Confessions of an Economic Hit Man, 3rd Edition

INTRODUCTION

The Third Economic Hit Man Wave and China’s EHM Strategy

It’s important to emphasize that people everywhere are victims of the EHM strategy. We have been duped. Many of us have bought into the idea that our country is doing the right thing. That is true for Russians, Chinese, Brazilians, Nigerians, Americans, and people in so many places. Even though we are victims, we are also collaborators. The strategy works because we support it.

Since the time of the ancient Chinese, Persian, and Roman empires, the basic strategy has served those who seek to dominate others—both inside and outside their borders. Despite all the cultural and technological changes over the centuries, that strategy has focused on the same goal: the exploitation of resources to satisfy short-term materialistic consumption and increase the riches and power of a few elites.

The goal of domination is cloaked in a critical factor: the perception that those being dominated are receiving benefits. In modern times, the justification for EHM tactics is the perception that they produce better lives for all, raising lower-income countries to higher-income status and elevating the poorest people to the middle class. We are the good guys is the story taught in economics and business courses at universities, as well as in World Bank and International Monetary Fund (IMF) reports. For many years, believing this story, I was eager to spread that perception. Like so many involved in the economic development business, I was convinced that I was doing the right thing. I and my staff compiled impressive statistics and created sophisticated econometric models to prove that our strategy resulted in greater prosperity, equality, and democracy. Eventually, I realized that we were promoting a lie.

Although economists develop much more complex models, a simple back-of-the-envelope calculation illustrates how numbers can be used to deceive. In the United States three individuals have as much wealth as half the population. If those three individuals earned 10 percent on their wealth in one year while half the population lost 3 percent and the rest remained the same, the composite would indicate an average growth of slightly greater than 3 percent. The perception would be that everyone in the country prospered, and yet the truth would be the opposite. Only three individuals made all the money.

Statistics about the numbers of people who have gained access to electricity, water and sewage systems, televisions, and cell phones, along with complex econometric models, appear to demonstrate that huge investments in infrastructure create economic growth that translates to prosperity for everyone in a country. However, as the many examples in this book illustrate, those conclusions are based on measurements of gross domestic product (GDP), gross national product (GNP), and other metrics established by the institutions that promote the EHM strategy. Increases in such metrics do not indicate overall prosperity. Instead, such growth often concentrates more and more power and wealth in the hands of a few, increases inequality, and results in environmental destruction and climate change. People may have cell phones, but too often they live in squalid conditions under the shadow of glittering skyscrapers. Their homes may have electricity but are built with toxic materials. They may be connected to water and sewage systems, but their air and lands are polluted, and their food lacks nutrition and may be carcinogenic. Many are driven to crime and drugs. What has been promoted—perceived—as good is bad for billions of people and for nature.

The modern version of the EHM strategy can be summarized as follows.

A higher-income nation identifies lower-income nations that possess oil or other resources but lack sufficient means and/or the political will to develop them. The higher-income nation sends its EHMs to convince the lower-income nations to accept large loans, using their undeveloped resources as collateral. An important condition is that the money is earmarked to hire higher-income-nation companies to build infrastructure projects that drive economic growth—especially in the vital energy sector (today, electricity). These companies reap huge profits, a few local elite business owners benefit from the improved infrastructure, and everyone else suffers because funds are diverted from health services, education, and other public sectors to pay interest on the loans. The debts are so large they can’t be repaid. The lower-income countries default on their loans. This process is sometimes referred to as debt-trap diplomacy.

As a first step toward resolving the default problem, the EHMs demand that the lower-income nations sell their oil, minerals, or other collateralized resources at rock-bottom prices to higher-income-nation corporations, with few (if any) environmental and social regulations. If a country’s collateralized resources turn out to be insufficient to pay off the debt, the second step is to implement what are known as neoliberal policies. These include austerity programs that cut taxes for the rich and wages and social services for everyone else, reduce government regulations, privatize public-sector businesses and sell them to higher-income-country investors, and discourage collective bargaining—all of which support free markets that favor transnational corporations. Neoliberal advocates promote the perception that money will trickle down from the corporations and elites to the rest of the population; however, these policies almost always cause greater inequality.

