Chevron Corporation (CVX) – China Commits to Ecuador: Out With the Old, in With the New

Since it’s clear that Ecuador’s government doesn’t plan to honor its Bilateral Investment Treaties, China has been smart to let its money do the talking. Instead of tying down the country with restrictive, reciprocal agreements, China is forming a symbiotic relationship with Ecuador that is far stronger than Texaco and Occidental’s prior investments in the country.

In other words, the more western oil companies urge Ecuador to pay treaty-related damages, the better China looks as a business partner. Therefore, Ecuador is welcoming China Petroleum & Chemical Corp (ADR) (NYSE:SNP) and China National Offshore Oil to drill across the Amazon rainforest with open arms.

China has also shrewdly taken advantage of anti-American sentiment across the globe to expand its oil operations. It is Sudan’s largest trading partner, heavily imports oil from Iran, and is the world’s largest consumer of Iraqi oil. In other words, China reserves political judgment in favor of mutual economic growth, which has been an attractive option for countries with controversial regimes.

The Foolish Bottom Line

In conclusion, Latin American governments like Ecuador are every bit as accountable for the deforestation of the Amazon rainforests as multinational oil giants. Today, China has outdone America by going a step further by cultivating controversial symbiotic relationships with national governments, which guarantee it clearance to drill for oil in environmentally sensitive areas.

That’s not to say that America is any better. America has been embroiled in Middle East conflicts to secure oil reserves for over four decades. Our oil companies have also repeatedly expanded into emerging nations with more relaxed regulations to generate higher revenue growth.

In the end, there’s not much that will stop Latin American countries from auctioning off their precious rainforest land to loggers, farmers, miners and oil companies. These nations, being the emerging economies that they are, will desperately grasp for ways to grow their GDP, and the Amazon rainforest will soon become a major casualty of that desire.

The article China Commits to Ecuador: Out With the Old, in With the New originally appeared on Fool.com and is written by Leo Sun.

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