Summary: In recent years China’s prolonged and sustained economic growth has
fuelled a considerable rise in Latin American exports of raw materials
(hydrocarbons, minerals, food, etc) to the Chinese market and, at the same
time, an increased growth in the region’s economies.
In recent years
China’s prolonged and sustained economic growth has fuelled a considerable rise
in Latin American exports of raw materials (hydrocarbons, minerals, food, etc)
to the Chinese market and, at the same time, an increased growth in the region’s economies.
This was confirmed more recently by the visit of the Chinese President Hu
Jintao and other senior officials of the Chinese government to several
countries of Latin America. At the same time, but in the opposite direction, numerous Latin American
leaders, from all over the region and from different ends of the political
spectrum, making pilgrimages to China’s capital and its main cities, seeking to
consolidate the business opportunities that have arisen in recent years, lure
new investment for their respective countries and boost bilateral relations.
These many trips in each direction confirm a mutual and relatively new
discovery, which speaks of the countries’ interest in each other. The trend
will certainly grow and at times move at surprising speed.
interest has spurred high expectations on both sides, some of them viable and
others totally disproportionate and exaggerated. And if they are not met to a
significant extent, this could lead to acute frustration, especially for Latin America. The situation has generated abundant literature on Sino-Latin American
relations, a fact which shows how interested international analysts and
academics are in these questions. Along with it must be noted that Argentina, Brazil, Chile, Peru and Venezuela
have recognised China as an attractive market, while China has granted most of
them the status of ‘tourist destination’. This gesture has eliminated
restrictions on the visits that the ever-growing number of Chinese travellers
can make to many Latin American tourist resorts. We should also add that Latin America is not looking just to China but also to other countries of Asia, starting
with India, the other Asian giant, as well as Vietnam, Indonesia, Thailand, Malaysia and Singapore, to cite just a few examples. So one of the
goals of this study is to identify the main characteristics of the massive
Chinese penetration in Latin America and discuss what the two sides expect to
gain from each other through this phenomenon.
On the one hand
there are China’s expectations. it must not be forgotten that Latin America is
only fourth on China’s list of foreign policy priorities. First are the
countries of the Pacific Rim (especially the US and South-East Asia), followed
by Europe and Africa. So it is appropriate to pose the question of what China expects from Latin America. Here, numerous issues and problems arise, and they could be summarised as
follows: (1) guarantees of continuous and regular supplies of raw materials;
(2) recognition of the People’s Republic of China by those countries which have
not yet taken this step, and the international isolation of Taiwan; (3) to some
extent the presence of China in Latin America poses a challenge to the US,
which sees another country operating in its own backyard; therefore it is
important to keep in mind how this issue influences the pace and modalities of
the Chinese ‘landing’ in Latin America; (4) Chinese expansion clashes
constantly with the political changes that are occurring in Latin America, and
although pragmatism has been the hallmark of bilateral relations between China
and the different countries of the region in recent decades, the deeper problem
that arises now is how China views the shift to the left that is theoretically
taking place in Latin America and how it will respond to it; (5) cooperation on
defence issues. Finally, there is the often-cited question of triangulation between
Spain, China and Latin America, about which the Chinese hold a rather sceptical
At the same
time, and in the inverse sense, there are issues related to Latin America’s
expectations with regard to China, manifested in the many visits that Latin
American leaders have made to Beijing. What does Latin America expect from China? It is clear that here we must start
with the most basic issues, stressing the difficulty of generalising about the
region because the pros and cons of relations with China vary from one country
to the next. It is clear that they all want to cash in on the enormous economic
opportunities arising in Asia, beginning but not ending with China, which to some extent involves not getting left out of the big changes occurring around
the world. This means choosing between adapting to globalisation –with varying
degrees of obligation and willingness– and simply trying to take short-term
advantage of China’s presence and demands in the region.
In general the
following problems and issues can be outlined: (1) the need for dynamic, strong
markets for Latin American exports; (2) Chinese competition with local
manufacturers, which in some cases is fierce; (3) foreign direct investment of
Chinese capital in some specific countries and in certain strategic sectors in
the region –energy, export-oriented agriculture, mining, etc–; (4) countering
the political and economic presence and influence of the US, and even that of
the EU, in Latin America; (5) finally, there are some bilateral relationships
which deserve mention, in light of the recent political development of the
region. These are the ties between Cuba and China, and Venezuela and China. In the latter case, Venezuela is looking to China as a source of
military hardware and perhaps the country that will help it build and launch
the Simón Bolivar satellite, which would be Venezuela’s first.
China and Latin America
Some of the main
reasons for China’s interest in Latin America are the spectacular Chinese
economic growth of recent years, an exponential rise in the demand (and thus the
search) for raw materials and intermediate goods, the quest for
diversified supply sources and a constant zeal for new markets in which to sell
its excess of manufactured goods. However, this is not a trend that emerged
spontaneously as a result of a rise in China’s most recent needs for certain
products (especially Latin American raw materials, minerals and foodstuffs, but
not just these goods). Rather, it is the result of planning by a highly
centralised State that is tightly run by the Communist Party of China, as seen
after the last party congress. This basically means that it is not economic
sectors which make decisions on the ways, modes, places and paces at which this
expansion and presence take place. Instead, they stem from political and
diplomatic action that is planned and carried out by cadres juggling highly
diverse variables all at once.
