Latin America and the Caribbean are the next stop in China’s global expansion, and the first-ever Chinese white paper for this region, released on 4 November, 2008, doesn’t leave any doubt about China’s intentions. Latin America has ‘abundant natural resources, a good base for economic and social growth and tremendous development potential,’ the document says.
In the November-December 2008 issue of The Diplomat, Peter Hartcher wrote of China emerging from the current financial crisis as ‘a more credible and respected international leader’. This is precisely China’s image in Latin America. China is not only regarded as an alternative to the US hegemony in the region, but it is also seen as a good and credible partner. According to the 2007 Pew Global Attitudes Project, China enjoys a positive image among Latin American countries.
China’s aim in Latin America these days differs dramatically from the 1960s, when the Maoist revolution was the main exporting commodity into Latin America. ‘Chinese policy towards Latin America today is highly pragmatic rather than ideologically driven,’ Professor Gonzalo Paz, a China-Latin American expert at George Washington University told The Diplomat. Professor Paz said this is a ‘new development paradigm that seems to be attractive to Latin American countries.’
A sign of this new paradigm is the growing and wider range of bilateral agreements China has signed with Latin American countries, from education to tourism; from aviation to natural resources exploitation.
The trade between China and Latin America has jumped from US$10 billion in 2000 to US$102.6 billion in 2007, and Beijing has committed to increase its direct investment by around US$50 billion over the next few years. Due to its export boom and favourable terms of trade, Latin America enjoys a healthy surplus.
The Chinese diplomatic model – soft power, multipolar and non-interference – is considered as a real alternative to the US political and economic influence in the region.
‘South-south cooperation’, ‘strategic partnership of common development’ or ‘common understanding’ is the narrative used by Chinese leaders to frame the Sino-Latin American relationship. This has been the narrative used by the considerable number of high-ranking Chinese officials who have become frequent visitors to the region, including President Hu Jintao, who has visited Latin America three times in less than five years. This says a lot.
Dr Adrian Hearn, a China-Latin American Researcher at the University of Sydney and author of the forthcoming book, China and Latin America: The Social Foundations of a Global Alliance, said China’s soft power, technology transfer and integrated development had been the key to this link.
‘The soft power exercised by Beijing relies heavily on the Chinese communities that began flourishing in the late 19th and early 20th centuries,’ Hearn said.
The first Chinese immigrants in Latin America arrived in Cuba in 1847 and since then have formed well-established Chinatowns in the majority of Latin American countries. Hearn suggests, ‘Chinatowns are key to the soft power exercised by China in the region.’ This is especially the case in Cuba, Mexico, Peru, Costa Rica and Panama, countries with the largest number of Chinese immigrants. ‘Chinatown’s leaders play a central role in making connections and building partnerships.’
China leverages ethnic locals, technology transfer, development
Hearn highlights the northern Mexican city of Mexicali, the heart of the Mexican Chinese community. ‘Here Chinatown leaders have been luring Chinese investors to get involved in the development of the frontera del silicio [silicon border] – a high-tech park for the production of semiconductors and other electrical products.’ This is very much part of the Chinese growth model of building a series of industrial hubs.
Technology transfer is the second way the Sino-Latin American relationship is developing and, according to Dr Hearn, ‘this is. different to the United States and Europe.’ Venezuela is one of the largest producers of oil in the world and had previously been reliant on technicians from the US company Chevron for drilling. China, however, is happily teaching Venezuelans how to do it themselves.
‘China has implemented a lengthy training programme that has allowed Venezuelans to learn how to make drills – something that they have been doing since 2008,’ says Hearn. And technology transfer is exactly what Latin American countries need desperately to improve their economies.
Integrated development is the third way China has been able to forge relationships with Latin American countries. For example, Cuban workers trained by Chinese technicians are manufacturing a wide range of electrical goods, from televisions to electrical fans. These are moved to the ports by a transport system designed and developed by Chinese experts. The Cuban docks – from where the goods will be shipped to China – are no longer inefficient facilities. Chinese investors have transformed them into world-class ports.
Dr Hearn argues that soft power, integrated development and technology transfer have a political edge: ‘It is a way not to upset the US. You can build cooperation with a country and never express a political ideology or affinity – and this is what China is doing in the case of Cuba and Venezuela.’
China’s global economic and political model of expansion has another name, the Beijing Consensus. ‘With the collapse of the maligned 1990s’ Washington Consensus, the Beijing Consensus with its core values of growth, self-determination and equality resonates in Latin America,’ says Professor Ariel C Armony, a US Fulbright academic at Nankai University’s Zhou Enlai School of Government. According to Professor Armony, there is lot of interest in Latin America for the Beijing Consensus. ‘It offers hope to developing countries through partnerships and also foreign aid,’ he says.
Voraciousness for energy, resources and commodities
The Sino-Latin American relationship is undoubtedly driven by China’s voracious appetite for energy, natural resources and commodities. ‘China is in search of energy and this is a matter of national interest,’ Professor Yang Zhimin, Deputy Director of the Institute of Latin American Studies at the Chinese Academy of Social Sciences, told The Diplomat. ‘Latin America is today China’s most important source of petroleum, gas and other natural resources key to China’s energy viability.’
