Chinese Oil Enterprises in Latin America

Corporate Social Responsibility

Wenyuan Wu

• Publisher: Palgrave Macmillan
• Year: 2018
• Print ISBN: 9783319898629
• eBook ISBN: 9783319898636
• Topic: Politics & International Relations
• Subtopic: American Government
• Index: Politics & International Relations

This book focuses on corporate social responsibility (CSR)recordsof Chinese oil investmentsin five Latin American countries: Peru, Ecuador, Argentina, Colombia, and Venezuela. These investments have been spearheaded by China'snational oil companiesand their behavior has been scantly studied. The author uses comparative case studies to empirically examine existing theoriesofCSR. By using oil companies as thebasicunit of analysis, this project adds a micro-level dimension to the field of China-Latin America relationship. It is ideal for audiences interested inthepolitical economy of the oil industry, China, Latin America, and corporate social responsibility.

© The Author(s) 2019

Wenyuan WuChinese Oil Enterprises in Latin AmericaLatin American Political Economyhttps://doi.org/10.1007/978-3-319-89863-6_1

Begin Abstract

1. Introduction: Mapping the Terrains

Wenyuan Wu¹

(1)

University of Miami, Miami, FL, USA

Wenyuan Wu

End Abstract

On November 24, 2016, China’s Ministry of Foreign Affairs published the country’s second policy paper on Latin America and the Caribbean, eight years after the first, groundbreaking white paper. Reflecting Beijing’s official attitudes toward a region where ardent exchanges in political, social, and economic realms were only recently established, the policy paper reinstates China’s pursuit for comprehensive and strategic partnerships throughout Latin America and the Caribbean. Specifically, energy development is highlighted as a critical field of cooperation.¹

Notably, the second policy paper formalizes a new framework for collaboration, which was first proposed by the Chinese President Xi Jingping during his historical visit to four Latin American countries—Brazil, Argentina, Venezuela, and Cuba in July 2014. At the China-Latin America and the Caribbean Summit, Xi outlined a new “1 + 3 + 6” cooperation framework² that lists the energy field as one of the six cooperation priorities.³ It is imperative to notice that Chinese (NOCs) are spearheading these energy investments in the region. Chinese state-owned oil enterprises entered Latin America in 1993.⁴ In addition to Venezuela, major destinations to receive Chinese investment include Brazil, Peru, Colombia, Ecuador, and Argentina.

In an environment of intensifying global competition, Chinese oil companies are rapidly internationalizing their assets and operations by acquiring new oil assets, taking over existing exploration and exploitation projects, or merging with international oil companies (IOCs) for joint ventures. Under this expansive context, Chinese NOCs are increasingly committed to the theme of corporate social responsibility (CSR) as an important vehicle to boost their images and competitiveness overseas. In 2013, China’s largest NOC—China National Petroleum Corporation (CNPC)—published its eighth annual CSR report,⁵ highlighting its overseas social contributions.⁶ In the same year, the company produced its first report on social responsibility performance in Latin America, summarizing achievements from 1993 to 2012.⁷ Andespetro in Ecuador (wholly owned by CNPC [55%] and Sinopec [China Petroleum & Chemical Corporation; 45%]) stands out in the report as an all-around social player by winning a series of international, national, and local CSR awards. All other Chinese NOCs have also pronounced their commitments to social affairs through similar programs.

Nevertheless, in spite of continuous attempts to showcase their social conscience, Chinese NOCs are oftentimes criticized in Latin American countries, in part due to their lack of international experience as well as the contentious nature of the oil sector. Indigenous populations in Ecuador, for example, are adamantly skeptical of Chinese oil operations in the country’s Amazon forests. Other allegations mention Chinese NOCs’ biased hiring toward Chinese workers and their connections to corrupted host governments.

So, in reality, how are Chinese oil companies doing on the social responsibility front in Latin America? Do they respond to host countries’ sociopolitical contexts in devising and executing their CSR strategies in a similar way as conventional oil investors in the region?

This book intends to systematically assess Chinese oil companies’ CSR records in five Latin American countries: Venezuela, Colombia, Ecuador, Peru, and Argentina, from 2000 to 2016.⁸ It ponders two research questions. First, how do Chinese NOCs behave in the social dimension? Second, under what circumstances do these companies tend to assume positive roles in fostering socially responsible practices? By focusing on the relationship between oil corporations and sociopolitical factors specific to their host countries such as host government regulations and local civil society groups, this project seeks to reach a nuanced understanding of CSR in the oil industry of emerging economies.