The system is based on what the woman who trained me (more on her later) referred to as the four pillars of the EHM strategy: fear, debt, anxiety over insufficiency (of food, housing, etc.), and divide and conquer. Historically, the strategy leaned heavily on fear caused by military intimidation, and usually this led to the implementation of the other three pillars. For example: Potentate A defeated Potentate B in a war that devastated B’s lands; A put B into debt by offering B his daughter in marriage, investing in the restoration of B’s lands, and promising to increase prosperity for B’s people; and an important condition for such generosity was that B would help A divide and conquer neighboring states.

The emphasis on the various pillars might change from time to time and depending on specific circumstances, but the general strategy persisted for most of recorded history . . . until significant modifications occurred during my EHM days in the 1970s.

The failure of the world’s largest, best-equipped military to defeat North Vietnam, combined with the Cold War specter of a nuclear holocaust, replaced the pillar of instilling fear in others with the pillar of debt as the primary tactic. The military and all the business associated with it were relegated to a backup role. Although the possibility of coups, assassinations, and invasions lurked in the shadows, beginning about the time I entered the EHM ranks, debt became the most important tool in the strategy. This highly successful modification was driven by the first wave of modern post–World War II EHMs, as detailed in Parts II–V of this book and hereafter referred to simply as the first EHM wave. It lasted until September 11, 2001.

After the attacks on the World Trade Center and Pentagon, the US military stepped back to center stage. Businesses that produced or sold war materiel and those that provided them with financing, insurance, and other services intensified their activities. In addition to the highly visible wars in Iraq and Afghanistan, US military actions increased in every country suspected of harboring terrorist organizations. The CIA, NSA, and other US agencies accelerated their actions. Debt programs that had been so successfully implemented in lower-income countries during the previous four decades by the first EHM wave also continued. At the same time, a second EHM wave took the strategy to new levels and applied it in the US and other higher-income countries, as described in Part VI.

Beijing recognized an opportunity. China’s leaders understood the leverage they could gain by getting their EHMs to modify the four pillars even more than the US EHMs had. They also saw the advantage of taking this strategy to all the regions the US was neglecting as it concentrated on the Middle East. Thus began the third EHM wave, as detailed in Part VII.

The Critical Factor: Perception

Marketing executives, psychotherapists, and politicians know that perception molds reality. Countries, cultures, religions, and corporations do not exist until enough people accept a perception that drives them to take reality-altering actions. Nations intent on dominating others understand that the key to their strategy is perception.

To attain eternal salvation, the savages must be civilized. The red tide of Communism needs to be stopped before it inundates the world. Success is measured by short-term profits, stock prices, and trade balances. Perceptions like these have been ingrained in national psyches. They are integral to what Howard Zinn referred to as the propaganda machine. They are taught in schools, inspire lofty political rhetoric, influence the media, motivate soldiers to go to war, and are the foundation of a nation’s biases around race and culture. They justify EHM strategies.

The first and second waves of American EHMs promoted a perception that may be summarized as: If you want your country to prosper, accept loans from the Washington Consensus, hire our companies to build infrastructure projects, and submit to neoliberal policies. The Washington Consensus refers to the World Bank, IMF, US Treasury Department, and related institutions—organizations that provide the loans and enforce neoliberalism.

While Washington was distracted in the Middle East and resentment of the US grew in many countries, China’s third EHM wave offered a perception that was distinctly different from that of the United States.

China Modifies the EHM Strategy

Xi Jinping became president† of China in 2013 and immediately began campaigning in Africa and Latin America. He and his EHMs emphasized that, by rejecting neoliberalism and developing its own model, China had accomplished the seemingly impossible. It had experienced an average annual economic growth rate of nearly 10 percent for three decades and elevated more than 700 million people out of extreme poverty.¹ It had risen from the catastrophe of the Cultural Revolution to become the world’s second most powerful economy. No other country had ever done anything even remotely approaching this.

China presented itself as a model for rapid economic success at home and made major modifications to the EHM strategy abroad.

