Institutions, Firms, and Communities: Explaining Social Response to Chinese Investment in Latin America

• In Event: Social responsability

Abstract

Chinese investment in Latin America has grown dramatically, but the foundation of the economic relationship—extraction of primary commodities from Latin America and the purchase of manufactured goods from China—has raised the specter of economic dependence for Latin American countries, motivating political discord across the region. However, local resistance to Chinese investment varies significantly across Latin American countries, ranging from large-scale protests to referenda and legal action. I examine these dynamics through case studies of Chinese firms in Peru and Chile. In Peru, Shougang Hierro Perú sparked significant resistance from local communities, while the Toromocho Project by Chinalco led to less social protest. I contrast the Peruvian cases with two Chilean cases: Shunde Rixin’s iron mine and Minmetals’ unsuccessful bid for partnership in the Mina Gaby copper mine.

I hypothesize that when the institutional landscape of the state sets more strenuous conditions for investment in the country and ensures that citizens who are negatively impacted have channels for recourse, resistance tends to be mitigated and citizens are more likely to utilize formal political avenues, such as elected representatives and the judiciary, to express their grievances. Moreover, when Chinese firms engage in corporate social responsibility or employ in-country mediators to negotiate with local communities, resistance tends to be less intense. This research furthers our understanding of how local institutions structure the relationship between firms and local communities, which will be critical factors in determining whether developing countries can achieve sustainable development in a globalized economy.

Author

• Kerry Ratigan, Amherst College