1.1 Book Overview

Since the endorsement of the “Go Out” policy in 1999, the Chinese government has encouraged, through official guidelines and economic incentives, Chinese companies to expand their operations overseas. Since 2010, Chinese direct investments in Latin America have averaged about ten billion dollars per year. Today, Latin America has become the second largest recipient of Chinese outward foreign direct investment (OFDI), 87% of which “came from public companies”.⁹ As Chinese monies spearheaded by large state-owned energy companies steer deeper into the terrains of Latin America, their records on delivering social responsibility are scrutinized by local civil society groups, transnational environmental and human rights organizations, and various media platforms.

My book evaluates and compares CSR records of Chinese oil companies in Latin America. Most Chinese oil projects in the region are owned by one or two of China’s four state-owned oil corporations: CNPC, Sinopec, Sinochem, and China National Offshore Oil Corporation (CNOOC). These state-owned enterprises (SOEs) were unknown to the international oil market until very recently, but their global profiles have grown exponentially in less than a decade. For example, CNPC (or PetroChina as its primary subsidiary) was ranked as the world’s fifth largest oil company in terms of production levels by Forbes.¹⁰

My analysis is theoretically informed by scholarly research on the subject of CSR and, more specifically, on empirical studies of CSR in the oil and gas sector. Broadly speaking, there are two opposing theoretical standpoints in this arena. The first view is often referred to as the Business Case for CSR, which states that a company conducts socially responsible activities because they add to the bottom line of profit maximization. Occupying a dominant position in the field of CSR research, the business case viewpoint is amplified through a succession of empirical studies focused on the oil and gas industry. Perceiving the hydrocarbons sectors as highly controversial and vulnerable to environmental, social, and political risks, scholars in this camp tend to view CSR as internally driven by oil companies to strategically smooth oil operations and transactions.

On the opposite side, the counter-hegemonic view argues that a firm is socially responsible because it responds to pressures from political and societal groups. This second standpoint emphasizes the intertwined relationship among the state, the society, and the business. Corporations are ultimately accountable to a broad range of stakeholders, including international organizations, national governments, and civil society actors. This counter-hegemonic view is further examined in the realm of oil and gas operations, with an emphasis on the roles of national and local governments as well as local civil society in influencing CSR agendas.

This theoretical debate, along with scholarly insights on China’s overseas business ventures, which are explained laboriously in Chaps. 2 and 3, provides a profound context under which motivational factors for CSR can be systematically examined. A gainful endeavor to comprehend Chinese oil companies’ social conducts must take into account all thematically significant factors informed by relevant literature.

For the purpose of analyzing Chinese oil giants’ social activities in different Latin American destinations, factors pertaining to specific host countries are emphasized. These factors include the host country’s oil sector outlooks and regulations, the government’s policies toward its civil society, capacity and strategy of the civil society, its participation in relevant international frameworks, as well as its economic relations with China. Such cross-country comparison is guided by existing theoretical insights on the subject of CSR and that of Chinese enterprises’ overseas endeavors. Figure 1.1 integrates all potential explanatory factors in relation to CSR records.

Fig. 1.1

An overview of explanatory factors

In a nutshell, Chinese NOCs were found to be most willing to commit to social responsibility under an enabling regulatory environment in which the host government facilitated competitiveness and decentralization in its hydrocarbons industry while up...

Table of contents

• Cover
• Front Matter
• 1. Introduction: Mapping the Terrains
• 2. Chinese Oil Investments in Latin America: Evolution, Behavior, and Motivations
• 3. Determinants of CSR Commitments: A Theoretical Dimension
• 4. Chinese Oil Investments in Ecuador and Peru: The Role of Indigenous Civil Society and Government Regulations
• 5. New Investments in Argentina and Colombia: CSR, Regulatory Regime Centrality, and Openness
• 6. Chinese Oil Investments in Venezuela: Could the Business Case Work in the Absence of Exogenous Motivators?
• 7. Conclusions: Summary of Findings and the Way Forward
• Back Matter