‘The Chinese are taking over’: Bahamas resistance mounts to massive resort

Huge hotel and casino complex Baha Mar faces cash shortfall, with project now at standstill

NASSAU, Bahamas — Missing two grand opening deadlines isn’t something that any large venture hopes to experience, but that’s exactly what has happened to Baha Mar.

Touted as China’s largest commercial real estate project in the Western Hemisphere, Baha Mar, a $3.5 billion Bahamian resort complex, has floundered this year, causing the most serious economic damage the small island country has seen since the global financial crisis. The resort is predicted to contribute 12 percent to the country’s gross domestic product, but its failure to materialize has at least in part led Standard & Poor’s to downgrade the country’s sovereign credit rating.

Thousands of Bahamians had expected to work at the resort by now. Instead, the developer filed for Chapter 11 bankruptcy protection in Delaware this summer while the government assigned a provisional liquidator. The spat between Chinese contractor China Construction America and local Bahamian developer Sarkis Izmirlian — with the Chinese side accusing its local partner of mismanagement and the Bahamian side citing missed deadlines — has meant no progress on opening the 97 percent completed resort for business.

“It’s vital, because the majority of the people who are set to work for this great project — if they cannot work here, I’m not too sure they’re going to get jobs elsewhere,” said Justin Lockhart, an engineer who was hired to work at Baha Mar but is spending more time these days playing solitaire. “For the average busboy, housekeeper, houseman, waitress, you know they’re not going to get this opportunity again. So obviously, it has to happen.”

Meanwhile, unemployment in the Bahamas hovers at about 15 percent. The bankruptcy filings, with one exception, have been dismissed. And while China Construction America returned to the site for the first time last week for an assessment of what needs to be done to finish the project, it is unlikely Baha Mar will open before 2016.

“Tourism is still our No. 1 industry. And in light of the largest resort that has not taken off as yet — and there is no positive sign as to when it would commence, if it does — [all this] is very unsettling,” said Branville McCartney, an opposition politician from the Democratic National Alliance Party.

Most notable 'troubled' transactions by Chinese firms, in billions USD

From fossil fuels and minerals, to railroads and communications, many deals have faced lengthy delays or failed outright

Investor Amount Partner/Project Sector Country Year
Chinalco 19.5 Rio Tinto Aluminum Australia 2009
CNOOC 18.5 Unocal Oil USA 2005
CNOOC 16.0 Government Gas Iran 2006
China Development Bank 13.9 Dresdner Bank Banking Germany 2008
China Railway Construction 7.5 Government Rail Nigeria 2006
CNOOC 7.1 Pan American Energy Argentina 2011
CITIC 6.9 Sino Iron Steel Australia 2014
CNPC 5.4 Encana Gas Canada 2011
China Mobile 5.3 Millicom Telecom Luxembourg 2006
China Construction America 2.5 Baha Mar Tourism Bahamas 2015

Source: AEI Chinese Global Investment Tracker

Note: Involving less capital than other botched ventures, Baha Mar project (with Chinese contributing $2.5bn out of $3.5bn) is reportedly the 27th largest.

The Baha Mar disaster has raised serious concerns about China’s heavy footprint in the country. Beijing’s interest in the Bahamas started with its 2012 stadium diplomacy overture, a $30 million gift of a new national stadium — with no clear strings attached — from the Chinese to the Bahamians. In addition to the multibillion-dollar Baha Mar resort, China Construction America has purchased the historic British Colonial Hilton in downtown Nassau as part of a $250 million waterfront project.

“I thought it was a good idea, personally, when it first started out, because foreign investment is something that I agree with,” said Lockhart. But, he explained, his thinking changed. “I don’t like the fact that it’s a state-owned entity, because the feeling around the country is that the Chinese are taking over.”

Local newspaper editorials have excoriated the Bahamian government, accusing officials of fast-tracking Chinese projects without considering their impact on ordinary Bahamians. As China operates in many other parts of the world, Baha Mar was built by thousands of imported Chinese migrant laborers. In response to public displeasure, Prime Minister Perry Christie has pledged that the capital’s waterfront project with China Construction America will be a “Bahamian-dominated construction site.”

Not all Bahamians, however, have a problem with China’s economic activities in the Caribbean. 

“Everybody’s borrowing from the Chinese,” said Gus Fountain, a cab driver who works a few blocks from the Baha Mar construction site. “We’ve been colonized by the Europeans. The Americans occupied this place at one time, [then] the Spanish. So what’s the big deal?”

Although Christie’s office didn’t respond to Al Jazeera’s request for an interview, Minister of Tourism Obediah H. Wilchcombe said he had no problems with Chinese investment in the country. “We have a wonderful relationship, and we’ll continue to develop and work with them. Nobody’s buying out our country. That’s not true. And no government is going to allow the country to be bought out.”

In the last decade, Chinese international investments and building transactions total more than $1.1 trillion.
Neda Djavaherian

Even those in the Bahamian business community see shortcomings with the current system of vetting foreign investment projects in the country.

“We think that there has to be some spreading of the risk,” said Edison Sumner of the Bahamas Chamber of Commerce. “We have nothing against the Chinese investors who are coming in. But we would like to see others coming in as well.”

What’s happening in the Bahamas is hardly unique. China’s substantial investment in Africa over the last decade has surged past $200 billion. Beijing has poured some $116 billion into South America, chasing its raw materials and working — with somewhat mixed results — to develop the continent’s railway systems. As China diversifies its focus beyond natural resources, its interest in real estate has grown to almost $100 billion in projects in the United States.

By and large, these forays have not resulted the kind of quagmire seen in the Baha Mar project. But troubled transactions, from Rio Tinto in Australia to energy deals with Iran, do happen — with more harmful effects in smaller countries ruled by less robust governments. Bahamian officials, for example, have buckled under pressure.

In an effort to stem citizen discontent, it has stepped in to pay Baha Mar employees’ salaries with taxpayer money while the legal battle continues. The stopgap measure has prevented unemployment from spiking but has pulled the government into the middle of a legal battle between Chinese and Bahamian investors.

Sumner believes the project should be the last of its kind in the Bahamas. “The country obviously cannot handle another single investment the size of Baha Mar,” he said. “It is a monstrosity of a structure. We cannot handle it. It’s too large.”

Largest Chinese worldwide investments and construction contracts, in billions USD

Among the most valuable projects are deals in Australia, Canada and the U.S., in addition to Brazil, Peru and Venezuela

Investor Amount Sector Country Year
CNOOC 15.1 Energy Canada 2012
Chinalco 12.8 Aluminum Australia 2008
China Railway Construction 8.0 Rail Nigeria 2014
ChemChina 7.9 Autos Italy 2015
China Railway Engineering 7.5 Rail Venezuela 2009
Sinopec 7.2 Energy Switzerland 2009
Sinopec 7.1 Oil Brazil 2010
Shuanghui 7.1 Agriculture USA 2013
Minmetals, Suzhou Guoxin, CITIC 7.0 Copper Peru 2014
China National Nuclear 6.5 Energy Pakistan 2013

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