Overview

China's economy and its global influence are growing at a rapid rate. Nowhere is that growing influence clearer than in Ecuador, a country that Beijing has lent nearly $9 billion and has promised $7 billion more in financing. Those loans and promises add up to nearly one fifth of Ecuador's GDP, allowing—and in some cases forcing— the nation to advance new infrastructure and energy projects including massive oil, mining, and hydropower projects in the Amazon.

This report aims to serve as an analysis of China's growing presence in Ecuador, to help shed light on Chineseprojects and loans in Ecuador with attention to the Amazon region, and to offer insight into the significance of Chinese geopolitical power in the region and its implications for the future of the Amazon rainforest and its people.

Introduction

Limited by geography and necessity, the political and economic ties between Asia and South America have historically been modest. But over the last decade, the south-to-south relationship of these two Pacific Rim continents is in full bloom. And while a controversial new trade pact dubbed the Trans Pacific Partnership (TPP) has been six years in the works, bilateral relationships are being forged that are dramatically altering the world of finance, commodities, and markets, in particular between China and Ecuador.

But what does the world's second largest economy want with one of the smallest? China and Ecuador have entered into a marriage of convenience, born out of the domestic necessity of each country. China's oil consumption doubled between 2000 and 2010, and is on par to surpass the U.S. in the next five years. As part of its "Going Out" policy, China has been searching outside its national borders to meet its rising energy needs and is on a global quest for diversified sources of commodities and raw materials. Currently more than 50% of its oil consumption comes from imports. Securing access to cheap energy is vital for China to support its growingindustrial expansion, massive population migration from the countryside to urban centers, and to maintain its hegemony as largest producer and distributer of goods to the global economy.

Ecuador, on the other hand, was in need of liquidity. An OPEC member with a dollarized economy, it was shut out of markets after a 2008 default on global bonds. Desperate for financing to keep its economy solvent, initial loans from China helped the small Andean nation stay afloat. Subsequent loans are now helping finance the greatest expansion of public sector spending in modern Ecuadorian history. By 2013, China provided an estimated 61% of Ecuador's financing needs. In exchange, China will get nearly 90% of Ecuador's oil—a

staggering monopolization of production from an OPEC member, and the first time Ecuador has provided crude to a lender. On the surface, the relationship appears mutually beneficial. Beijing provides credit and Ecuador provides oil and access to other natural resources. But as explained further in this report, the devil is in the details. The long view suggests it may be more of a colonial resource grab, with Ecuador playing the familiar role of debtor state bound by loan conditions with major implications for national sovereignty, and that appear even more odious than the loans for which it previously defaulted. The crude is slated to come from Ecuador's Amazon—vast tracks of pristine rainforest with record levels of biodiversity and home to ten indigenous nationalities, many of whom are vehemently opposed to drilling. The recently acquired debt is driving a new Amazonian oil boom, setting the stage for a major battle over rights and resources that will shape the future of the Amazon and its people