How long has China been interested in Latin America? Some Chinese nationalists, and other people who are
not Chinese, argue that Chinese navigators –not Christopher Columbus– were the
true discoverers of America. These theories go back to 1761, when a French
Sinologist, J. de Giognes, said something similar. Later, some Chinese
academics raised the possibility that the monk Hui Sheng had arrived in Mexico, which is Fusang in Mandarin, in the 5th century. More recently, a
book by Gavin Menzies, titled 1421 – The Year China Discovered America, was published in 2003. It said the feat was accomplished by Zhen He. But even
in the more than hypothetical case that this did in fact happen, its impact was
not even remotely similar to that of what Columbus did, neither in terms of
importance nor consequences.
more than improbable speculation aside, today we are witnessing the re-discovery
of America, especially, Latin America, by China. But it is not something that
is being left to chance, as the People’s Republic has invested physical and
human resources to develop think tanks specialising in the political, economic
and social realities of Latin America. Examples are the Institute of Latin American Studies at the Chinese Academy of Social Sciences and the Department of Latin
American Studies of the Chinese Communist Party.
implies a true and genuine Chinese interest in Latin America, one which is evident
for the countries of the region: in the past five years Chinese imports of
Latin American products have increased by more than 600%; China invests around US$1
billion a year in Latin America; it sends dozens of military training teams;
has become an observer at the Organisation of American States (OAS); and hopes
to be one at the Inter-American Development Bank in 2008 or 2009. This shows how
China’s presence manifests itself on different levels: bilateral, sub-regional
and inter-regional. Also at play are geo-strategic issues linked to international
maritime traffic, as seen in China’s great interest in anything to do with the Panama Canal and other trans-Pacific routes.
In designing its
foreign policy towards Latin America, from a regional perspective China has
created the China-Latin America Forum, while at the sub-regional level the
government of Beijing has established mechanisms of dialogue with Mercosur and
the Community of Andean Nations (CAN in Spanish), which represent the two main
integration processes on the continent. With the third integration organisation,
the one involving Central America, relations are more complex because some of
the countries of the region have recognised the Taipei government.
with Mercosur have three main goals: (1) try to neutralise, or at least minimise,
Paraguay’s relations with Taiwan (Paraguay is the only Mercosur country that
still recognises Taiwan); (2) to increase bilateral cooperation with the most
important countries of the bloc (especially Brazil and Argentina) in anything
that has to do with supplies of raw materials; and (3) to strengthen the role
of Chile’s ports (although Chile is only an observer at Mercosur) as a platform
for imports and exports of Chinese goods.
Finally, at the
bilateral level China has developed ‘strategic alliances’ with Argentina, Brazil and Mexico, while with Venezuela it has forged a ‘strategic alliance for
common development’. However, the first free-trade accord China signed in Latin America was with Chile (the region’s leader in free trade). China is interested not just in Chile’s minerals, such as copper, but also, and above all,
its deep-water ports as a conduit for boosting trade between China and the countries of South America. Ties with other Andean countries, like Bolivia, Colombia, Ecuador and Peru, fall in the category of relations of global
cooperation. It is the same kind of relationship China maintains with Cuba,
even though the Castro regime would like to improve substantially a
relationship it defines as ideal and it is Chinese financial assistance which
has allowed Cuba to overcome some of the economic difficulties associated with
what Havana calls a ‘special period’. Although in all of these cases,
especially that of Cuba, there is potential for upgrading to a strategic
bilateral alliance with Cuba, these steps have not been taken.
Foreign Trade and Chinese Investment
China’s interest in Latin America focused first on energy, certain metals
such as copper, and some South American natural resources like soybeans. In any
case, it is important to point out that for China its relationship with the US is much more important, both from a quantitative and qualitative point of view. Chinese
political leaders have no doubts about this and impose limits on China’s activities in Latin America. At stake is key access to the US markets in which China sells thousands of tonnes of manufactured goods, and the fact
that China is one of the largest holders of US treasury bonds. For now, China’s interest in the US is far greater than anything Latin America can offer, including
Venezuelan oil which for now is relatively expensive. It is not just a
coincidence that China is the US’s largest trading partner after Canada. Nor should Beijing’s pragmatism in dealing with the world’s great superpower be
ignored, a policy that is especially visible in all aspects of Chinese foreign
policy and in security and defence matters. For this reason, for China it is more important to guarantee continuity in the supply of the products it needs
than to embark on new political adventures in Latin America. Thus, it seeks
stability, and does nothing without first weighing the consequences.
Oil is one of
the products most highly sought by China (Latin America holds 14% of the
world’s reserves) and this explains to a large extent China’s interest in
energy-producing countries such as Venezuela, Brazil, Colombia, Ecuador and
even Mexico and Argentina. This has led China to develop certain ‘strategic alliances’
at the bilateral level, such as those mentioned above. Sinopec, China’s leading oil company, is developing several major projects with a variety of countries in the
region. Besides oil there are other raw materials China is particularly
interested in, such as minerals and foodstuffs. Brazil, for example, has uranium
and soybeans, but also some manufactured products like Embrear aircraft. China’s interest in Latin American foodstuffs stems from the enormous population that China has to feed and the low rate of productivity of the Chinese agricultural sector. It
is cheaper for China to buy Latin American foodstuffs at a good price than
undertake a transformation and modernisation of its entire farming sector.
