Chinese dam project in Argentina paralyzed over contract disputes

Photo: Wikimedia Commons.

The Chinese company Gezhouba has paralyzed the development of a megaproject that was building two dams in the Argentine province of Santa Cruz, laying off almost 2,000 workers.

Following the inactivity from Argentine President Javier Milei regarding the renewal of contracts with the Chinese company, Gezhouba opted to cut its losses and leave the country. The project, which had been paralyzed for 4 months due to a lack of funds and contractual problems, was paralyzed and could have major consequences for Argentina, which currently has a debt of $30 billion with China.

Through a press release published on March 13, the local company UTE Represas Patagonia, led by Gezhouba, confirmed that “some of the personnel linked to the project are momentarily dispensed with” due to lack of funds.

This project, which was initiated in 2013 under the presidency of Cristina Kirchner, was initially budgeted at $4.7 billion and is one of the most important projects that China has outside its national borders.

During the government of Mauricio Macri (2015–2019), the project was put on pause due to high interest costs and later, during the presidency of Alberto Fernández (2019-2023), operations restarted but at a slow pace, with little financing provided merely to keep the project active.

Work on the dams has been completely paralyzed since November 2023, a situation that has been aggravated in recent days by the comments towards China by the current Argentine president, Javier Milei.

Gezhouba is a partner in the local joint venture, made up of Eiling (Former Electroingenieria) and Hidrocuyo, which published a press release announcing the dismissal of 1,800 workers from the project.

However, this uncertainty about the project could entail severe consequences for Argentina. The contract contains a clause linked to the country’s pending swap payments and the Belgrano Cargas modernization project, which also has Chinese financing, according to analysis by the local outlet La Política Online.

La Política Online explained that if China decided to cash in on these loans, Argentina could face debts of more than $30 billion dollars.

It is also worth noting that China is currently Argentina’s second trading partner, following Brazil, therefore an escalation of tensions could lead to China’s decision to stop buying key products like soybeans and meat from Argentina.

The Jorge Cepernic dam currently has a 45% completion, while the Néstor Kirchner dam is at 20%,  once completed both dams would have a power of 1,310 MW. So far, $1.8 billion have been invested and the following stage would require an investment of $520 million, which had already been negotiated under the previous presidency of Fernández.

UTE Represas Patagonia urged the government to resolve the issues in order to continue with the project.