President Xi’s administration changed that critical factor, perception. It maintained that Beijing did not demand influence over other countries’ governmental policies. China replaced the US’s If you want your country to prosper, accept loans from the Washington Consensus, hire our companies to build infrastructure projects, and submit to neoliberal policies with If you want your country to prosper, accept China as a partner in global trade that will not interfere in your government and use Chinese loans to hire our companies to build the infrastructure that makes this possible. Substituting neoliberal conditionalities with promises of non-interference appeals to leaders of countries accustomed to creditor demands—despite China’s pattern of breaking those promises.

Along with this change in perception, the third EHM wave also altered the four pillars.

Fear

In the case of fear, until recently, China had not stationed troops in or threatened most other countries—with major exceptions in the South China Sea, Taiwan, Hong Kong, Tibet, and along its frontiers with India, Bhutan, Myanmar, and Russia. Instead, China’s EHMs focus on fears of poverty and underdevelopment and the US’s history of staging coups and assassinations. These fears ring true to people who have experienced centuries of militarily imposed European colonialism and post–World War II occupation by US troops. However, it is important to note that China’s authoritarian government is similar to those of colonial empires. Seemingly overnight, it has developed a navy that competes in strength with that of the US. It recently built a base in Djibouti and has held discussions for increasing its military presence in several other countries, including Cambodia, Myanmar, Pakistan, Tajikistan, and the Solomon Islands. These actions, along with its crackdown on Hong Kong, serve as warnings to countries that depend too strongly on China.

Debt

China’s pillar of debt differs from that of the US in several significant aspects, both positive and negative. The positive: 1) unlike the US, China promises not to interfere in government policies of debtor countries; and 2) China encourages local officials to determine the types of projects financed through its loans, as opposed to the US’s insistence on hiring experts who often are biased toward their own foreign ways of thinking. The negatives: 1) despite its claims of non-interference, China frequently pressures creditor countries to support its own policies, especially those around Taiwan, Hong Kong, Tibet, the Uyghurs, and other minorities; 2) although encouraging local officials to determine the use of loans is a positive in theory, it also has the negative potential of facilitating corruption because these officials can line their own pockets in the process; 3) China insists on using Chinese workers and parts that have to be replaced by other Chinese parts, thus establishing a perpetual dependency; 4) many of China’s projects are poorly engineered and shoddily constructed, which often leads to serious environmental and safety problems, as described in Chapters 1–3; and 5) because of China’s authoritarian government and lack of media freedom, a debtor country has little opportunity to address its grievances around engineering, construction, social and environmental damage, labor practices, and corruption.

Anxiety over Insufficiency

The anxiety over insufficiency pillar is promoted similarly by the US and China. Create prosperity by accepting our loans and hiring our companies is the message from both countries. However, China’s EHMs have the advantage of their own very recent rags-to-riches success story. Furthermore, their New Silk Road holds out the allure of connectivity with a vast global network of trading partners—something the US has never offered. And yet, the very attractiveness of this message poses a danger. The adage if it sounds too good to be true, it probably is is applicable. The allure of the New Silk Road can blindside countries to the reality that such interconnections may be used against them. Improved transportation networks open the door to greater exploitation, including incursions by foreign militaries. The appeal of ending insufficiency through debt-financed infrastructure can hide the realities of China’s failed projects, behind-the-scenes political manipulation, and corruption.

Divide and Conquer

Lastly, a change in the divide and conquer pillar is arguably the most significant modification made by China’s third EHM wave. The New Silk Road has reversed the divide and conquer idea with the promise of a world united by trade that will end extreme global poverty. When I first heard it described, my reaction was, Why didn’t we think of that? In recent years, this idea has come to dominate much of the world. It appeals to a global population that is increasingly interdependent and to the romantic vision of the history-changing caravan trade routes of ancient times (the reason I prefer the unofficial title of the New Silk Road to the official Belt and Road Initiative). But there is a downside. The New Silk Road is controlled by a single country, China, and governments change. Russia’s invasion of Ukraine offers an example of how a tyrannical administration can suddenly alter the course of history. When power is concentrated in one person or an insulated group of insiders, as in Russia and China, it can change rapidly and without warning. Beijing is uniting countries that were once divided, but it is doing so under an autocratic government that suppresses self-evaluation and criticism.

It is important to keep in mind that rhetoric around China’s modifications to the EHM strategy disguise the fact that China is using the same basic centuries-old tactics as those used by the US. Regardless of who implements this strategy, it is exploiting resources, expanding inequality, burying countries in debt, harming all but the elites, causing climate change, and worsening other crises that threaten our planet.