Latin America’s markets are more and more appealing for exports of Chinese
manufactured goods. For this reason the Chinese authorities and exporters are
increasingly concerned by protectionist measures, especially anti-dumping steps
that some Latin American producers are trying to impose. At the same time,
although for now with a less emphatic tone, China is also worried about the
nationalist bent of some governments, seen for example in the nationalisation
of the hydrocarbon sector ordered by the government of Evo Morales in Bolivia. In
the same way, China’s interests in the oil sector in Ecuador have already run
into some problems with the government of Rafael Correa, although for the time
being some governments prefer to deal with state-owned companies and this favours
the big Chinese conglomerates. To some extent, populist policies, which are
more and more interventionist, are not the best for Chinese investment, even
though the rhetoric might sound right for China.
When President Hu
made his tour of Latin America in 2004, rumours of a huge investment package
for the region began to circulate. Some sources said it could be as much as US$100
billion. The idea was that investments were to take place by 2015 and would be
concentrated basically in Argentina, Brazil, Chile, Colombia and Venezuela. In general, these reports came either from the governments that theoretically
were involved in the investment plans, or from sectors close to them. One of
the most prominent cases was that of Argentina, where government officials,
starting with President Néstor Kirchner himself, said they expected an
investment of between US$15 billion and US$20 billion. However, Chinese sources
have categorically denied such figures existed and said they were more like
just a few billion. In reality, Chinese investment –foreign direct investment– is basically
concentrated in Asia, although in 2005 Latin America did receive US$659 million,
16% of the Chinese total. It is also important to note that China and Latin America do not compete directly for sources of foreign investment. China basically benefits from Asian investment, while for Latin America the money comes
from Europe and the US.
data for 2005 from the United Nations Economic Commission for Latin America and
the Caribbean, the two regions received US$68 billion in foreign direct
investment. Broken down by country of origin, the main investors in the region
were the US (39%), the Netherlands (12%) and Spain (6%). Because of its low
volume (less than 1%), there are no specific figures on Chinese investment,
which are wrapped into the ‘Others’ section. This has led some analysts to feel
that all the talk about Chinese investment in Latin America is really a myth,
given the low level achieved so far when expectations had been so high.
However, this is an issue that must not be downplayed and will require greater
monitoring in the future.
Taiwan and Recognition
of the People’s Republic of China
From a political
standpoint, one of the main goals of the People’s Republic of China in Latin America is more to isolate Taiwan than it is to gain full recognition of the
Beijing government. It should not be forgotten that of the 27 countries that
grant diplomatic recognition today to Taipei, 12 are in Latin America or the Caribbean, although some have relations with both. This is perhaps the most traditional component of China’s foreign policy with
regard to Latin America, as it is a tendency that has existed since the
beginning of the second half of the 20th century. Then, the entire American
continent turned its back on the People’s Republic and chose to maintain
diplomatic ties with Taipei.
Cuba was the first country of Latin America to recognise the People’s
Republic, doing so in 1960. But for a long time Fidel Castro’s alignment with
the Soviet Union strained bilateral relations with China and stalled some
projects that had begun to take shape thanks to shared ideology. The Chinese
presence in the region increased starting in 1970, when Chile recognised the Beijing government. From then on, all the countries of South America except Paraguay followed suit. Uruguay, in 1988, was the last country of South America to turn its back on Taiwan. Mexico did the same, and more recently Costa Rica. This means Paraguay and most of the countries of Central America (El Salvador,
Guatemala and Honduras; Nicaragua, which under the Sandinista government had
recognised the People’s Republic, later switched and restored ties with Taiwan)
are the only ones that still support Taiwan. Panama recognises both the Beijing and Taipei governments, but even so Taipei considers Panama one of its closest
allies in the world.
The US and China:
Latin America’s Shift to the Left
The US position on the Chinese offensive in Latin America is uneven, and based more on perceptions,
speculation and fear than on hard facts. These different attitudes can be
addressed with two questions that are quite simple but far-reaching: does the
Chinese presence in Latin America really pose a threat to the US position (as a whole) in its so-called backyard? If that is actually true, the second
question is how much does the US lose because of that presence. The issues
related to these questions explain why, beyond the growing concerns of the US authorities, politicians and the media over the Chinese initiative in Latin America,
there is no unanimity as to how much of a threat that presence poses for the US economy and national security.
In recent years
many sources, especially those in the most conservative quarters or close to
them, have stressed that the Bush Administration, too preoccupied with Iraq and the Middle East, has ignored Latin America despite the growing threat from Venezuela. The argument is that, while China has clearly been strengthening its economic,
political and military ties in the region, the government in Washington has
displayed almost complete paralysis. For now, none of this has happened and in
terms of foreign direct investment, as seen earlier, the difference between US investment (especially in terms of the accumulated stock) and that of China is still huge. Therefore, it is important to see things over the course of time and
look to the mid- and long-term. Cynthia Watson does not think the current
Chinese presence in Latin America poses a serious threat to the security of her
country, although she does feel the Chinese strategy of establishing ever
closer ties with the region can affect US security over the long term.
