China-funded steel plant boon to Bolivia's recovery

A mega steel plant in Puerto Suarez, Bolivia, largely financed by the Export-Import Bank of China, is expected to meet half of the Andean country's demand for steel and boost its economic recovery and industrial upgrading.

The $546 million Mutun plant, inaugurated on Feb 24, will be run by Sinosteel Engineering and Technology, a subsidiary of Chinese state-owned Sinosteel Corporation, in its first year of operations.

It is expected to create around 1,000 jobs for Bolivians, offering cheer at a time when the economy is grappling with low foreign currency reserves, fuel shortages, high inflation, and declining natural gas reserves.

The project will help reduce foreign spending on steel imports and expand Bolivia's steel export market, said Omar Portillo, a professor at the economics and political science departments of the Higher University of San Andres in La Paz, Bolivia.

"The steel exports will be fundamental or strategic because Bolivia can reach northeastern Brazil at competitive prices," Portillo said.

Bolivia's new steel plant will produce 200,000 metric tons of steel annually, mainly composed of rebar and wire mesh worth $260 million, and process 66,000 tons of raw materials monthly from the Cerro Mutun deposit, one of the world's largest iron ore deposits estimated at 40 billion tons.

The project was mired in five decades of delays after its initial Indian contractor, Jindal Steel Bolivia, an arm of Jindal Steel and Power, ended the contract with Bolivia in 2012.

The construction finally started because of China's investment, and was completed during Bolivia's current administration led by President Luis Arce.

The Jindal Steel dispute "was a big problem because it delayed the iron industry in Bolivia for around 10 years", said Portillo, noting that the project got a new lease of life thanks to the participation of a Chinese company.

In addition, the Bolivian government is seeking plans for a second steel plant, which may involve further collaboration with China. The current plant is expected to significantly boost Bolivia's iron and steel exports, which stood at $23.51 million in 2023.

China is Bolivia's key trading partner in the mining and industrial sectors. In 2023, Bolivia's exports to China reached $1.21 billion, primarily in precious metals, zinc, and lead ores.

Greater access

"China's role in Bolivian trade is expected to expand with greater access for Bolivian food products to the Chinese market and the involvement of a major Chinese consortium, a leader in battery and solar panel manufacturing, in Bolivia's lithium industry development," said Juan Jose Bedregal, an economist at the Higher University of San Andres.

"These relations, along with the growing global influence of the BRICS countries, create favorable expectations for Bolivia's economic development," Bedregal said.

"Bolivia shares with China a vision of building a multipolar world within the BRICS framework, a forum of countries that Bolivia joined as an associate country on Jan 1."

Apart from expanding trade, China has been investing in the country's construction sector in the past decade, Portillo said.

"Many Chinese companies have been awarded tenders for the construction of paved roads," he said.

As for the steel plant, Portillo said the venture will help Bolivia's economy, and so will the China-backed Chancay Port in Peru.

Over time, Bolivia needs to diversify its sources of fuel supply, he said. Today, in the Bolivian context, the cost of import logistics has become quite expensive, he added.

Portillo suggested that Bolivia should create an "integration route" with Chancay Port to improve trade.

"To increase exports, Bolivia has to increase its proximity to this port, and the good relationship with the Chinese government can greatly facilitate this operation," he said.

The writer is a freelance journalist for China Daily.