In June, Costa Rica announced it was cutting diplomatic ties with Taiwan in favor of recognizing China as a trade alliance, a first for any Latin American country. Corruption with Taiwanese-Costa Rican officials was of course cited for the split, and the prospect of China opening doors to commercial trade is an even bigger plus for many small countries like Costa Rica, which lacks a competitive business environment. Whatever the reasons, we’ve been watching this closely and waiting on pins and needles to see what transpires, and not just because Costa Rica is Panama’s neighbor. Between Cuban/Communist-supporting leaders, intense environmental factors, and overall suspicion for Chinese relationships - we wondered, what would be China’s first move?
This week, our fears have been confirmed, and unfortunately Panama will be caught in the environmental and political cross-hairs of this new friendship between weak Costa Rica and gigantic, resource-sucking China. It has been announced that China is building an oil refinery on the border of Costa Rica and Panama to ‘help the Central American nation with its energy needs’.
‘The Chinese project is significantly less ambitious and will serve just to address Costa Rican needs,’ said Costa Rican President Oscar Arias, who was making an official visit to China (from the article at Forbes.com).
Arias’ ‘less ambitious’ remark refers to Mexico’s intent to build a refinery, which has been in the works for years but has fallen flat. But addressing Costa Rican needs? We don’t know enough about Costa Rican energy needs to make an official BS call, but it sounds pretty shady. The worst part is thinking about a sprawling, dirty, nasty oil refinery stuck somewhere in the Costa Rican jungle, ruining the trees and wildlife nearby, poisoning the air, polluting the water, basically sucking the life out of everything surrounding it. There’s no mention of where the refinery will go, but wherever it might land will bring fumes and pollution to places far off, including Panama. There’s a reason why there haven’t been new oil refineries built in the United States in 1976, and why many have made significant environmental improvements or closed altogether, recognizing the need for change in this significantly less-than-imperfect energy manufacturing method.
Interestingly enough, Costa Rica narrowly passed a referendum this month to join the Dominican Republican-Central American Free Trade Agreement (known as DR-CAFTA). This was actually expected not to pass, and now puts Costa Rica open to expanding its agricultural, telecom, and services sectors, areas where they fall at almost rock bottom in the world. Costa Rica is the’worst business environment of any DR-CAFTA nation except Honduras which it edged out only slightly; and worldwide ranks behind Bangladesh, Yemen, and Ethiopia’. Yikes.
Costa Rica needs help developing, but at who and what costs? Will the addition of DC-CAFTA support as well as China’s muscle result in a boom or bust for Costa Rica? We’ll be keeping our eye on this one…