In Washington, in the various departments of the Administration, there is no unanimity on this
issue. On the one hand, the Defense Department expresses a certain fear that China will end up becoming the main source of military training for some armies, in part
due to the US law that bans military aid to countries which allow the arrest of
US soldiers so they can be taken before the International Criminal Tribunal in The Hague. The Americans are also worried about Chinese activities in intelligence and cyber
war in the region, especially out of Cuba. The US State Department does not see
China as a concrete threat in Latin America but rather as a nation in growth
that requires a large amount of fuel and raw materials. In reality, for the
Americans the idea is that China’s concerns over the evolution of its domestic
situation sap it of energy to embark on adventures outside its borders,
starting with Latin America.
In any case, the
Bush Administration is worried about the Chinese presence in the region and
evidence of this is the visit that Thomas Shannon, Undersecretary of State for Hemispheric
Affairs, paid to Beijing in April 2006, at the invitation of Zeng Gang, in
charge of Latin American affairs at the Chinese Foreign Ministry. The trip came
shortly after President Hu Jintao’s tour of the US, and was the first time that
a senior State Department official went to Beijing for direct talks on issues
related to China, Latin America and the US. Beijing sees US concerns over these
issues –and the close eye America is keeping on China’s penetration– as something
perspective, it is understandable that China should proceed carefully in its
dealings with leftist governments in Latin America, especially those which fall
under the populist umbrella, such as Bolivia, Ecuador and Venezuela. As stated earlier, the growing protectionism of these governments, added to the
strong nationalism they espouse and their unpredictability, make them less
attractive for countries which, statism and ideological affinity aside, follow
the logic of business when they operate abroad and for this reason are seen as
foreigners, with all the problems this carries with it. Meanwhile, the
government of the People’s Republic was never all that keen on some leftist
activities, such as those of the Shining Path guerrillas in Peru. Even though this terrorist group has defined itself as Maoist, Beijing condemned it
for engaging in counter-revolutionary revisionism.
This is an area
with a growing profile and rising expectations on both sides. Thus, it is quite
common to see Latin American military officers attending courses at the National Defence University of the Chinese People’s Army. Western officers are not usually
invited to these programmes. Defence relations have also included more instances of dialogue, and after President
Jiang’s tour in 2001, Defence Minister Chi Haotian held talks with the defence
authorities of Colombia and Venezuela. This was another sign of Chinese
pragmatism in the region.
As far as
defence is concerned there is one issue that is of particular interest to China, especially with regard to its relations with Brazil and Suriname. Due to their
geographic locations, both countries have facilities for launching satellites
and spacecraft into orbit. These facilities are also used by other powers such
as the EU. Similar sites are hard to find in China, so it is easy to see why China is interested in this issue. Nor must it be forgotten that Venezuela wants China to build and launch the Simón Bolívar satellite.
These and other
circumstances explain the growing fear in the US, which is more acute in the
Defence Department, that China will become the main source of military support
for radical governments in the region, such as that of Venezuela. Memories of
what the Soviet Union was for Cuba are still too fresh. It is through this prism
that must be seen Venezuela’s efforts to acquire from China a large part of the
weaponry it wants for the National Armed Forces in order to face the challenges
posed by commander Chávez has called an ‘asymmetrical war’.
Latin America and China
As far as
relations between Latin America and China are concerned, here it is as hard to
generalise as it is in other aspects of life in the region. This means the
behaviour of the various countries is not uniform, and depends to a large
extent on the expectations each has –and the results it obtains– from China’s growth and greater presence in a globalised world. Although in general it can be
said that Latin America has a small trade surplus with China, this is not so on a
country-by-country basis because there are some cases where things are not
going so well. Mexico has the largest trade deficit with China, followed by Panama, which imports US$1 billion in Chinese textiles each year. Given
the moderate importance of Chinese direct investments, and their still-limited
impact on the Latin American productive sector –Chinese FDI in Latin America in
2005 was less than 10% of China’s total for the world– it is clear that the
degree of enthusiasm of the various countries of Latin America will depend to a
large extent on how things go in their trade relations with China and their
expectations in other areas of their bilateral agenda with the Chinese.
From a bilateral
standpoint, the countries with the strongest political and economic relations
with China are Argentina, Brazil, Chile, Cuba, Mexico, Panama, Peru and Venezuela. Chile is one of the Latin American countries with which China maintains the closest ties. In its support for globalisation and the opening of all
markets, Chile is looking to the Pacific and in particular to China, the third-largest market for its exports and its second-largest supplier of imports.