Why a Third Economic Hit Man Book?

China’s global EHM takeover has become so broad and successful that the dynamics and dangers of it need to receive everyone’s attention. China is now the largest trading partner with countries on every continent. Drawing on all four pillars of the EHM strategy, it has beaten out the United States in energy, transportation, communications, and other infrastructure development around the world, as detailed in Part VII.

Whatever one thinks of China, whatever its real intent, and despite recent setbacks, it is impossible not to recognize that China’s domestic successes and its modifications to the EHM strategy impress much of the world. I personally did not fully appreciate this until I was invited to speak at international economic summits in Russia and Kazakhstan that were attended by more than twelve thousand of the world’s most influential policy shapers. Speaker after speaker compared China’s successes with US failures. One of several oft-quoted examples: The inflation-adjusted US average hourly wage had not increased since 1973 and the US middle class had shrunk from 60 percent to 50 percent of the population; during that same period, China’s mushrooming wages raised hundreds of millions of people out of dire poverty into its middle class.¹

As we step ever closer to the precipice of ecological, economic, and social destruction, it is essential that we recognize that we have been living under a false and dangerous perception. Maximization of short-term profits and materialistic consumption and the EHM strategy are killing us. I wrote this third economic hit man book because I felt it was important to analyze this strategy and its relationship to the many growing crises we all face—and to offer ideas that will help each of us move from being a victim to being an agent of change.

A Request for Help

News about the appalling conditions in China’s detention camps and the crimes against the Uyghurs and other minorities have alerted the world to the darker aspects of today’s China—as have its imperialistic actions in parts of Asia. At the same time, events in the US, ranging from white supremacist violence and acts of social and racial injustice to attempts to undermine electoral democracy and the horrible conditions in prisons and immigrant holding camps, have exposed a darker side of the US. Despite the truth behind such revelations, prejudices that result from focusing on the negative aspects of others too often block the path to the cooperation that is so urgently needed in this crisis-riddled world.

I realize that as a white, male American, I grew up prejudiced by a belief that I was entitled to opportunities unavailable to people of different skin pigmentation, gender, or citizenship. Beyond that, I and many of my baby-boomer contemporaries were influenced at an early age by films, TV shows, and cartoons that prejudiced us against people of African, Asian, and Middle Eastern heritage. I’ve traveled enough to know that human beings everywhere hold prejudices against others.

I hear such prejudices when people accuse me of being pro-Chinese because I write that China’s model might seem attractive to other countries, as anti-Asian because I criticize China’s strategy, and as anti-American because I expose the mistakes made by US EHMs.

So, I request your help.

I have worked diligently to write from as objective and fair a perspective as possible, yet I’m sure I’m unaware of some of my own biases and that you may come across statements in this book that reflect those biases. If so, I ask for your forgiveness and understanding. Please know that my goal is not to offend anyone. Nor is it to defend China’s model. Or America’s model. It is rather to permanently relegate the EHM strategy to the trash bin of history. Every EHM strategy. Once and for all.

My hope is that by the time you finish this book you will be inspired to participate in a new era of global cooperation that redefines what it means to be successful human beings on this living planet.

† Xi is usually referred to as president in English, but his title in Chinese is closer to state chairman, which defines his role within China’s Communist Party (CCP); he served as General Secretary of the CCP beginning in 2012. In this book, I will use the more common president.

1

A Defiant President

President Rafael Correa stood alone on the balcony of Ecuador’s Government Palace and smiled down at the cluster of people beginning to gather below him in Quito’s Independence Plaza. They were waving and pointing their cell phone cameras at him. In less than a year he would complete his second term as president and, as required under Ecuadorian law, retire from office in 2017. He would leave knowing that he had scored a major victory. He had met with China’s President Xi Jinping and signed the deal of the century. He had beaten the American economic hit men at their own game.

