Aluminium (RUSAL). “It’s not just about the United States versus everybody else. Increasingly, Latin America is a complex multidimensional space so, for example, the Russians, as in the case of the mining industry, find themselves in competition with the Chinese. In other cases, the Russians find themselves complementing the Chinese so that the economic activities of the Chinese do help to create a space in places like Venezuela in which the Russians such as Rosneft (a Russian petroleum company) can operate,” he added.

Dr Ellis added that the prospects for inking good deals with “credible” Chinese and Russian companies would be participation in legitimate open bidding in Guyana. “To me the important thing is technically competent, effective, transparent management of these deals and I think if you have that, you would tend to sort out bad actors who are not qualified, who don’t have legitimate things that are looking to basically circumvent the process and cutting side deals that are not to the benefit of the country,” he said.

Cash-based informal economy

The Latin American Studies Professor also pointed out that legitimate businesses and formal communications infrastructure such as trucking companies, airline flights, roadways, container traffic and the transfer of goods provide an avenue for criminals and the informal economy to function. He said not all transnational organised crime is narco-trafficking but includes illegal mining, kidnapping, extortion and human trafficking based on their various revenue models and dismantling by law enforcement agencies.

Dr Ellis suggested that Guyana’s familiar cash-based (informal) economy create a fertile ground for other types of illegal activities to take place. “If you have people typically… working on a cash basis, those people are available to participate in the activities whether it is to act as bodyguards or to act as enforcers or act as informants or whatever the other part-time or full-time role happens to be,” he said. In terms of keeping dirty money under the radar of regulatory and law enforcement agencies, Dr Ellis said the cash-based economy does exactly that. “If you could track everything through electronic transactions, it would be pretty hard to hide millions and billions of dollars of income but when it comes out of that cash economy that’s when it becomes very difficult to follow the money trail,” he said.

In 2017, findings in a study, “Estimating the Size of the Informal Economy in Caribbean States” conducted by Caribbean economist Dr Amos Peters, suggest that Guyana’s informal economy is 35 to 44 per cent, the second largest to Jamaica’s 35 to 45 per cent.