Chile signed a free trade accord with China in 2005. At the time, Chile was the first non-Asian country to sign such an agreement with China. This particular accord is limited to exchanges of goods only. Later, in a second
phase of this free trade accord, Chile hopes to become a platform for Chinese
investment in the Latin America energy, infrastructure, mining and agriculture
sectors. This is to be complemented by the formation of Chinese-Chilean
business alliances and Chinese investment in the mining, forestry, fishing and
Latin America has been growing at a rate of more than 4% for the past five years
and it is clear this trend will continue at least in 2007. This genuine growth
in the region –in recent years all countries have grown, although at different
rates– stems to a large extent from external factors, and the strength and
demand of Chinese markets is one of the key reasons. Beyond the typical demands
of the Chinese economy, any change in consumption habits can affect the future
of a variety of products, given the size of the Chinese market. An example is
meat, demand for which has increased substantially in recent years, and also
coffee. In the latter case, although there has not been a mad rush of Chinese
consumers to start drinking coffee, the mere fact that several hundred
thousands have taken up the habit is positive for Latin American producers. In
this way demand from Asia affects a large number of Latin American countries,
regardless of their political stripe, the ideology of their governments and how
efficient their economic policy is. For this reason it is inevitable for these
countries to look to Chinese markets, which need a large number of raw
from Chinese Manufacturers
A wide variety
of industrial sectors in Latin American countries are worried about the massive
entry of low-cost Chinese manufactured goods in their domestic markets, which
enjoy varying degrees of protection. It is here where these goods compete with
an advantage over local goods, due mainly to low wages in China, state loans to Chinese businesses, trade barriers imposed against competitors,
Chinese companies’ capacity for copying and international acceptance of their
products. To all of this should be added migration from the countryside to the
cities in China, a process which provides a large pool of cheap, unskilled
labour from people willing to work long hours.
This situation has
led to sharp criticism of Chinese imports, and these comments have become quite
common in countries such as Argentina and Mexico. Of all the countries affected by this competition, the one most
worried is Mexico. For the business people concerned, it is very difficult for
low-quality Latin American products, which are less protected and less favoured
by their socio-political environment, to compete with Chinese goods. The
jitters are greater in certain specific sectors, such as textiles and shoes,
which had experienced a certain development in many countries of the region and
now face very stiff competition from China. But the problem of competition from
China is not limited simply to what happens in the domestic markets; even
though it is tough there, local entrepreneurs have a greater flexibility
because they know the rules of the game. Rather, this competition also shows up
in regional markets. This is the case for Mexican industry, which is watching
with great concern as Chinese products compete in the US market, which the Mexicans had conquered thanks to the North American Free Trade
Agreement. It also applies to Brazil, which must now compete for Latin American
markets on the Pacific coast.
competition has led to the moving of some cross-border assembly plants, as far
as conquering the US markets is concerned Mexico still has location advantages.
This stems fundamentally from its being so close to the markets on the other
side of the US border, as seen in investments that major Japanese companies
have made in car assembly plants. Such is the case of Toyota, which in a short
span of time has become a major leader in the US car market. It should be noted
that this was possibly due in large part to the existence of a free trade
accord between Japan and Mexico. And although the proximity of the US markets makes Mexico especially interesting for the Chinese, bilateral relations are
very complex. Evidence of this is the fact that Mexico was the last country
with which China negotiated its entry into the World Trade Organisation. In Brazil, some factories have also been uprooted because of the Chinese ‘invasion’, although
here contradictory factors are at work. One notable case is that of a Brazilian
footware company that exported its products to the Pacific coast of Latin America. In order to continue competing on a level playing field, it decided to
establish a presence in China and in this way take advantage of wages and other
production costs that were lower than they are in Brazil.
China as a Counterweight to the US and the EU
Brazil, Mexico, Chile, Argentina and Panama are China’s largest trading
partners in Latin America. Even for other countries that have a more modest
trade volume with China, the Asian country is critical. In this case China has quickly become the second most important market for Peruvian goods. At the same
time China is Brazil’s third-largest trading partner and Argentina’s fourth. Brazil is not only China’s largest trading partner in Latin America,
but also the most important one in the region from a Chinese strategic point of
view. Brazil alone absorbs 42% of the goods China exports to the region. The
two countries have developed a ‘strategic partnership’ since 1994, share
similar visions on the international stage (they joined together against the US and the EU in the Doha round of the WTO talks) and are grouped together in the category
of the BRIC. In 2002, China overtook Japan as the top trading partner in Asia and many
Brazilian companies have conquered Chinese markets or invested in them. Such is
the case of the oil company Petrobras, the steelmaker CVRD (Companhia Vale do Rio
Doce), Embraco (refrigeration equipment) and the aeronautical firm Embraer.
China’s second most important trading partner in Latin America. It has had
diplomatic relations with the People’s Republic since the third Perón
government (1973) and trusts in China as a permanent member of the UN Security
Council to resolve its claim of sovereignty over the Falkland Islands. For political reasons this
issue has become one of the foreign policy priorities of the government of President
All of these
circumstances, along with others that have been described earlier in this
paper, have led many Latin American leaders to believe that in no time at all
China could become the counterweight to the US in the region, or possibly even
overtake it. This explains the high expectations with which these leaders look
at everything to do with China, and also the furious speculation over the
amount and destination of its investments, as well the political support some
of their most controversial measures might receive from China in international organisations.
