China Stakes Its Claim in Latin American Energy:

Cerrado grasslands. 74 BRI-designated projects such as the high-voltage transmission system to carry electricity from the Belo Monte Dam, the expansion of the port of São Luís and the creation of the Ferrogrão’s railway threaten to accelerate this trend. 75 The construction of new roads, canals, and railroads that move products to ports rank as major factors causing deforestation that increases GHG levels.” 76 Moreover, many Chinese-financed infrastructure developments and direct foreign investment projects threaten some of the region’s most biodiverse areas and indigenous territories, causing both environmental and social impacts. 77 To counterbalance environmental threats from China’s commodity-driven actions, some LAC governments have enacted environmental safeguards. For example, in 2008 the Central Bank of Brazil significantly enhanced its power to enforce environmental regulations. It changed rules so that projects with unpaid fines for environmental irregularities would no longer have access to public bank loan operations. 78 After facing international pressure, China has set up some environmental standards for its overseas economic activities. In early 2013, the Chinese Ministry of Commerce published voluntary “Guidelines for

Environmental Protection in Foreign Investment and Cooperation” for both public and private investments, regardless of how they are financed. 79 These guidelines provide a degree of moral authority for SOEs, but they are not binding. And they still fall behind those of traditional multilateral institutions. Similarly, the China Banking Regulatory Commission has set “Green Credit Guidelines” for Chinese banks that finance various investment projects abroad. 80 These say that investments should conform to the environmental laws of host countries and the international community. CDB and CHEXIM have also set up additional safeguards that are applied to their portfolios. 81 All the same, these guidelines are only as strong as the will to enforce them. Still lacking, however, are formal methods of receiving and investigating complaints (grievance mechanisms). Without them, “banks have little immediate incentive to follow up on any communication they receive.” 82 Moreover, LAC countries with weak governance often find it hard to enforce their own laws due to political instability, corruption and other factors. 83 Chinese lenders must use the power of civil society and strong community relations to hold private investors accountable for adhering to environmental guidelines.

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