US policies had impacted Correa all his life. It began when he was five years old and his father disappeared behind the walls of a US prison, convicted as a narco-trafficker who fed America’s appetite for drugs in order to feed his family. Shortly after Rafael turned eleven, a CIA-supported coup resulted in the death of one of his heroes, the democratically elected Chilean president Salvador Allende. While he was still in his teens, he was greatly influenced by two of my EHM clients, Ecuador’s president Jaime Roldós and Panama’s Omar Torrijos. He admired the way both men stood up to the fraternity of US corporate, governmental, and banking heads who wanted to exploit their countries’ resources. He was especially impressed by Roldós’s commitment to ending the abuses of Big Oil and Torrijos’s determination to gain Panamanian ownership of the canal that bisected his country. Both men resisted my personal attempts to bribe them and refused to buckle to death threats by the jackals who stepped in when I and other EHMs failed to corrupt them. Both were hated by Ronald Reagan and powerful US CEOs. The year when Correa turned eighteen and Reagan entered the White House, Roldós and Torrijos died in plane crashes that had all the markings of assassinations, as detailed in upcoming chapters.

Correa’s father’s trial and conviction, the shadow of the CIA that hung over the deaths of three heroic leaders, the Vietnam War, and race and social discord in the US drove the young man to learn about a system that seemed biased in favor of rich white Americans and their corporations. He studied hard and earned scholarships to an Ecuadorian college, then a master’s degree from a Belgian university, and finally a PhD in economics from the University of Illinois. He’d experienced humiliation, degradation, and exploitation firsthand. It had motivated him to become an expert in a global system that was promoted by EHMs and called itself capitalism.

I learned, President Correa would later tell me, that your economic hit man game is about enslaving countries with debt. Then you own us. He understood the US’s EHM strategy. He also wanted to find a way to make his country part of a more just and egalitarian global economic movement. After reading Confessions of an Economic Hit Man, he wrote to me, I want to thank you for a significant contribution to the new universal way of searching for innovative and better approaches to coexistence. Under his leadership, Ecuador enacted a new constitution, the first in the world to legalize the inalienable rights of nature, and he established the Ministry of Buen Vivir (Good Living) to bring social-economic-environmental balance to all aspects of Ecuadorian life.

Buen Vivir Secretary of State Freddy Ehlers summed it up for me one day while we walked through Quito’s beautiful El Ejido Park. This president understands what’s happening to the world, Freddy said. He also knows that we are all in trouble, the current system needs fixing. Rafael wants to benefit his country and its environment and, in the process, make Ecuador a model for others to follow.

Correa raised his arms to the crowd rapidly growing below him. His popularity seemed to increase every day as people recognized that American domination was ending. To make the break from that domination, he had felt he had no choice but to turn to China.

One of the first things Correa had done after being elected president in the 2006 democratic election was to investigate the EHM strategy I had helped implement. He appointed a commission to examine World Bank loans that had been made to unelected military dictators. Correa’s economics education had taught him that the US EHM strategy for domination was grounded in debt. The commission asked: Were the Ecuadorian people obligated to pay interest and principal on debt they had not agreed to and that benefited dictators but not them? Following the commission’s conclusions, Correa declared that much of Ecuador’s $10 billion debt was illegitimate.¹ The Minister of Energy and Mines, Alberto Acosta, explained this to me as we sat in his office shortly after Correa’s decision. Banks that grant loans to unelected dictators, he said, knowing they will finance projects that benefit the rich minorities and hurt the poor majorities, have to accept the blame for much of what is wrong here in Ecuador—and so many other places. After true democratic elections are held, elective officials must stand up for the majority.² Acosta had a degree in economics from the University of Cologne, Germany; like Correa, he understood the importance of escaping from the trap of the EHM strategy.

In retaliation for Correa’s actions, Standard and Poor’s Rating Services and Fitch Ratings slashed Ecuador’s credit score. They were determined to send a signal that any country that refused to honor World Bank and other US debt claims, that did not buy into the EHM strategy, would be punished. Ecuador had to be brought to its knees.

But Correa was not about to give in. He recognized that modern capitalism was based on using the EHM strategy to beat the competition and attain monopolistic power. He saw, sooner than most, that the position of the United States as top competitor was being seriously challenged. The American monopoly, the empire, was showing signs of collapse. The Chinese dragon had woken up and it did not give a damn about rating services.