Still, China prompts
ambivalent attitudes among Latin America’s elite and in public opinion. On the one
hand, Latin Americans expect a lot from China. Depending on the case, they
expect a veritable flood of investment that would overshadow the need for that
which comes from the US or the EU, or even that the Chinese arms industry can replace
traditional suppliers, and also, as stated, that Beijing will lend political
support to Latin America. Taken to an extreme, this raises the possibility that
one day the desire and power of the Asian giant would banish forever the
unwanted omnipresence of US imperialism. However, a major lack of knowledge
about China, its true intentions and its military might, added to reserves
about the sometimes aggressive Chinese style of negotiating, the way the
environment has suffered in China, its poor human rights record and other legal
issues, have raised fears over and resistance to a rapprochement that is viewed
with contradictory feelings. With this in mind, China’s arrival in Africa is
being watched with keen interest in Latin American capitals, especially
everything related to Chinese methods for consummating its investments on that
continent, including bringing in Chinese labour to work on African projects.
In 2004, public
opinion in Argentina, Brazil, Chile and Mexico had a more favourable opinion of
China’s rising influence in the world and its economic growth, but was much
more wary of its increasing military power. Chile (56%) and Brazil (53%) were the countries that most approved of China’s international role, while the
most sceptical were Argentina (44%) and Mexico. With regard to China’s economic
growth, Mexicans were the most enthusiastic (54%), followed by Brazilians and Chileans
(48%), while Argentines, perhaps because of their fierce nationalism and the
greater protectionism present in their economic policy (30%), were the most
wary. In terms of military might, negative views outnumbered positive ones.
Those most dubious were Argentines (58%), followed by the people of Chile (53%) and Brazil (50%), whereas Mexico, a neighbour of the US, had only a 37% negative
China, Cuba and
As we have
stated, so far China has staged its incursion into Latin America very
carefully, trying not to irritate the US. When Hu visited the region in 2004,
he did not stop off in Venezuela and when he went to Cuba he tried to keep a
rather low profile, concentrating on joint projects, particularly in the area
of biotechnology. And even though China is seeking to boost its ties with Caracas, especially in the area of oil, the care it is taking reveals a clear will to
avoid triggering unwanted reactions from other players in the region.
Beginning with Cuba,
it can be seeen how after the long period in which the regime of Fidel Castro
maintained a strategic alliance with the Soviet Union and kept it up until the
Soviet bloc collapsed, its relations with China only began to improve after
June 1989, when Havana backed the Beijing government in its repression of the Tiananmen
Square pro-democracy demonstrations and in its refusal to engage in political
openness. Since then, the two countries have backed each other’s claims in the
international arena, such as denouncing the US trade embargo against Cuba, or China’s position against the secession of Taiwan, in 2005. It is a well-known fact
that Raúl Castro and other Cuban leaders have looked for inspiration in the
Chinese development model, despite Fidel Castro’s more closed stance.
Cuba, with great effort, managed to survive the economic crisis of the 1990s
following the dissolution of the Soviet bloc, on which it depended for
survival. The Cuban government later tried to reconfigure its international
alliances, focusing on two countries, Venezuela and the People’s Republic of China. However, while at least superficially, relations with Venezuela are quite satisfactory
and well-oiled with the more than 90,000 barrels a day of petroleum that the Chávez
government sells Havana at a subsidised price, with China things are much more
complicated, as argued by William Ratliff. This is mainly because the two countries attach greater prominence to their
international relations, which means leaving ideology aside. Although China wants to import nickel from Cuba, for now Cuban exports are minimal, even though China is Cuba’s third-largest trading partner, alter Venezuela.
relations rest on three pillars: political, economic and strategic. While Cuba gains from China’s political and economic support, China benefits from Cuban
government intelligence data on the US. Fidel and Raúl Castro and many other of
the main Cuban leaders have visited China at least once or twice; and two
Chinese Presidents (Hu Jintao in November 2004) and many other Chinese leaders
have been in Cuba. In different ways, China supports Cuban education, oil
exploration, nickel mining, technological development and transport
infrastructure. China is looking to the energy sector and important reserves in
Cuban waters of the Gulf of Mexico, where Sinopec is prospecting for oil. In Cuba, China has a good observation post for watching the US. While Washington and its
intelligence agencies have many places from which to monitor China, beginning with Taiwan, China has only Cuba for this purpose. It can be said that to
some extent Cuba’s relationship with China is much more intense than its ties
with other countries of the region.
Energy is the
basis of the privileged relationship between China and Venezuela, which have established a ‘strategic alliance for common development’. From China’s standpoint, despite the difficulties caused by it being so far away, Venezuela is of great strategic importance as a supplier to meet China’s growing appetite
for oil. But it is also an investment stepping-stone for Chinese firms that
want to get in on the business of developing the extra-heavy crude in Venezuela’s Orinoco Belt. Some analysts and especially the Venezuelan government say these
reserves could yield spectacular revenue in the future. In December 2004, during
one of his many visits to China, President Hugo Chávez said his hosts would
invest large amounts of money in the Venezuelan oil sector. Just over two years
later, in March 2007, the creation of a US$6 billion investment fund was
announced (Venezuela would contribute US$2 billion and China the other US$4 billion). However, to date China has only invested just over US$1
billion in Venezuela. This does not come close to meeting the needs of the
Venezuelan oil sector. Even the US$6 billion that were announced fall short.
