Post a Comment On: China Matters

As an illustration of how the IMF and China really don’t get along—despite Beijing’s interest in the IMF in a source of gold and SDRs—I've written a piece for ATol entitled China’s copper deal back in the melt, on a high-profile tussle in the Democratic Republic of Congo.

The IMF is openly lobbying the Congolese government to renegotiate a $9 billion copper and cobalt deal with China, for the stated reason that the project encumbers the DRC government with sovereign debt (an allegation that the Chinese dispute) at the same time the IMF is mediating with the Paris Club to forgive a chunk of the $10 billion tab run and embezzled in the name of the predecessor state of Zaire by kleptocrat-in-chief Mbuto Sese Seko.

In a classic example of the witless stenography that passes for Western reporting on Asian and African issues, the actual story - IMF threatens to withhold debt relief unless the Chinese deal is renegotiated - got a bit of a twist - as in Voice of America's "Chinese Mineral Deal Blocking Congo's IMF Debt Relief."

To get the real story, one perhaps has to dig even deeper—to the case of the Freeman MacMoRan-operated Tenke Fungurume copper mine.

The website operated by whistleblowing ex-Freeport MacMoRan employees with the buzzkilling name “FCXsucks.com” (“FCX” is Freeport’s NYSE ticker symbol) provides some interesting details and analysis.

The TF project is similar in scale to the Chinese project, and will take somewhere between $2.7 billion to $3 billion in copper out of Congo annually when it gets up to speed.

By a remarkable coincidence, at the same time the IMF is complaining about the Chinese deal, the DRC government is trying to renegotiate the sweetheart deal that the TF project got from the Sese Seko regime—a deal that capped the Congolese share in the project at 17.5%.

To compare and contrast, the DRC share in the Chinese project is already at 32%.

The FCXsucks people think the Chinese deal turns out worse than the TF deal despite the higher percentage because the Congolese partner, Gecamines, walks away with less money per year.

But that’s because the Chinese loan disbursement is bigger than the Freeport investment and covers a range of do-gooder infrastructure items not directly related to the deal. From the overall perspective of the DRC, adding the infrastructure improvements to Gecamine’s own ROI, the Chinese deal doesn’t look too bad.

President Kabila reportedly wants to see the DRC’s share in the TF project boosted to 45%, over the vigorous opposition of the project’s investors in the United States and Canada, and the U.S. government.

At the same time, the President is no doubt all ears to the IMF’s insistence that the interest rate on the Chinese project be dialed back from more expensive commercial terms to government-to-government concessional rates, like those China gave Angola.

Perhaps the DRC is less interested in the IMF’s proposal that the Chinese project get scaled back to $6 billion, as that would decrease the quantity of nice things the Chinese would build there in the next few years.

The Democratic Republic of Congo is flat on its back in terms of economic and social infrastructure. China coming in with a fast-track project to help rebuild the country (as the PRC did for Angola, in return for crude oil) is probably more welcome than a lecture from the IMF on Mbuto Sese Seko’s debt.

However, it will not be surprising if President Kabila—eager not to alienate either China or the West—finds a way for both deals—and debt relief--to go ahead.

The war in the Democratic Republic of Congo (previously Zaire) since 1998 has killed an estimated 5.4 million people, making it the bloodiest conflict since World War II.

Although the conflict has attracted intensive meddling from outsiders fixated on the country’s vast mineral reserves, the immense human suffering has inspired little in the way of the high profile attention and assistance.

The website Friends of the Congo provided this chilling perspective on how things are in the eastern end of the republic (the main copper deposits are in the south, in Katanga, which also saw fighting during the wars):

The International Center for Transitional Justice, the Human Rights Center at the University of California, Berkeley and the Payson Center for International Development at Tulane University conducted a survey of 2,620 Congolese between September and December 2007. The study focused North and South Kivu, Ituri, Kinshasa, and Kisangani. The results of the survey were predictable but shocking nonetheless. A summary of the survey revealed:

• 80 percent of respondents said they had been displaced at least three times in the last 15 years
• 75 percent said their cattle or livestock had been stolen
• 66 percent said their home had been destroyed or confiscated
• 61 percent of those polled in the east said they witnessed the violent death of a family member or friend
• 60 percent said one more of their household members had disappeared
• 34 percent said they themselves had been abducted for more than a week
• 53 percent reported being forced to work or being enslaved by armed groups
• 31 percent said they had been wounded in fighting
• 35 percent said they had been tortured
• 46 percent had been threatened with death
• 23 percent had witnessed sexual violence
• 16 percent had been sexually violated and 12 percent multiple times
• 85 percent of people polled believe "those responsible for the violence should be held accountable"

In North Kivu, at the epicenter of the violence, responses to the question "who protects you" were quite revealing. Respondents answered God (44 percent), the army (25 percent), the police (8 percent), nobody (7 percent), U.N. peacekeepers (6 percent).

Emphasis added.