From the Belt and Road to the 'Corridor Wars'

Physical connectivity adds greater value to economies, based on the assumption that if one builds infrastructure, it will eventually pay for itself through increased trade. However, from the Romans to the Dutch East India Company, it is well known that new routes also have inevitable geopolitical effects: the paths traced by vanished empires endure. 

As we mark a decade since China launched the billion-dollar Belt and Road Initiative, many assessments are being made regarding the success or failure of this initiative by Xi Jinping, which aimed to enhance connections between Asia, Africa, and Europe primarily, and subsequently, with the rest of the world.

This objective would be achieved through the provision of direct loans to countries—without thoroughly considering their actual repayment capacity—to build roads, railways, ports, airports, and energy and data transmission networks. As a plan, it was undoubtedly a good idea to create the ‘Community of Shared Destiny’ promoted by Xi, as many regions of the world have enormous infrastructure deficits, including Latin America. 

In practice, the so-called New Silk Road has had mixed results, as there are projects that have succeeded, such as the train between Ethiopia and the port of Djibouti, and others that have not had the expected effect (Italy is even considering withdrawing). 

An example of the latter is the Xinjiang-Gwadar corridor, considered the ‘crown jewel’ (over $60 billion in investment), which seeks to provide China access to the Indian Ocean while avoiding India. At its inception, the project stimulated Pakistan’s economy through the purchase of machinery and construction materials. However, over the years, it has further pressured the country’s fiscal deficit. While the terminal is completed, there have been strong protests due to local dissatisfaction, as the population does not see concrete benefits. Another country that experienced a significant uprising against the government is Sri Lanka, burdened by debts incurred to expand the Hambantota port. 

It is true that unforeseen events intervened in the Belt and Road Initiative, such as the COVID-19 pandemic, with all its negative effects on the most fragile economies, and the Russian invasion of Ukraine, which once again stressed global supply chains. However, from a financial perspective, several leaders who engaged their countries with the plan seem to have focused more on short-term benefits, with the injection of millions of renminbi for their current governments, rather than on long-term outcomes, a common tendency among populists. 

Nevertheless, one might even thank China for launching the New Silk Road, as this maneuver unleashed a true ‘corridor war’ and international initiatives to finance competing infrastructure. The challenge now is to channel the funds effectively.

At the recent G20 summit, the creation of a corridor between India and Europe through the Middle East was announced; the European Union launched its Global Gateway to mobilize up to €300 billion. Led by the U.S., G7 countries pledged to channel $600 billion for quality infrastructure. Japan has its own plan underway in Southeast Asia. Europeans and Americans support the idea of an African connection linking Zambia and Angola via the Democratic Republic of the Congo.

For this reason, it is very difficult to achieve an objective assessment of the Belt and Road Initiative today, as its geopolitical effect has become evident by increasing global competition to gain influence in less developed regions and create reliable supply chains to and from industrial powers. 

However, since this is not a zero-sum game but a variable one, the challenge is to access those available resources for infrastructure without deepening fiscal deficits or exacerbating economic dependencies to dangerous limits. Latin America is particularly sensitive to this. It was never clearly explained why Chile joined the Belt and Road Initiative, beyond its trade relationship with China, as there is a concession system that avoids direct deals and multiple possibilities for accessing credit. Those attending the 10th anniversary summit of the New Silk Road will have the opportunity to request an honest evaluation from its creators, although the difference from 2013 is that they will be able to do so in contrast to a varied offer of new corridors, which present both economic opportunities and a true geopolitical crossroads.