This provides yet more evidence of how hard it is to implement that ‘strategic
alliance for common development’.
visit in December 2004, Chávez not only said that the Chinese would invest
large amounts of money in the Venezuelan energy sector, something which so far
has not happened, but also that there would be a substantial rise in bilateral
trade. He even said that in 2005 it would reach US$3 billion (more than double
the figure for 2004). This did in fact happen. According to official statistics
of the People’s Republic of China, bilateral trade in 2006 totalled US$4.34 billion,
an increase of 102.5% from the previous year and well above the forecast for 2005.
Returning to the
issue of energy, this is quite complicated. There is a peculiar impasse at work
here despite all the rhetoric. The difficulties begin with the quality of
Venezuelan crude, which is heavy or extra heavy, and end with the enormous
distance that separates the two countries. This means transport adds a lot to
the total cost of the Venezuelan products that China imports, especially oil. For
now, the main refineries for processing Venezuelan crude are in the US, specifically on the Gulf of Mexico. So the US market is still the main destination for
exports of Venezuelan crude. In order to alter the flow, several refineries
specialising in processing this kind of crude would be needed, either in China or Venezuela.
Then there is
the issue of transport, and the fact that Venezuela has no ports on the Pacific
coast. Enlargement of the Panama Canal, which interests China so much, could be
a solution for the passage of supertankers. But even in this case, the long
distance between the ports of Venezuela and the ports of China mean that for China, oil from the Persian Gulf or Central Asia is still cheaper than Venezuela’s. One solution for cutting transport costs would be to build an oil pipeline
across Colombia to reach the Pacific Ocean, but this idea is still on the
drawing board and far from being a reality. All of these projects require hefty
investments of many billions of dollars, something which has not happened, and a
lot of time. Indeed, investments and time are necessary for these projects to
take shape, but the Venezuelan government is short on both: inflation and the
earmarking of PDVSA profits for activities other than necessary reinvestment
are two sources of potential conflict.
is another factor which must not be ignored. So long as Chávez is in power, his
presence is more of an obstacle than a catalyst for good Chinese-Venezuelan
relations. This is not just because of his rhetorical habit of repeating time
and time again his admiration for Mao Zedong. Without him, the pace of China’s business dealings and presence in Venezuela would probably be greater. The
important thing to keep in mind is the Chinese government’s goal of not
provoking the US too much with its penetration of Latin America. This means the
Chinese do not want to see their long-term positions and projects threatened by
supporting political options that Washington frowns upon.
China, Spain and Latin America
In the last few
years Spain has become the main outside player in Latin America, if the US is viewed as participating in the same hemisphere as the rest of the region. However, if
the Chinese presence continues to advance, this position could be clearly
threatened. Therefore, it should be asked whether China really does threaten
Spanish interests and what the Spanish authorities should do about this. For
now, and in general, Spain’s position is not in jeopardy because of the Chinese
arrival. But this does not mean the Spanish Foreign Ministry should not follow
the issue with interest and concern, albeit without panicking.
In this regard
the issue of energy is very important. It is worth noting that Spain hardly imports any gas or oil from Latin America. But if it wants to broaden its
supplier base to reduce the chances of an energy crisis, it needs to be able to
rely on the possibility of these imports. Such a Spanish aspiration would clash
with the needs of China, which is already eyeing the best way to benefit from
the Latin American market. At the same time, the tendency in many countries of
the region to encourage the presence of state-run rather than private companies
might favour Chinese state-owned firms to the detriment of Spanish private
sector companies like Repsol-YPF.
The other aspect
that tends to be present in the relationship, generally on the Spanish side, is
triangulation between the three parties involved. Spain basically serves as an
intermediary between China and Latin America. Jacinto Soler Matutes, author of
the study ‘Triangulación Asia-España-América Latina: una visión desde la
empresa’, puts it this way: ‘Spain should boost its presence in natural markets such as… Latin America so that Asian companies will have the incentive of going through Spain to gain market share’. This means these companies using Spain as a platform, an issue
in which logistical, fiscal and human resources factors come together. However,
despite the enthusiasm the Spaniards show for the idea of triangulation, China and Latin America tend to view it with greater scepticism.
between China and Latin America are often formulated as a ying and yang
dichotomy. In this model, the question is whether the relations are an
opportunity or a threat, or if China is an angel or a devil for Latin America.
To some extent, this approach masks the existence of a complex reality which
varies from one country to the next and has many new features that remain to be
discovered. Although both sides have gained from having closer relations, their
respective expectations, as Jorge Domínguez states, are asymmetrical. China is
realistic and pragmatic. But the expectations of Latin America, especially
those of countries characterised by a lesser institutional density, such as Argentina,
Bolivia, Ecuador and Venezuela, are marked by thinking that assigns an element
of magic to the Chinese presence, treating China as a saviour in the face of
other countries viewed as traditional enemies. While China has developed
important think tanks to learn more about Latin America, and more and more
academic studies of the region are coming out, the other side has done no such
thing. The main exception is Mexico, especially the Centre for Asian Studies at
the Colegio de México. But the rest of the Latin American countries are not
following suit. Rather, they are leaving the future to chance.
