China's Proposed Colombia Railway: Challenging the Panama Canal

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China's Proposed Colombia Railway: Challenging the Panama Canal

By Tim Padgett Thursday, Feb. 17, 2011

While President Obama this week unveiled a budget that underscored America's economic malaise, China whooped it up some more in America's backyard. As if timed to coincide with news that China has passed Japan as the world's second-largest economy (albeit still a distant second to the U.S.), Colombian President Juan Manuel Santos told the Financial Times on Sunday that Bogotá and Beijing are in talks to build a multi-billion-dollar railway connecting Colombia's Caribbean and Pacific coasts. Said Santos, in a poke at U.S. superpower self-esteem, "Asia is the new motor of the world economy."

Colombia, mind you, is the U.S.'s best friend in South America. But it's also one of the western hemisphere's up-and-comers, a country that in the past decade has gone from guerrilla-ravaged basket case to a more secure and prosperous showcase — thanks, ironically, to $5 billion in U.S. military aid — and it's no longer waiting for the U.S. to come through with the bilateral free-trade agreement that's been lingering in Washington for years. "Santos, like Colombia as a whole, is feeling very confident and just wants to plow ahead," says Michael Shifter, president of the Inter-American Dialogue in Washington. Or as Santos told TIME last fall, "South America is a continent that is now surging [and] I think it's in the interest of the U.S. and us to work together." But, he added, "Frankly, Latin America has not been on the [U.S.'s] radar lately."

It's very much on China's. In the past 10 years, annual Latin American exports to China have gone from negligible to more than $40 billion as the Asian giant reaches for commodities like oil, copper and soy beans to fuel its roaring economic growth (10% last year). China is now the top purchaser of exports from Brazil and Chile; and according to the U.N.'s Economic Commission on Latin America & the Caribbean (ECLAC), within five years it should replace the European Union as Latin America's second-largest trading partner after the U.S. In the process, Beijing is lavishing billions of dollars in financing on the region, from hydro-electric projects in Ecuador to development funds in Argentina. (See photos of China's high-speed rail.)

And now, perhaps, a major railway in Colombia to compete with the nearby Panama Canal as an Atlantic-to-Pacific shipping shortcut. Chinese officials confirmed this week that their country has agreed to invest in the $7.6 billion project, which would stretch about 140 miles (220 km) from Colombia's northern Caribbean region, near Cartagena, to an as-yet undesignated site on its western Pacific coast, mainly to ferry Colombia's abundant coal to Asia.

What's less certain, however, is whether a trans-Colombian railway would really be more efficient than using the Panama Canal — especially since that shipping lane is undergoing a $5.25 billion expansion to accommodate more massive cargo ships. (Relations between China and Panama are also cool due to Panama's strong ties with Taiwan.) Ever since the canal was completed in 1914, rail, particularly across southern Nicaragua, has been discussed as an alternative; but it's never been more than an interesting idea. What's more, Shifter notes, even though the Colombian state has largely beaten back the fierce Marxist rebels it has fought for more than four decades, "guerrillas haven't disappeared in Colombia," and a 140-mile-long railway would be as juicy a target for insurgents as the oil pipelines they've blown up for so many years.

Still, both Colombia and China seem to think it's worth the risk. China sees the country "as a good strategic opportunity," says Shifter, "a good location for conveying a lot of South American commodities but also a place with more sophisticated governance today." The rail partnership is also a pragmatic move for Bogotá, he says. Although China is now Colombia's second-largest trading partner, vanquishing the guerrillas has put it behind other Latin American countries in terms of forging major infrastructure and industrial deals with China, like the recent oil production and bullet-train construction financing Brazil has secured. (See if China is facing a Japanese future.)

Many Colombia watchers believe a key impetus for Santos is to make Washington nervous about China's growing involvement with the U.S.'s top South American ally, in the hopes of getting Congress to expedite the free-trade agreement (FTA). But analysts like Shifter doubt that's a consideration, since the Colombians are well aware that the FTA is being held up mostly because of opposition from U.S. labor unions (based partly on concerns about human rights for Colombian workers). Either way, recently leaked U.S. cables, based on conversations with Colombian diplomats, help explain why Colombia, despite its realization that China is out to exploit its natural resources, is building the partnership. "Colombia is wary of Chinese motives," says a March 2009 message from the U.S. embassy in Beijing, released last month by WikiLeaks. "However, Colombia needs new economic partners, particularly given the lack of progress on a U.S.-Colombia [FTA]."

And particularly because Colombia wants to fuel its own boom. Its economy is expected to grow 5% or more this year and next; the World Bank now rates it the 39th best nation to do business with, up from 76th place just five years ago, and Santos has pledged to put it in the top 20 by 2014. He wants its coal production to increase 70% by then, to 124 million tons a year; its oil output by 75%, to 1.4 million barrels per day; and its value-added products to jump from 29% of total exports to 40%. (Comment on this story.)

It's looking to China to help it get there in large part because the Harvard-educated Santos is said to be especially impressed with Beijing's commitment to getting things done. In other words, the can-do spirit Latin America used to expect from the U.S. — the kind that built the Panama Canal.

China's Feat

This will be a very great feat for China and win it great goodwill in South America.

The issue, however, will be whether it will be cheaper than ferrying through the Panama canal.