The government of Peru needed funds to offer its people new roads. Finding its coffers nearly empty, Peru gladly accepted China’s offer to give some money toward the road project. To ensure that China continued giving them money, Peru granted mining concessions like Las Bambas to Minmetals, a Chinese mining company, to mine in the Apurímac region. Peruvians got their roads, Minmetals got their golden reward, and everyone was happy.

This didn’t last long. From 2013 to 2015, state authorities approved six modifications to the environmental impact assessment, the document detailing the potential environmentally harmful aspects of development projects. Among the things approved by the new assessments was the relocation of a mineral-processing plant that caused 250 trucks a day to pass along villages’ unpaved roads. Local community protests sprung up against these environmental and social impacts, and the Peruvian police moved in quickly to squash the protests. Three civilians were killed, and national troops were sent in to enforce a state of emergency in the region.

That a Chinese firm’s investments could have such devastating effects is hardly surprising. New research from Shapiro, Vecino and Li (2018) presents a damning study of mining conflicts in Latin America. While the foreign mining companies might profit, the local people are usually not happy about the situation. In fact, violent conflicts between local Latin American communities and Chinese mining companies occur almost twice as frequently compared to firms of other national origin.

China has become a major lender to the Latin America and Caribbean region. In 2005, China loaned US$4 billion to the Latin America region but by 2015, this number had reached US$24 billion. Meanwhile, China has also increased its foreign direct investments to 8.65% of the world’s total. China is investing heavily in the Latin American region, and this new article unveils who is getting what from these lucrative deals.

The study finds that China’s generosity goes hand in hand with more market access for Chinese firms in Latin America. While other governments do this through development aid or international investment agreements, the study found that there was a high positive correlation between Chinese foreign direct investment and loan announcements. Right around the time of the Las Bambas concession, Chinese loans to the Latin American region reached the highest amount yet, at US$37 billion. China is funneling money to Latin American governments to pry open Latin America’s wealth of natural resources.

But how effective is this strategy?

By looking at the use of a mechanism called state investor dispute settlement, which allows corporations to sue governments for lost profits due to host government actions, the researchers found that Chinese firms use these mechanisms at a significantly lower rate than other firms. In other words, Chinese firms have fewer problems with Latin American governments than other firms.

This played out all too clearly in Peru. While protests sprung up over the Las Bambas mine, Chinese premier Li Keqiang held talks with the Peruvian president Ollanta Humala to sign new deals on infrastructure and manufacturing development, perhaps in hopes that with new agreements, the Peruvian government would squash the protests.

In the analysis so far, the Latin American governments and the Chinese firms are both getting what they want from each other. But those living in mining communities have different opinions.

The researchers used data from mining conflicts registered by more than 40 social welfare organizations throughout Latin America. What they found was startling: Chinese firms’ conflict-to-project ratio is about 26.92%, more than double the average conflict-to-project ratio among all firms of 12.18%. This means that Chinese firms were more than twice as likely to be involved in some sort of conflict with civil society about their mining operations.

The protests in Las Bambas aren’t an exception to normal operations for Chinese firms. They’re the rule. Across the region, scenes like the Las Bambas military takeover and the death of local community members because of Chinese mining projects play out again and again. Loans from the Chinese government help Chinese firms gain politically favorable conditions, but the Latin American people stand up to bad conditions resulting from the investments.

The study offers some explanations for these higher than average social conflict rates. In China, nongovernmental action is not nearly as important for being awarded contracts and successfully carrying out operations. Chinese firms are relatively new to the international scene, so they are not as used to operating in countries in which civil society has a lot to say about what they do. The Chinese firms may also not invest as much in corporate social responsibility actions, such as community outreach and resource building.

With the help of loans, the Chinese government effectively helps its firms to enter into Latin American markets and to gain political favor there. What it hasn’t been able to do is prevent social conflicts arising from its firms’ investments.

If Chinese direct investment continues to increase without any change in how firms relate to the environment or Latin American communities, the deaths and mass protests that occurred in Peru around the mine in Las Bambas will multiply. Foreign direct investment is an increasingly important tool for development, but if used with little thought to communities, the effects of the projects devastate the people they were intended to help.