Despite all of
this, one of the most important conclusions of this study is that relations
between China and Latin America do not depend on political or ideological
factors. Indeed, this alleged affinity, which at times is not affinity at all, as
much as either side may claim allegiance to the thinking of Mao Zedong, can be
more of an obstacle than a stimulus. China’s pragmatism includes an acute
awareness of the role of the US in the region. China knows it has very intense
relations with the US, and reaches the conclusion that there is nothing in Latin America which justifies jeopardising those ties. However, the potential for growth in
relations between China and Latin America is enormous, and to the extent that
realism also sets in on the Latin American side, the gains will continue to
grow and benefit everyone.
Analyst for Latin America, Elcano Royal Institute
 This Working Paper is an updated version of the article ‘China y
América Latina: ¿qué esperan los unos de los otros?’, published in the Anuario
Asia Pacífico 2006, CIDOB, Casa Asia and the Elcano Royal Institute,
Barcelona, 2007, p. 103-114. I would like to express my appreciation to Carlota
García Encina for her help in carrying out this study.
 The first visit to Latin America by a Chinese head of state was in
1990 with Yang Shankun. In April 2001, right after a US EP-3 reconnaissance
plane was shot down over Hainan, President Jiang Zemin began a tour of Latin America, surprising many analysts in the US. The presence of Jiang in Argentina, Brazil, Chile, Cuba, Venezuela and Uruguay at that delicate moment was a clear
sign of the importance China attached to the region. Later, in November 2004,
President Hu Jintao, coinciding with an APEC summit in Santiago, Chile, visited four countries of Latin America: Argentina, Brazil, Chile and Cuba. He signed 39 accords (trade, investment, space research, tourism and education).In
January and February of 2005 Vice President Zeng Qinghong travelled to Mexico, Peru, Venezuela, Jamaica and Trinidad and Tobago.
 Among the many studies done on this issue, the following are worth
mentioning: Jorge Domínguez, “China’s Relations with Latin America: Shared
Gains, Asymmetric Hopes”, Working Paper, Inter-American Dialogue, June 2006;
Javier Santiso and others, “Angel or Devil? China’s Trade Impact on Latin
American Emerging Markets”, OECD Development Centre Working Paper, nº
252, 2006; Diego Sánchez Ancochea, ‘El impacto de China en América Latina:
¿oportunidad o amenaza?’, ARI, 21/11/2006, www.realinstitutoelcano.org;
and Sergio Cesarim, ‘China y el espejo latinoamericano’, Foreign Affairs en
Español, vol. 6, nr 1, 2006.
 For now, for a variety of reasons, it is unfeasible for China to host a summit with all the countries of Latin America, as it did with those of Africa in Beijing in November 2006.
 Those worth mentioning include the ones made by Mexico’s Vicente
Fox in June 2001; Lula da Silva of Brazil in May 2004; Néstor Kirchner of
Argentina in June 2004; and the four trips made by Hugo Chávez of Venezuela in
1999, 2001, December 2004 and August 2006.
 Presentation by Jian Shixue at the Elcano Royal Institute, 1/III/2007.
 Jorge Domínguez, op. cit.
 China is the third largest user of the Canal, after the US and Japan, and the China Shipping Company is the company that sends the most
vessels through it. See Jorge Domínguez, op. cit.
 Presentation by Jian Shixue at the Elcano Royal Institute, 1/III/2007.
 Sergio Cesarin, op. cit.
 Cynthia Watson, appearing before the US House of Representatives’
Subcommittee on Hemispheric Affairs, 6/IV/2005.
 Andrés Oppenheimer, ‘EEUU y el “peligro chino” en América Latina’, El Nuevo
 Said Jiang Shixue, ‘It shows in a certain sense that the
development of China-Latin America relations has drawn Washington’s attention’,
in ‘A Positive Outlook’, Beijing Review, nr 49, December 2006.
 Jorge Domínguez, op. cit.
 This has not prevented Spanish military officers from being invited
sometimes to teach courses.
 Carlos Malamud & Carlota García Encina, ¿Rearme o renovación del
equipamiento militar en América Latina?, DT nr 31/2006, Elcano Royal
Institute Elcano, http://www.realinstitutoelcano.org.
 In 2005, Latin American exports totalled US$26.8
billion, compared with US$23.7 billion in imports, Latin America-Asia Review,
 Mauricio Naiberger, ‘China, la revolución empresarial’, Clarín,
21/III/07. The author is the Secretary
of the Argentine Chamber of Commerce for the Clothing Industry.
 A group of countries (Brazil, Russia, India and China) which are expected to become major powers in the 21st century, despite the very
different economic performances in recent years of Brazil and China.
 Jorge Domínguez, op. cit.
 Jorge Domínguez, op. cit.
 William Ratliff, ‘Cuba & China’, Latin
Business Chronicle, January 2006.
.Florencia Jubany & Daniel Poon, ‘China and Latin America:
Historic Opportunity’, Latin Business Chronicle, May 2006.