Oil is one of the key resources China seeks in Latin America, and Beijing is embarking on all sorts of partnerships to keep it flowing. In 2004, the Chinese state oil company Sinopec invested US$1 billion in a joint venture with Brazil’s oil company Petrobras to build a gas pipeline that goes from south to north-east Brazil.
In 2006, in a partnership supported by China, Venezuela and Colombia began the construction of a US$200 million oil pipeline from western Venezuela to the Colombian Pacific coast.
The gas pipeline is due to be extended to Panama, a country where Mandarin is a compulsory language in schools. Panama’s president, Martin Torrijos, managed to get congressional support for a proposal to widen the Panama Canal allowing ultra-large Chinese cruise carriers to pass through. The Chinese want this to happen and the Chinese giant Ocean Shipping Company is putting its resources into this massive project. Currently, Chinese companies control the entry and the exit of the Panama Canal.
The unstoppable Chinese inroad into the Latin America economy was further reinforced on 23 October, 2008, when the People’s Bank of China, the central bank, became an official member of the Inter-American Development (IDB). This is a major step in the Sino-Latin American relationship. The move will undoubtedly strengthen Latin American-Chinese financial cooperation, trade and investments. China has pledged US$350 million to the IDB to bolster key economic programmes in the region, especially in areas of heavy Chinese investments such as petrochemical, mining, information technology, electricity, telecommunications and automobile industries.
While the Sino-Latin American relationship seems to be cruising, it is not exempt from friction. Mexico and the Caribbean nations, highly dependent on textiles, have trouble competing with Chinese imports. Mexico has lost one million manufacturing jobs to date, and the Caribbean nations are not doing any better.
The lack of democracy is also a point of anxiety. After the brutal military dictatorships of the 1970s and ’80s, Latin American countries genuinely appreciate democracy, and there is a sense of uneasiness dealing with a one-party-rule country. And then there is the Taiwan case, a country that through its infamous ‘chequebook diplomacy’ has been able to lure the allegiance of several Latin American countries, including Costa Rica, Paraguay, Grenada and Dominica. China won’t rest until all Latin American countries adopt the one-China policy.
The Chinese leap forward into Latin America has occurred in the context of the lowest point of US-Latin American relations since the end of the Cold War. While it is true that the US has tended to stop looking southwards since 9/11, Latin America is still in Washington’s zone of influence. This is a powerful reason for China to be cautious in its move to the region. As Gonzalo Paz says, ‘China doesn’t want to change the strategic paradigm in the region and doesn’t want to be seen as a threat to the US.’
This is especially important in the all-sensitive security and military front. According to Professor Paz, ‘The evidence of Chinese military presence in Latin America is not conclusive, and while there has been an increase in military connections, these are minimal when compared with Russia, for example.’ He also believes ‘intelligence sharing has been limited’.
And while Latin American countries have so far welcomed China’s growing influence in their region, they are less welcoming when it comes to a possible Chinese military presence. ‘Generally speaking, Latin American countries don’t want to replace China for the US in this area,’ Paz argues.
American foreign policy and military strategists express concerns
According to Dr José Luis León, Professor of International Relations at Mexico’s Universidad Autónoma Metropolitana, the US did not seem to be particularly concerned in the early stages of China’s involvement in Latin America.
‘However, in the last few years both American foreign policy and military strategists have expressed concerns about the Chinese presence in what the US sees as its historic sphere of influence,’ he says.
And perhaps the US should be concerned. Left-wing Ecuadorian president Rafael Correa campaigned on a promise to close the US naval base of Manta that has been operating since 1999. The lease will expire in 2009 and it has been reported that he has offered to lease Manta to China as a transit port from which to exploit the vast resources of the Amazon. Commentators speculate it will only be a matter of time before Manta becomes a Chinese intelligence surveillance base.
While the military and intelligence Sino-Latin American relationship is so far mainly speculative and perhaps limited at its best, the economic relationship is a solid fact and keeps on growing. For Latin America countries this is crucial. As Professor Paz told The Diplomat, ‘China is the new engine of Latin American economic growth.’
China has established diplomatic relations with 21 of the 33 Latin American countries. In 2004, Brazil, Argentina, Chile, Peru and Venezuela announced recognition of China’s full market economy status. In 2007, Brazil was China’s largest Latin American trading partner, with bilateral trade reaching US$29.7 billion, followed by Mexico with US$14.9 billion, Chile with US$14.6 billion, Argentina with US$9.9 billion and Peru with US$6 billion. Bilateral trade with Cuba totalled US$2.3 billion. China has displaced Japan as the main trading partner for Latin America. China’s main export commodities to Latin America include fabric and textile products, shoes, machinery, televisions and plastic products. Chinese activities in Latin America centre on natural resource extraction, principally soy products (Argentina and Brazil), copper (Chile), iron and fishmeal (Peru), crude oil (Venezuela) and nickel (Cuba). Twelve of the 25 countries worldwide that recognise Taiwan are in Latin America (down from 14 in 2004, as Grenada and Dominica subsequently switched). The 12 are all seven Central American countries (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama); four Caribbean nations (the Dominican Republic, Haiti, St Kitts and Nevis, and St Vincent and the Grenadines); and one South American country (Paraguay).