China came to Ecuador’s rescue with a $1 billion loan, followed quickly by another billion.³ Ecuador’s credit ratings immediately rose. Correa had rejected neoliberalism and the Washington Consensus; he had successfully turned to Chinese bankers and their promises to expand trade throughout Latin America and with the rest of the world. To benefit from this New Silk Road, the country had to build up its electrical systems, highways, ports, and airports. All of this, along with the new schools and hospitals, would seal Correa’s legacy as the leader who had used the sea of oil buried beneath Ecuador’s rain forest as collateral to bring the nation out of poverty and set an example that offered hope to other countries.

Correa leaned against the railing and studied the crowd of onlookers that continued to gather below him; they were waving at him, smiling and shouting greetings, and continuing to snap photographs. He had done a good job. In addition to the new constitution and the Ministry of Buen Vivir, he had brought unprecedented political stability to a country that had experienced seven presidents during the ten years before him and suffered from a long history of coups and military dictators. He had followed in the footsteps of his hero, President Roldós, during his first term by reining in foreign oil companies. In his second term, he had built the infrastructure and developed the social services he thought were critical to the well-being of his people. Ecuador had experienced continual economic growth, even during the 2008–2009 international financial crisis. The country’s minimum wage had more than doubled and become one of the highest in Latin America. More than a million people had been lifted out of poverty. All this under his leadership.⁴ He raised a hand and gave a thumbs-up to the people in the plaza. The Sino-Ecuador partnership had paid off.

But questions hounded Correa. Reporters kept asking, Do you think the Chinese will be less exploitative than the Americans? The reporters brought up the violence against the minority Uyghurs, Hong Kong and Tibet, the extension of Beijing’s imperialistic activities in the South China Sea and toward Hong Kong and Taiwan, and its dismal record around freedom of speech, gender, and other human rights issues. And it wasn’t just the reporters who asked those questions. Opposition politicians asked them. Correa’s own advisors asked them. He himself asked them. And yet, he wanted to believe in China’s stated commitment to spreading global trade. The New Silk Road idea contrasted sharply with Washington’s focus on bilateral US–Ecuador projects and trade. In addition, China’s President Xi had assured him that he would not use debt to impose Beijing’s will on Ecuador. Besides, there was no backtracking. Correa had committed himself to reversing the excessively pro-American policies of his predecessors.

By the end of 2015, Correa had accepted nearly $6 billion from China, around 30 percent of Ecuador’s external debt.⁵ And it kept growing. The New York Times reported:

Chinese banks are in talks to lend $7 billion for the construction of an oil refinery, which could make Ecuador a global player in gasoline, diesel and other petroleum products.

Across the country in villages and towns, Chinese money is going to build roads, highways, bridges, hospitals, even a network of surveillance cameras stretching to the Galápagos Islands. State-owned Chinese banks have already put nearly $11 billion into the country, and the Ecuadorean government is asking for more.

Ecuador, with just 16 million people, has little presence on the global stage. But China’s rapidly expanding footprint here speaks volumes about the changing world order, as Beijing surges forward and Washington gradually loses ground.⁶

One of China’s loans was used to pay the Chinese Sinohydro Corporation to construct a massive hydroelectric dam that promised to generate more than a third of Ecuador’s electricity, stimulate business and industry, produce hundreds of thousands of jobs, and expand international trade. Correa knew that electricity was the key to Ecuador’s future development. This particular deal seemed like frosting on the president’s cake.

But the costs mounted. China bailed Ecuador out with more funds. Again and again. Debt piled on debt.

Then everything went terribly wrong—all at once.

2

A Savior’s Nightmare

On the day before Christmas 2018, the New York Times wrote about the Sinohydro project:

This 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. Instead, it has become part of a national scandal engulfing the country in corruption, perilous amounts of debt—and a future tethered to China.¹

Reading that article, I could only begin to imagine the turmoil that Correa was experiencing, emotionally and politically. He had fallen from a very high mountain into a deep crevasse.

President Xi’s visit to Ecuador just two years earlier must have seemed like the moment when Correa would get even with the United States for its abuses against his father, his family, his heroes, his country, and the entire continent. Defaulting on the World Bank loans had been a bold and big step. Receiving loans from China, restoring Ecuador’s status in the financial world, and arranging for the country to become an industrialized refiner of petroleum, instead of merely an exporter of crude, was even bigger. But the final deal Correa struck with Xi had been hailed as a huge leap into the new century, the new millennium.

When Xi and his wife stepped down from their plane onto Ecuadorian soil in November 2016, Ecuador’s president and many of its people celebrated it as a moment of historic significance. Ecuador was ending a subservient relationship with the United States that dated back to 1823, when President James Monroe issued the Monroe Doctrine, a manifesto that had been used ever since to justify American intervention throughout the hemisphere. China had pulled Ecuador out of the US-imposed credit rating debacle. Now, during Xi’s visit, the two leaders signed an agreement to collaborate on major energy, transportation, agriculture, and manufacturing projects. The Monroe Doctrine hit the geopolitical shredder.²

The knowledge that Xi met with Correa long before he met with a US president was particularly sweet. In fact, by the time Xi finally shook hands with President Donald Trump in 2017, he had visited not only Ecuador but also Argentina, Brazil, Chile, Costa Rica, Cuba, Mexico, Panama, Peru, Trinidad and Tobago, and Venezuela. He had negotiated a number of agreements similar to the Sino-Ecuador one. By contrast, Trump visited only one Latin American and Caribbean country during his four years in office, and that was to attend a G20 summit in Argentina. The message was clear to Correa and every other president in Latin America and the Caribbean: China was paying attention and it would not be intimidated by the Monroe Doctrine or the United States; it intended to present itself as the region’s new savior. It would do so through trade instead of neoliberal policies.

The fact that oil prices had plummeted in 2014 and continued to remain low might have discouraged China and ended the deals it was striking. After all, those deals had been based on the value of oil in the ground as collateral for the debt. However, Ecuador, like most of its neighbors, had other natural resources. For Beijing, these offered more opportunities to increase loans, build projects, exploit Ecuador’s mineral riches, and expand trade. The South China Morning Post stated:

The Mirador project, a US$1.4 billion open-pit mega mine set up to extract primarily copper but also silver and gold . . . is being built and operated by EcuaCorriente S.A., a subsidiary of state-owned Chinese consortium CRCC-Tongguan Investment Co. . . .

Ecuador is not traditionally a mining country, but the industry was given a more prominent role during the Correa administration. . . .

Although Mirador is considered the country’s most significant mining project, several concessions for major projects have been granted in recent years, many of them to Chinese companies.³

I knew the mining area well. It was located in the Amazonian rain forests where I’d served as a Peace Corps volunteer in the late 1960s and is one of the most biodiverse and fragile land environments on the planet. Known as the Oriente because it is east of the Andes Mountains, it is the traditional territory of the Shuar and other indigenous peoples. Its rivers, birthed in the glaciers and high-altitude lakes of the Andes, eventually make their way through Ecuador’s jungles into Peru, down the Amazon River and across Brazil to the Atlantic Ocean.

China had built its mammoth dam and now was developing mines in a region so important that environmentalists refer to it as the Sacred Headwaters of the Amazon. And China was making colossal mistakes.

First, the dam catastrophe.

The Chinese Sinohydro Corporation built the dam next to Reventador, a highly active volcano, in a rain forest that is prone to earthquakes. Nearly one thousand Chinese workers had swarmed into the country to construct the facility, which included a 15-mile underground tunnel and eight turbine-generator units—a sore point for Ecuadorian workers who could have done much of that work themselves. Within two years, the generator building was riddled with cracks. The reservoir was clogged with silt, trees, and other jungle debris. Lands both upstream and downstream of the dam became horribly eroded. A spectacular and ecologically important waterfall that had been expected to generate tourist revenues was destroyed. Pipelines were undermined, burst, and spewed oil into the jungle. When operators switched on the generators, Ecuador’s electricity grid shorted out.

I traveled to Ecuador frequently during pre-pandemic days, visiting parts of the country that are directly affected by China’s projects and talking with indigenous leaders, students, government officials, and people on city streets and in rural farmers’ markets. I was deeply distressed by what I saw and heard. Regardless of Correa’s intentions, Ecuador was being victimized by the same old EHM strategy we Americans had used. Only now it was implemented by the Chinese.

By the time Correa left office and moved to Belgium (the home of his wife), the dam project had become a national disaster. The New York Times wrote in 2018: