6

China and Latin America by Margaret Myers

"h. I k A 6 2018 sJ,o,vs a truck 1111/oadi11g a11i111alfeed 111adef ro111 soybea11s, which are imported from Bra:il, at a port , , 1s p 1010 w ·en 011 ugust , . in Na111ong in Chi11a s eas t em Jia11gsu provm ce. (AFPVIA GETTY IMAGES)

China seemjn g ly leaped onto the stage in Latin A meri ­ca in the past two decade , establishing_ a remarkable presence across eountr ie and ector 111 a matter of

a few years. Chine e in vo lvement in Latin A merica ha o f course dated back centuri es to at least the mid- I 800s, when Chinese indentured laborer ' we re ship ped to Latin Am erica build railroads and wor k on plantat ions. Other have poi~tcd as far back as the 16th century as the genesis of the rel~uon­ship, noting that the M ani la Ga ll eon trade routes e tabli shed

commercial contact between the Phili pp ines, Mexico, ar1d

Macao, now a Chinese Special Administrat ive Region. ~ considerable degree of po lit ica l engagement was also ev i­

dent in the mid-20th century, durin g the M ao Zedong e~a, When the Chinese Commun i t Party (CC P) engaged w i th

MARGARET MYERS is director of the Asia & Latin Am erica Program m the /111er-A111erica11 Dialog ue. where she has published extensively on Chinas relatiom with the La 1i11 Am erica and Ca­ribbea11 region. The Politi cal Eco nomy of China- Latin Ameri ca Relation s a11dThe Cha ng ing Curre nts of Tran s-Pac ific Int egra tion: China. the TPP, and Beyo nd , her co-edi ted volum es with Dr. Carol \Vise a11d Dr. Adr ia11 Heam. respecrive/y, were released in 2016. Myers has also restified before rhe House Commiuee on Foreig n Affair s 011 rhe China-Ln1i11 Am erica rela1io11ship and is reg ularly feawred i11 major domesric and imemationa/ media. My ers previ­ously worked as a Larin Am erica analysr and China analyst for rile U.S. Department of Defe nse, during which rime she was deployed wirh rhe U.S. Navy in support of Partnership of rhe Americas. My­ers is a Co1111cil 011 Foreign Relations rem, memb er. She was rile recipielll of a Freeman fellowship for China studies and a Fu/bri g/,r Specialist gram 10 research China-Colombia relations in Bogo ta . In 2018,she was idemified by Global Ameri cans as one of the "new genera tion " of public intellecwals.

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6 GREAT

like-minded governments througho ut the region. But the expa nsive com­mercia l activ ity and inves tment char­acteristic of the cur rent China- Latin America relationsh ip is a relative ly new phe nome non, and one th at has been transformative for the region .

The rece nt boom in Ch inese ove r­seas engageme nt is gene rally associa t­ed with the implemen tation or China's "going-o ut strategy" in 1999. Pa rt of China's broader process o f "refor m and ope ning-up," the policy promo ted over­seas engagement , mostly by Chinese state-ow ned ente rprises, to promote the export of Chi nese goods and services, supplement China's supp ly of natura l resources, and foster the deve lopmen t of Chinese multinationa l companies. In their initial ventures abroad, mos t Chi­nese companies headed closer to home, to As ia or eve n Africa, but a numb er of compa nies made initi al inroads in Latin America in the late 1990s and early 2000s. Some of China's earli est ac tivity in the reg ion included Ch ina

at ional Pet ro leum Co rpora t io n' s (C PC) exp lora tion project in Pe ru in 1994 and the compa ny's sizable oil concess ion in Venezue la in 1997.

Many of China's ove rtures in Latin America ove r the pas t two dec ad es have broad ly supported the tenets of the going-o ut stra tegy. Throu gh the efforts of C hinese co mp a nies, th e region has beco me a valuable export destinatio n for Ch inese goo ds- trade grew from abou t $2 billion in 200 0 to nea rly $ 149 b illi on in 2018. Ch ina­Lati n America trade ties inte ns ified in the afte rm ath of the 2008 globa l fina ncia l cr isis, as C hi na face d de­creasing demand fro m Europe an d the Uni ted States for its expo rts. Chinese offeri ngs in Latin Ame rica have also quick ly ex pa nded fro m mos tly low­ski ll ma nufac tures to a g row ing range of hig h-tec h goods a nd serv ices, in­c lud ing high-speed rai l, 5G teleco m-

Before you read, do wnload the compa nion ! Glossa ry that includes definitions, a guide to acronyms and abbre viations used in the article, and o ther material. Go to www. fpa.org/ great_decision s and se lect a topic in the Resources sec tion. (Top Right)

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munica tions infrastructure. and ultra­high-voltage electrici ty transmiss ion.

Lati n America -es pecially Sou th

Ame rica - has also been a crit ical source of natural reso urces for China eve r since Chinese firms first engaged the region. Chinese demand is increas­ingly concentrated in four Latin Amen­can commodities: soy, crude oil, iron , and co pper. These four commodit ies acco unted for 59.2 % of all Chinese im­ports from Latin America from 2013-17, as Bos ton Univers ity's Rebecca Ray has demonstrated . High rates of Chinese demand for the region 's min­eral are linked to China's ow n mode l infras truc ture- led eco nomic growth. Per iods of mass ive infras truc ture in­vestme nt across Ch ina, inclu d ing as part of the cou ntry's fisca l stimulus after the Globa l Financia l Crisis, have meant surging de mand for construc­tion materials , including Latin Ameri­can iron and copper. Brazil ian and Ar­gentine trade in soy has also boo med alongs ide Chinese demand for animal feed , the result of an agr icultural trade policy that prioritizes importation of soy and a rapid ly expanding middle class that consumes more meat.

In addit ion to trade, Chine e invest­ment in Latin American raw materials also gai ned momentum in the 2000s. For China's leader hip, the 2008 g loba l food price crisis highl ighted the coun­try's considerable depende nee on for­e ign markets and co mpanies for suppl y or agricultura l goods. As they grap pled with soaring food prices, Chinese poli­cy make rs fonn ulated new guidelines for both overseas inves tment and do­mes tic pro~u ction . Chines e co mp a­nies have since grown their prese nce ac ross Lat in Ame rica n and o the r re­g ions' agro - indu tr ia l s uppl y cha ins

to better co1~trol su_pply and pricing. In Lattn Amen ca , this e ffort was led by COPCO , China's ma in gra ins trade r, thro~gh targeted acquisi tions in pro­~ess1ng, _storage, and trad ing. Chong q­''.1g Gra tn Group, Sa nhe, China a­ttonal Heavy Machine ry Co rporatio n ~nd many othe rs have also inves ted in fac to ries, p ressi ng plants , mi lls and o ther agricultural infras truc t . ' . ure tn Latin Amer ica. Chinese miii·ing. 1nve t-

2 0 2 0

ment in the region is also pro lific, but is mostly focused on extraction, rather than across the entire supply cha in . Three Chi nese compa nies-Shougang, China lco, and MMG - hold sizab le and orowing mini ng assets in Peru. Chinese ~in ing activ ity, inc lud ing of the i~legal variety, is also eviden t e lsewhere 111 the regio n , includ ing in Boliv ia, Co lomb ia, Guya na , and Venezuela. . .

The Latin American reg ion 1s com­para tively margina l to Chi na's ene rgy security, supp lying around 10 % of Ch ina 's oil and only a frac t io n of its imported coal and na tu ral gas, but the regio n still factors into China's efforts to "hedge" its energy acquisit ion stra te­gies and establish a balanced po rtfolio of supplie rs and assets. Muc h of Chi­na's trade in oil with Latin America has been secured by oil-backed loans from China's "po licy banks," China Devel­opment Bank and China Export- Import Bank, which has disb ur sed hundreds of bi llions in finance to Latin America and other reg ions since the early 2000s. O il-backed loa n agree ment re qu ire countries suc h as Venez uela a nd Brazil to make all o r a portio n of loan pay­me nts in crude oil.

Although trade in co mm od ities still under p ins the econom ic re latio n hip, the China- Latin Amer ica dyna m ic is a lso increasi ng ly being sh aped by Chi na 's effor t to revitalize its s low­in g econo m y. Chi na's lea d ers h ip views ove rseas e ngage ment, es pecia l­ly th ro ugh large-sca le in fras t ruc ture inve tme nt , as supportive of cer tain

dome st ic po licy objec tives, incl uding eco nomic upgrad ing , trade faci litation,

and em ploy me nt o r excess capac ity in s tee l and o the r secto rs-t he result of inefficie ncies in some or the co untry's Slate-domin ated indu tries.

W" l I · . . it 1 a I o r this a nd po ten tia l prof-tts 111 min d, C hi nese fi rm s have ex­pressed interest in develop ing about

ilSO lr~n po rt infras t ruct ur e projects 1~ Lat in Amer ica a nd th e Caribbean

n~cc 2002 , inclu din g num erous road, rail , port, and o ther deals. Some of the

;~~re _si_zeable pr opo als, such as the . b illion Biocea nic Rai lway stretch -tng b '

etwee n por ts in Pe ru a nd Bra zi l wou ld · ' '

a im to tra nspo rt Braz ilian soy

-

CH IN A

and other goods to Peru, faci litatin g trade in key commodi tie . If backed by Chinese finance, t_hc propo ed rail­wa) could al o provide opportunitie s for Chinese construction firms and for exportation of rail and other equipment to Latin America. Many of China 's Joans for infrastructure developmen t in Latin America include procurement clau es requiring the use Chinese con­tracting firms and the importation of pecified quantitie of Chinese goods.

The e stipulations are intended to boost Chinese exports of goods and service , while also putting China 's surplus dol­lar reserves to productive use, and even promoting Chinese currency interna­tionalization in omc cases . In Argen­tina, Brazil. Ecuador. and Venezuela , in particular, Chinese equipme nt ex­porters and cons truction compan ies have been key beneficiarie of projects backed by Chine e finance.

In the area of transport infrastruc­ture, China has been most success ful in negotiating port deals in Latin Ameri­ca. with about 20 port projects either in progre s or already completed thus far, according to Inter-Amer ican Dialogue analysis. These vary con iderab ly in type and scale, from dredging and ex­pansion deals to construc tion and/or operation of entire ports. In other ca es, Chinese companies have acquired ex­isting port facilitie . Two termina ls of the Santos port in Brazil were acquired by Chinese shippin g firm COFCO in 2014 and 2015, for examp le, as part of the company's purcha es of a majority share in Dutch firm idera and all of Hong Kong's Noble Group 's soft com­modities arm.

In addition to transport in frastruc­ture, China has also pursued a number of high-profil e energy infra structure projects in the reg ion, includ ing nu­merous dams and electricity transmis­sion projects. omc of these proje cts were viewed a impo rtant opportuni­ties for Chinese infrastructure compa­nies, such as Gezhouba , inohydro , and late Grid, to grow their market share in Latin America . In Ecuador alone, former President Rafael Correa and Vice President Jorge Glas signed seven hyclropowcr construction con-

AND LATIN AMERICA

View of the Belo Mo111e Hydroelectric Power Pia/I/ in Altamira, Para State, Brazil on March I/ , 2019. (MAURO PIMENTEUAfPVlA GETTY MAGES)

tracts with Chinese firms, including for the Coca-Codo, Sopfadora, Minas San Francisco, and Quijo s dams, in an ef­fort rid the country of power shortages and provide surplus power for export to neighboring countrie . Chinese in­vestment in electricit y infrastructure is similarly extensive in Brazil. Hav• ing already constructed transmission lines from the country 's Belo Monte hydroelectric dam to city centers such as Sao Paulo and Rio de Janeiro, Chi­nese state-owned power company tate Grid has noted that it will invest an ad­ditional $38 billion in Brazil over the next five years, including in transmis­sion, generation and other power indus­try segments.

Despite the rapid growth in Chinese trade with and investment in the region over the past two decades, China has al o encountered its share of setback in Latin America. Latin America is cast a a " land full of vitality and hope" in China's official policy, but Chinese in­vc tors have for many years viewed the region' di tance from A ia as prohibi­tive. Others have viewed the region' regulatory env ironments and bidding proccs cs as exceeding ly complex or taxing, especially as relative newcom­ers to the Latin Ame rica investment environments.

The region 's perce ived complex­ity i exace rbated by a lack o~ due diligence on the part of some hme e

companies in the region, leading to un­foreseen conflicts and resulting project delays or cos t overrun s. In Bolivia , for example, the Rositas Dam project was stalled following protests about a lack of prior consultation with alTccted communities by the Chinese-Boli,ia n consortium tasked with the dam's con-tmction. In Ecuador, the seven hydro­

electric projects that are either partially or wholly owned by Chinese contrac­tor have faced numerous delay . due in large part to engineering and envi­ronment al problem s. Corruption al­legation have also been problematic for Chinese companies. They led to the cancellation ofa Queretaro railway concc sion in lcxico and inquirie into two hydroelectric clam in Argen­tina, among other challenge .

Venezuela has also become a regular source of stress for Chine e policymak­ers and the many banks and companic operating there, even a Beijing main­tains strong tics to ico las Maduro 's gove rnment. In 20 1 , China ended a critical grace period for Venezuela on its debt payme nt , which was inter­preted as a sign of Beiji ng's growi ng impatience with Maduro 's mismanage­ment of economic alTair . Chine co il companies continue their work in the country, however, sometime in part­nership with Venezuelan national oil company PdV A. ationa l A embly leader Juan Guaid6's claim to the Venc-

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6 GREAT DECISIONS •

Workers are seen as copper 011tp111 begins at the Chinese-owned Mirador mining project in T1111dayme, Ecuador 111/y 18, 20/ 9. (DANIEL TAPINREUTERS)

zuelan pres idency prese nts yet another challenge to Chinese decis ionmak ers, pa rticularly if a new Venezue lan gov­ernme nt were to res tructure o utstand­ing debt to Ch ina .

Despite its some times-rocky entree into Latin A merica, and some endur ing cha llenge s, Chi na has beco me a key economic partn er for most every coun­try in the region . Two dec ad es s ince the imp leme ntation o f the "go ing-o ut" strategy , Ch ina still look s to the region fo r marke ts, re source s, and op portu ­n ities to comp ete internat iona lly with glo ba l firm s . ow , thoug h, C hina is

among the dominant players in in some of the reg ion 's most strategic markets. Chin ese companies such as Huawei , ZT E, and China Mobile are poised to export far more in the way of goods and se rvices as the region look to adopt 5G and deve lop smart c ities. Chinese surve illance technologies, though con­tro ve rsia l c lement o f Chin a's grow ­ing expo rt baske t, have also grown in popularit y in recent years. Variations of the technology a re ev ident in Bolivia, Guyana, Panama, Uruguay, Venezuela, and other countries in the reg ion.

In term s of raw mater ia ls, Braz il

Trucks are seen a:, copper 0111p111 began m the Chinese-owned Mirador mining proj ect in T11nday111e, Ec11ador July 18, 20 / 9. (DANIEL TAPINREUTERS)

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has bec ome an incr easingly cri ti cal market for Ch inese soy importe rs, es­pecia lly after Ch ina placed tar iffs on U.S. soy exports as part of the ongo ing U.S .-China trade war. In 20 I 8, Brazil expor ted 66. 1 millio n tons of soy ­beans to China, far more tha n the U .S., and will exp ort eve n more to Chin a in 2019 . C hine se inve stor s a re a lso ac­tive ly ex panding the ir inve stments in the regio n 's mine ral s. In add itio n to co pper and gold , Chinese com panies have inve sted ex tensi ve ly in vari ous lit hium projects. Ch inese co mp any Tianq i L ithi um pai d mo re th a n S4 bi llion to beco me the second -lar ges t share holder in Soc iedad Qu imica y Mi nera ( SQM), a Chilea n m i ning company. The deal give s the co mp any cont rol over nea rl y ha l f th e curr ent globa l product ion of li thium, a main comp onen t in batt ery ma nufa cturin g. In additi on, China' s Ga nfeng Lit hium bought SQ M 's 50% stake in the Cau ­char i-Ol aroz lithium proje ct , located in Arg ent ina 's Jujuy Province. Chine se comp an ies w ill also likely be ac ti ve in a number of Bolivian lithium proje cts in the coming yea rs.

C h ina's int e res t in in fras tructure developm ent a lso con tinu es una ba t­ed, espec ia lly a the Belt an d R oad, Xi Jin pin g's sig natu re, infra s tru c­ture- ha ed fore ign pol icy in iti a ti ve, make s it s w ay to Lat in Am e rica. China 's over $ 1 IO billi on in cumula­tive fore ign dir ect investm ent in the reg ion thro ugh 20 18 has focused ex­te ns ivel y on infr as tru c ture deve lop ­men t. ewl y art icu lated ag reem ents, inc ludin g Chin e e par t ic ipa tio n in the con tru c tion of the Bo gota metro ,

sugge st continued intere st in t rans ­port and other infra structure proje cts. Co mpa nies have a lso dem onstrated inte re st in mo ving beyo nd short-term co nstruction contra cts toward equit y inves tm ents in Lat in Am erica mean­ing longe r-t erm in te res ts in ~roj ects beyo nd the initi a l co ns tru ct ion pha se, to in c lude in pr oje c t o perati o n and maint enan ce.

Th e volume of Chin ese ac tiv ity in L~ti n A me rica in the co mi ng year w ill lar ge ly depend on C hin a' own eco no mic health . C hin a 's eco no mic

CHINA AND -------- ---=._:_::__=.~~~_! L~ A~ T!._!l~ N~ ~A~ M~ E~ R~ l~ C~ A~ --- ---

Chinese Policy toward Lat· A . 1n mer1ca and the Caribbean

China's most recent tridcs in Latin Amer·ica d . . arc ue 111 large part to a enc of carefully crafted por e· h

. • • I ICS t at ad-vance Chinas own mterest while address· . . , . 111g some of Laun America d~velopment priorities. China's

20 16 Policy Paper on Lalin America and the Caribb . can- an up-orade to the 2008 ver ion- highlights the variotis , a . " . . v,ys 111 which Ch111a mtcnds to cooperate with the reg· (

. . . 1011 e.g., on financial mtegrat1on, space cooperation and cducat·

1 . . , '- 1ona exchange). while also ca tmg China and Lat·,11 A · . . . mcnca a critical part_ners 111 a sh1ft1ng global order. The policy call for altemat_1ve approache to global governance, in which the countne of the Global South feature more promi­nently. and propose cooperation with Latin America on a wide v_ariety_ of both region-specific and global challenges, includmg climate change and trade protectionism.

Other policie , such as the" l + 3+6 cooperation frame­work" -firs t announced during Pre ident Xi Jinping 'str ip to Fortaleza, Brazil, for the 20 14 BRICS (Brazil, Ru ia, India, China, and South Africa) Summit- were crafted in response to calls for d iversification of Chinese trade and investment. The "l" in the title mean one plan, refer­ring to the China-CELAC Cooperation Plan (2015- 19) . which was published after the China-CELAC ministerial meeting in Beijing in January 20 IS. The "3" refers to the economic "cngines"- trade , investment, and financial cooperation- that will drive China' s relat ions with the region in the coming yea rs. And the '·6" in this frame­work refers to the six industries in which China plans to focu it attention: energy and resources, infrastructure construction, agriculture, manufacturing, scientific and technological innovation, and information technologies.

Though less frequently cited by Chine e officials. Pre­mier Li Keqiang also introduced another numerical poli-

cy- the "3x3" model for Sino-Latin America economic cooperation- during hi visit to the region in 20 14. This policy proposes cooperation between Chine e and Latin American enterprises, societies, and governments (3) in lo­gistic , power generation, and information technology (3). Li simultaneously proposed a $30 billion special fund to develop production capacity in these and other industries.

China's numerical policies for Latin America aren' t promoting of a fundamental shift in Chine e engagement, considering that Chinese entities are already active in all of the above-mentioned ectors, to varying degrees. They are instead intended to communicate China's commit­ment to more and increa ingly diver ified engageme nt and to a "systematic upgrading of the relation hip." as Zhu Qingqiao, director general of the LAC division at the Chine e MOFA, explained during a 2014 meeting at the Inter-American Dialogue in Washington. DC. As China contends with economic shift at home. these frameworks also pave the way for China's top communications. infra­structure, IT, and other high-tech firms to establish new markets, contracts, and partnerships in Latin America-a goal clearly articulated in China's over eas investment policies.

China' has demonstrated ome commitment to alter­native form of global governance, a articulated in it 20 I 6 policy paper. by creating the Asian Infra tructure Investment Bank (All B) and other fora for multilateral cooperation. Brazil is a founding member of the AIIB and several other Latin American government are in the process of seeking member hip. Cooperation on climate change and other global i sues is le s apparent, de pite China's interest in positioning itself di tinct from the United State on these matter .

challenges, which Be ijing a11ribu1es to a structural dclcveragi ng after years of debt-intensive growth, will make it difficult for China to achieve 6% eco­nomic growth in the coming month , according to Chinese Premier Li Keq­iang. This situation will only be exacer­bated by a protracted U.S.-China trade war. If China' growth lows con id­erably, Latin Amer ica should expec t some tapering of Chinese intere t in c_enain ector . Merger and acqui i­llon~ and greenfield projec t already dropped from a record leve l of $17.5 billion in 20 I 7 to j u t 7 .6 billion in ~Oi8. China's policy bank have al o issued cornparatively low level of fi-

nancc to Latin American governments over the past two years, although other Chinese financial actors (e.g., commer­cial banks and regional private equity fund ) arc also increasing their activity in the region to a certain extent.

Regardless of Beijing' GDP growth projection , it would be reasonable to expect a more focu cd approach to in­vestment from Chine c companic and banks in the coming year - with in­ve tment and finance funneled toward tho c indu tries that arc mo t support­ive of China's domestic policy objec­tives. The e include strategic cctors such as telecommunications and elec­tricity transmis ion, where China ha

demonstrated considerable competi­tive advantage. As China continue to grapple with its food and energy secu­rity challenges, trade will al o remain concentrated in primary commoditic . with limited intcrc t from Chi na in importing more expensive. procc. ed or refined variation . Amidst mount­ing economic uncertainties at home or abroad. Chinese con~truction and other companies may begin to take rcputa­tional and financial risk more cr i­ously when selecting projects in Latin America. leading to a possible tapering of overall infrastructllrc investment in the region.

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6 GREAT DECISIONS • 2 0 2 0

The Belt and Road Initiative ing def in itions even in China, the BR ! and the opportuni ties it repre ­se nts have been attractive to Latin Amer ican gove rnm ents. As a result , 19 countries in the reg ion hav e signed bilateral Be lt and Road Coope ration Ag ree ments with Ch ina s ince 20 I 7. Pana ma, wh ich brok e ties wit h Tai ­wan in 2017, was the fi rst co unt ry in th e re gion to s ign one of these ag reements, which are in the form of a memorandum of unde rstandin g. As fo rmer pre sident of Pana ma Juan Carlo s Varela ind icated in a speech in Hong Kong in 20 19, the BRI i " all abo ut co nnect ivity and Panama is one of the most co nnected countrie s in the reg ion ." He adde d that hi s cou ntr y saw a " big op portunit y" in th e BR!.

Backed by the Silk Road Fund , Chi­na's policy banks, and the As ian

Infr astructure Invest ment Ban k (ATIB), the Belt and Road Initi ative (BRI ) is the sig natu re fo re ign pol icy in itiat ive of Chinese Preside nt Xi Jin ping, and one wi th wide-ra ngi ng economic, diplo ­mati c, and geo polit ica l aims. Wh en ini­tially co nceived in 20 13, the Initiative imag ined the deve lopmen t of a multi ­t rillion dollar we b of infra stru ctur e and o th er proj ec ts across Euras ia, to promote trade and other forms of co n­necti vity wh ile improv ing prospec ts for econo mic deve lopment amo ng part ner nation s. Th e BRI was described at the t ime as supp ortin g five ave nues (wu tong) fo r coope ration, includi ng on pol icy, finan ce, trade , infrastr ucture , and peop le-to people exchanges.

has evo lved fro m two spec ific geo­g raphi ca l rout es - an ove rland Silk Road Eco nomic Belt and a sea-ba sed 2 1st-ce ntur y Mari time Si lk Road­toward an increas ing ly globa l ambit. Latin America was officia lly included in the BRI in 2018, follow ing China 's inclusion of the Arctic reg ion. Prior to that, Chinese officia ls had highlight­ed a few Lat in Amer ican co untries as likely parti cipa nts in the BRI. Mexico was singled out as an " important node" in the Initiative's extension during the Septembe r 201 7 BRICS Sum mit , for examp le. Pana ma becam e a "natural extension" o f the BRI durin g Chinese Fore ign Min iste r Wang Yi's v isit to the Ce ntral American nation that same year.

Now that the China-backed Belt and Road Initi at ive has take n root in the Latin Ameri can and Caribbean region, hopes are high that Ch inese inves tment Over the pa st six years, the proje ct

Th ough not we ll und ersto od in Latin Am erica , and subjec t to vary -

Unpacking China

Of imp orta nce when ana lyz ing Chin a's approac h to the region is an und erstandin g that China is not a monolithi c prese nce in Latin America, but instead cons ists of mul ­tiple actor s with di verse intere sts and motivation s. It is imp ortant, as po liti ca l sc ienti s t Ariel Armon y ha writ ­ten , " to unpack the idea of the Chinese srate." Ther e are inde ed occasio ns whe n China act s as a unitar y state, with ve ry clear na tional go al s. But the re are also instan ces when Chin a act s in a seemingly fractured and d ivergen t m anner. Although China upho lds a ce ntral ized hierarc hy, var iation s in int er pre tation and impl ementation amon g diff eren t ins tituti ons and at diff erent leve ls o f Ch inese gove rnm e nt ha ve led to w ide-ra nging outcome s in Ch ina 's ove rseas ac tivi ty.

Th e interes ts a nd mot ivati ons of Chin ese companie s al so vary co ns ide rab ly dependin g on their s ize and tic to the Chin ese gove rnm e nt. For example , Chinese inves­tor s in Latin American ag ricultu re range from mass ive s tat e-ow ned e nte rp rises, such as COF CO, which has in­ves ted ex tens ive ly in Lat in Ame rican ag ro-i ndustry w ith sup po rt fro m the Chin ese s tate to small firms, such a Z hejiang Fud i, which was crea ted by 50 farmers from Hu afe ng v il la ge in Ch ina 's Zhej iang provin ce. Face d wi th lan d limit ations at home, the villa ge rs ex plor ed the po ss ibilit y of pooling their indi vid ua l financial reso urces to buy Brazi l ian land for soy production . After es tabli sh-

70

ing Zhejian g Fudi Agricultur e Group , they pu rchase d 16,800 hectares in Rio Grand e do Sul and Tocatin s for the production of soy.

Whether directly supportive of Chi na 's national inter­ests or not , the cast of Chinese charact ers is also chang­ing somewh at in Latin America. An increas ingly diverse group of Chinese fim1s, lenders, and investors is now en­gag ing with the region. China 's commer cial banks. such as ICBC and Bank of China , are play ing a more promi ­nent role in the region , for exampl e. They are in some cases is uing more credit to Latin America than China 's major policy banks, China Development Bank and China Export-Import Bank.

Chinese companie s and funds are also increas ingly ac­tive in Latin Ameri can private equity. Chinese firm Didi' s acq uisit ion of 99, the Brazilian ride-share comp any, is one such examp le. As China become s increasingly ac tive in the tech space , a wide variet y of Chinese technolo gy co m­panies arc also looking to invest in the reg ion, includin g in in formation and commun ications technolo gies ( ICT). Chinese ICT investment in Latin America wou ld pre um­ably provid e opportunitie s not on ly for provider of ICT service s and infrastructu re, but al o for the deve lopmen t of increasingly advanced technologies (e.g., art ificia l in­telligence plat forms and applicat ions) that arc catered to local populatio ns.

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"ill address some of the region' most pressing transportation and other infra­cruc1ure needs. So far al least, China-

backed infrastructure deals are indeed in che works throughout the region, including in the three countries that re-

cently establi hed diplomatic ties with China. China bid on and won a num­ber of construction contracts in Panama over the past year and a half, and has also discussed a possible railway with Panamanian offic ial . which would

run from Panama City 10 the border of Costa Rica. The railway, for which an initial feasibility scudy was recently completed, was among the first ven­tures in the region to be officially af­filiated with the BRI.

The political dimension

When C~ina b~gan inve ting more extensively m the region in the

early 2000s. the Chine e govern ment sought support from Latin American governments for a handfu l of fairly straightforward foreign policy objec­tive , including recognition of China's ·'market economy" status and upport on questions of territoria l integrity (e.g., China's views on Taiwan, Tibet, the outh China Sea, and Xinjiang).

Taiwan, in particular, ha been a prominent factor in China's political dealing with the region for a number of decades. dating back to the establish­ment of the People's Republic of China (mainland China) in 1949. After many year of diplomatic competition with China and numerou , oflen controver­sial, examples of "checkbook diploma­cy," Taiwan had achieved 15 diplomatic allies in Latin America and the Carib­bean ac the end of 2008, including Para­guay, ome Caribbean nation , and mo t of the countries in Central Amer ica . Thal same year Taiwan's newly elected president, Ma Ying-Jeou, proposed a "diplomatic truce" with China, effec­tively halting the practice of providing financial as islance to small nations in exchange for diplomatic recognition. For the next eight years, China and Tai­wan largely refrained from grandiose diplomatic gescures.

Competition quickly reignited follow­ing the May 2016 election of Democratic Progressive Party candidate Tsai Ing­wen, however, and concerns in China about her perceived pro-independence agenda. Since Pre ident 1: ai's election, Chinese officials have been increasingly active in those countries chat continue to support Taiwan, toucing the economic benefit of stronger tics with China. As a re uh,overthc past two years alone, three countries in the region- the Dominican

Memberl of rhe military andjo umalisrs (R) gather 011 the dock as the 'Fe11g Chia '(L-I I I 5) a11d 'Mi11g Chua11' (C-1112) navy frigates are pictured during a ceremony to commission the two Perry-clas_s guided missile frigates from the US imo the Taiwan Navy, in the so111h­em port of Kaohs11111g 011 November 8, 2018. - Presidem Tsai Ing-wen vowed on November 8 (hat Taiwa11 would ,wr "co11cede 011e step" in defe11d111g itself as sire inaugurated rwo frigates bought f rom the US aimed at boosri11g the isla11d's 11a\'{l/ capabil,ries against Cl11na threats. (CHRIS STOVVERS/AFPVIA GETTY IMAGES)

Republic, El Salvador, and Panama­shifted their diplomatic recognition from Taiwan 10 China.

China rcponcd ly offered the Do­minican Republ ic a package won h $3 billion in exchange for diplomatic recognition, over half of which was destined for infrastructure projec t . Th e Domini ca n Republic i a l o in the process of sec urin g a 600 million loan from Chi na' s Export­Import Bank to upgrade its powe r dis1ribu1ion systems, and Dominican Pre ident Danilo Medina has flagged ad­ditional projects for possible Chinese supporc, including the modernization of 1he Pore of Arroyo Barri I. El Salva­dor' former ruling Farabundo Martf

a1ional Liberation Front (FML ) ten­tatively ncgo1ia1cd al lea I 1wo major projects with China- renovmion of the

La Union port and a po sible pecial economic zone, which would account for about 14% of alvadoran territory and much of the country' coastline­before siding diplomatically with Bei­jin g. These propo al are currentl y under review by El Salvador' new government. Panama is 1he proce of negotiating a free trade agreement with China and has negotiated a number of infra tructure deal with the A ian na­tion, including the clcvclopmenl of two port facili1ie .

As the Dominican Republic, El Sal­vador, and Panama navigate their new lie with China, Taiwan' rema inino allies in the Latin American and Carib~ bean region- Haiti, Guatemala, Hon­duras, icaragua, Saini Kin and ev­i , aint Lucia, and Saini Vincent and the Grenadines- arc no doubt weioh-o

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GREAT

ing their options. Some may fear that cutting ties with Taiwan would lead to retaliation from the U.S. U.S. ena­tor have indicated a trong preference that Guatema la and Hondura remain stea dfa t in their dipl omatic upport for Taiwan . In September 2019, the Senate Foreig n Re latio ns Co mmitt ee passed the Taiwan Allie Interna tional Protection and Enhancement Initiativ e (TA IP EI) Act to engage mor e exte n-ive ly with gove rnm ents that support

Taiwan's dip lomatic recogn ition while dow ngradi ng tie wi th co untri es that do not, and pos ibl y suspendin g or a h e rin g U.S. foreig n ass is ta nce to the latt er.

l n additi on to Taiwan, outh -South cooperat ion is another endurin g feature of Ch inese fore ign po licy in the reg ion , and one that is cons i tent with China 's long- stan din g se lf-identifi catio n a a deve lop ing co untry . China's gra nt and concess ional lending in Latin America and the Caribbea n, in add itio n to fac­to ring in Chi na-Ta iwan co mp et ition , ca n a lso be inte rpr eted a a fun ction of Be ijing's Sou th-South po licy. Chi­na 's support for deve loping co untry intere sts in inte rnational c limat e and trade forums are also supportive of the China's South -So uth age nda. Th ough a top po lluter itse lf, hina ca lled on rich co untrie s to "pay the ir deb ts" on cli­mate chan ge during the COP24 meet-

DECISIONS •

ings in December 2018, for exa mple, crit icizing developed countries for not doing enough to reduce green hou e gas emissio ns and provide finance to he lp poor countries do the same .

Beyond these decade s-old featu re of Chinese foreign policy is an increas­ingly complex po litica l and diplomatic agenda. Beiji ng ha focused extensively on the power of dipl omacy ince the Mao Zedong era , but China has focused with greate r inten ity on the develop­ment of soft power under the leaders hip of Xi Jinping. In 20 14, at the beginning ofh i pre idency, Xi proclaimed a need to " increa e China's oft power, give a goo d Chine se narrative, and better co mmuni ca te Ch ina's message to the world ." More recently. during the 20 l 7 19th Party Congress, Xi called on China to expand it '"capacity for engaging in internationa l co mmu nicat ion so as to te ll China's storie well, present a true, multi-dimensional and panoramic view of China, and enhance our co untr y' soft power."

In re pon e to these calls , and a pa rt of broade r BR I-related. peop le­to-people dip lomatic efforts, China ha employed an array of actor to improve China's image and advance it interests abroad . These range from Co nfuc iu Institut e and Inte rna tiona l Depart ­ment de lega tion to foreign language media outlet , think tank missions, and

Mim 11er of , .. oreign A/Jain a11d Swte <;or111s~l~r of tit~ Pl!ople s Republic o/Clti11a. \\'t'.mg Yi (R) 111111 th<' Domimca 11 Rl!ptt/Jltc Forl!tg11 Mu~rsll!r M,grrel \i irgal M_aldonado (L). rmcol'er the Inauguration plaque dttri11g tire r11t1t1grmrtro11 Cl!re111011y of tire Clunese Embassy in Samo {)1J11l/lt }/O, (I/I September 21. 20/8 . (ERIKA SANTEUCESIAFPVIA GETTY IMAGES:

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cultur al troupes, for instance. As Chi­ne e cholars Zhao Kejin and Gao Xin have noted. '•Diplo macy is no longer confined to the domain of foreig n af­fairs, but it has become a multipla yer, mu lti-ta sk und ertaki ng for Chin a­tran sfom1ed from a mere govern men­tal function und er the contro l of the Mini try of Foreign Affairs to one that includes the wor k of the Party, the gov­ern ment. the ationa l Peo ple' Con­gres . the Chine se Peop le's Po litical Consultati ve Conference . the Peo ple"s Libera tion Army (PLA) and o forth ."

C hina has also so ught to deve lop produ ctive relatio nships wi thin Latin American regional orga nizat ions for a number of years . including bye tablish­ing observer statu at the Organization of American State , beco ming a mem­ber of the Inter -A meric an Deve lop­ment Bank , engagi ng with lDB lnve t and CAF-Development Bank of Latin America , and working at time with the Santia go-based United ation Eco­nom ic Commi ion for Latin America and the Caribbean (ECLAC) . China al o e tab li hed the China-CE LAC Forum in 20 15, utilizing the nearly defunct Com­munit y of Latin American and Ca rib­bea n Stat e (CELAC). e tabli hed by

cnezucla n Pre ident Hugo Chavez in 20 11. a a vehicle for the new China-led regiona l platfom1. The Forum has since been used to articulate Chine c policy toward the reg ion. including on the Belt and Road Initiativ e . and to develop a five-year plan for China-Lmin America cooperatio n.

nothcr imp or tan t dim cn ion of the po litica l re latio nship i the e ffect o f C hin e c eco no mi c e ngagemen t on regional po liti cs and democ ratic gov erna nce. Chi na maintain a strict po licy of no n- inte rfer ence in the do­mes tic affa irs of ovc re ign na tions, but eve n a strictly econo mic age nda in Latin Ame rica ca n have politi ca l and gove rnan ce -re lated impli ca tions for the regio n. There arc co ncerns, for ex· ample , that Chinese engagement may be facil ita tin g co rr uption in cc rrnin cou ntr ies. China's po licy bank s have ~ftc n ex tended finance thou gh cn:dit Imes with no pub lic ly speci fied pur• po e, limiting the availabili ty of infor-

p CHINA AND

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rnauon for domestic consti tuencies and forcorruption prevention . In Venezuela, for example. these arrangeme nts have stoked allegations that Chi nese fund have essentially disappeared , wit hout much benefit to the Venezuelan popu­

lation. China al o continue s to rely on the

project preferences of individ ual gov ­ernments when conside rin g infr astruc­ture project . Thi s occa ionally has led 10 the selecti on of national leader •

"pet" or "p re tige" projects, such as the e tor Kir chner and Jorge Ceperni c

dam in Argentina, whic h were thouoht to have benefited forrner President Cri s­tina Kir chner and her a sociate , but were deemed of low relati ve prior it y for energy sector develop ment in stud­ie conducted by the Argentin e Energy Mini try . Other nati onal developmen t finance institut ion operati ng abroad, including Brazil 's B D ES, have also tended to rely o n gove rnme nt "w ish Ii ts," but as ind icated by the B DES­linked lava ja 10 scandal , thi s approach i often l inked to co rrupti on in Latin

America. The extent to wh ich Ch ina exert s

any influence ove r electi on outcome s in the region is less c lear, but Chi na has cenainly been accused , especiall y by the U .. govern ment , of " propping up a failed regime" in Venezuela through the extension of multi -bi lli on-d oll ar line of credit. In other cases, Chi na's influence is less dir ect. T he decision by El Salvador 's forrner government to cut tie with Taiw an came j ust months ahead of that co untry 's preside nt ial elections. The FM L may have hoped

that China's two large-scale offe r­ings- renovation of the La Union pon and a massive special economic zone­would boost their standin g in the poll s, but the pany was voted out of office in February 20 19.

As China becomes a dominant eco­nomic panner for many countries in the region, whether in terrns of trade or as a source of invc tment or finance, Chine e entities arc increa ingly capable of in­Ouencing ho t country dcci ion-making, whether they do so intentionally or not. The same is of course true of the region's Other major economic panners and there

Members of 1he Chinese Confucius i11s1i1111e take par/ i11 a L1111ar New Year celebration in Vina de/ Mar city, about /21 km (75 miles) 11orthwes1 of Santiago, February 3. 2011. The f:imar New Year begins 0 11 Th11rsdaya11d marks the start of the Yearof1h e Rabbit, accord­mg 10 the Chinese :odiac. (ELISEO FERNANDEZ/REVTERS)

i no shonage of example of U.S. and other external influence on the region's politics, for example. China's effect on regulatory and other decision-making is lik ely to be increasingly pronounced in the coming years, however. Extensive investment in some of the region's most critical economic sectors has already led some government in Latin America to change inve tmcnt-related regulations to promote continued Chinese engage-

ment. China also hopes for broad-based support in international organizations for a series of agenda items, includ­ing in global debates on internet gov­ernance. In additi on Chinese company eff orts to engage more extensively in the tech pace in Latin Am erica, includ ­ing through grants for sman cities and surveill ance equipm ent. wi ll g ive Chi­na growi ng influence over the region 's broader tech-related deci ionmak.ing.

A "win-win" relationship?

China is an increasingly cr itica l partner for the Latin American re­

gion. T he country is South Ameri ca's top trade partner and comes in second to the U.S. for the rest of the region. Chinese fi nance nnd investment ha also been transfonnat ivc, e peciall y in pecific countrie and sectors. But the

nature of Chi nese engagement- espe­ciall y a trade relationship ba ed on the cx ten ive import of pccific primar y commodi ties from the region and ex­port of i ncrca ingly high-value-added manufactured good - is thought to be problcmnti c for the region from a deve lopment per pcc ti vc. Alt hough commod it y producti on is 110 1 inher­entl y inferior in terms of value-added potentia l. as Wor ld Bank and ~ther economists have indicated, weak diver­sification of export exposes the region

to price and demand shock . For outh America's resource rich economic in particular, China-Latin Ameri ca trade dynamic have re urrected deve lop­ment debates from the 1960 abut " un­equal exchange," the " resource cur e," and heightened " dependency." Indeed, South American countrie ' reliance on export of certain primary commodi ­ties left some in diffi cult circumstances when global commodit y price dropped in 20 14.

China ha also been link ed to de­creases in market share for some of the region 's manufacturer . l ndustrie in Brazil, Colombia, and Mexico all face competition from Chin a in their ow n markets. According to a study from the United ations Economic Commission on Latin A meri ca and the Caribbean (ECLAC), Mexi co in particular ha

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faced sizeable growt h in consumption of impo rts from Ch ina- from 3.3% to 6.4% between 2005 and 20 I 0. The most alTected sectors in Mexico were the textile and appa rel industry, au to parts, industr ial machinery and equip­ment, and metals and derivatives. Sec­tors such as industrial machinery and equ ipment, office mach inery, electrica l equipme nt and metal products in Ar­ge ntina, Brazil, Colom bia, and Mexico have also faced considerab le compet i­tion in third markets.

Co ntr ove rsy has a lso sur rounded the pr ese nce of low to mid-sk illed Chinese wo rkers in Latin Ame rica and the Car ibbea n, cente red on a perce p­tion that low -ski ll Chinese labore rs are be ing employed instead of ca pable lo­ca l labor. One prom inent exa mple was Ch ina 's inves tment in the Ba l,a Mar hote l in the Bahamas. China Construc­tion Americas s igned a contrac t that allowed for the emp loyment of up to 7,000 Chine se workers ove r a spec i­fied pe riod of t im e, a lthough fewe r actually arri ve d. The Bahamian Co n­tractor s' Associa tion objec ted to the use of Chi nese co nstruction worke rs, indicat ing that they were not consulted about opportuniti es for highly experi­enced Bahamian. Tens ions ge nera ted by the use of Chinese labor have also surfaced elsewhe re in the Caribbea n, as well as in Centra l America, Venezuela, Guyana, and Su riname, among other cou ntri es. Chin ese compani es have tend ed to limi t the ir use of Chin ese low-sk ill labor in rece nt yea rs, perhaps in response to nega tive reactions from loca l populations.

T he enviro nmenta l e ffec ts of Chi­nese engage ment are a lso of gro wing concern. China is heavi ly invested in in fras tru ctur e and ex tra ctives - sec­tors wit h outs ize env ironm ental im­pac t. Chin a- backe d in fra st ru ctur e projects are in some cases transfo rm­ing the regio n 's de lica te ecosyste ms. Sinohy dro's dred ging proje c t in Peru w ill reportedl y a lter the dynamics o f the alTected rive rs and their ca pacity to susta in lakes in na tura l parks like the Pacaya Samiri a. Chinese co mpa­nies have also some times stru gg led to mee t the regio n's ambitio us enviro n-

74

mental and social sta ndards, leading to socia l conflict or environmental damage. This is especially common whe re enforceme nt has been lacking from nationa l governme nts in Latin Amer ica. Moreover , o f Ch ina's pipe­line o f proposed transport and other infras tru cture projects , many are lo­cated in especially biodiverse parts of the reg ion. Future development could therefore further degrade the region's

ecosystems . Chi na' s effect on job growth, so­

cial inequality, and on a wide var iety of other development issues have been studied to a degree, but are not yet well unde rstood. Progres s toward sustain­able development in the region will re­quire enhanced co mmitment from the Chinese ministries , embass ies, banks, and compan ies to sustainable develop­ment goa ls and internat ional standards on cor pora te social res ponsib ility. Some Chinese comp anies and institu­tions are making strides in this respect ,

but others sti ll lag behind their peers. The extent to wh ich China 's en ­

gagement is promoting of the deve l­opment interests of Latin America will depend to an even greater degree on the actions of Lat in American goven:_i­ments and stakehol ders. Researc h sug­gests that the performa nce of Ch'.n_ese companies comes down to the politica l will of local governments to maintain hard-fought standar ds and ensure ac­cou ntab ility, whether on labor issues , environme ntal matte rs , pr ior consu lta­

tion, or in other areas. Pervasive Sino­Latin American trade imba lances also dema nd creative policy responses from Latin American governments and trade blocs. New thinking on this issue will be crit ica l not on ly to ba lance relations with China , but also to enhance com­petit iveness and streng then the region's eco nomic standing as it competes in what is now a very different econom ic order, with new markets and expand ing sources of competit ion.

The U.S.-China-Latin America "triangular" relations

Over the past two years, the United Latin Ame rican governance , security , States has soug ht a more dire ct corruption, regulatory capac ity, and fl -

role in shaping the evolution of China- nancial stability, and in a range ofother Latin America rela tions. At the begin- areas. ning of 20 18, then Secretary of State While ome of the U.S .'s articulated Rex Tillerso n vo iced his- and pre- concern certain ly re onate with Latin sumab ly the broader Trump admini s- American aud ience , the T rump ad-tration's- conce rns about China' rise ministra tion's effor ts to portray China in the region . Ti llerso n warned Latin a a relati ve bogeyma n in Latin Amer-America about its ties to China, stat- ica have generally been cr iti cized or ing, "China's o ffers always come at a co untered by scholar s and official in price," and describ ing Beiji ng's ambi- the region. Peru' fore ign tra de min-tions as imperiali stic. When curren t ister, Edu ardo Ferrey ros. respon ded to U.S. Sec retary of State Mike Pompeo Secretary Tillerson 's initial co mments, assumed the posit ion, he took a similar noting that China is a "good trade part-message to the reg ion. During a trip to ner" and that Peru i "ca refu l with all Mexico City Pomp eo stated , "C hina of its t rade re lat ion ." u . . cholar ha s inves ted in ways that have left and po licy profc sionals have also lob-co untri es worse off. " Whi le in Chile bied for a more productive re pon e to he noted that Chinese dea ls in Latin China's rap id growth in Lat in America America generally introduce corrosive and other regio ns. capi tal or generate corrup tion. Warn- Although it ha bee n the most vocal ings abou t the perils of engaging with on the top ic, the Trump admini trat ion China were also delivered by U .. of- isn't the fir t to fret ove r China's rise in ficia ls in Arge ntina, Chile, and other the reg ion . In fact, the U.S. gove rnment countries, referencing China's elTect on has been taking stock of Chine e inter-

,.

CHINA ANo ---------- -...::.....::...:___..:_~~~ ~ L,_!_A~T~l ~N~_!_A~M!_E~R~l~C:...!_A~------

ests in Latin America and the Caribbe­an since the 1990s. Concerns surfaced around 1998 about Hong Kong firm Hutchin on Whampoa's involvements in the Panama Canal. Chinese billion­aire Wang Jing's canal adventure s in

icaragua were also close ly moni­tored in Washington start ing in 20 13. And China's interests in Venezuela, in­cluding Chinese financial support for the governments of Hugo Chavez and

icolas Maduro, continue to aggravate U.S.o fficials. The U.S. has al o point­ed to possible dual (civilian-military) u e infrastructure investment as an ex­ample of China's broader strategic in­terests in Latin America, and as a po si­ble respon e to U.S. engagement in the South China Sea. Among other areas of concern are China' s growing cyber operations in the region, which have been in place for a number of yea rs in an effort to increase positive senti­ment toward China in the region, often in support of economic objectives, but are increasingly sophisticated.

Behind all of this is a broader- pos-ibly warranted- concern that the U.S.

ri ks losing influence, competitiveness, and control in Latin America as China grow it pre ence in the reg ion. Ac­cording to the Pew Research Center's Global Attitudes Survey, nearly all of the region's top economies now have a more favorable view of China than the United States. Some , such as Brazil , have favored China for a number of years, whereas Mexico and Peru be­gan viewing China more positively in 2017. U.S. companies are also going head to head with increasingly expe­rienced and capab le Chinese firms in Latin America, including in areas such as tech, finance, and agriculture, where U.S. firms have been active for many decades.

To "level the playing field" in Latin America and other regions, the Trump administration ha engaged in a year­and-a-half-long trade war with China, and a o-callcd "tech war," wherein the U.S. has sought 10 limit China's acce s to American technology and market . Both "wars" will have prolonged eco­nomic consequences for China and the U.S., certainly, by unra veling long-

T/ris plroto taken 0 11 May 23, 2019 shows workers checking aerosol ma fac tory which pro­duces/or export to Brazil, Arge111ina, Chile, Egypt, India and other co11111ries, in Dongyang , Ill C/1111a 's eastern Zhejiang province. (AFPVIA GETTY IMAGES)

established supply chains. But Latin America and other regions are expect­ed to fair badly as well. Brazil benefit­led in 20 19 from a boost in oy exports to China- the result of tariff placed on U.S. soy. Mexico has seen ome ben­efits, too, as international companies relocate their production from China to cut mounting costs from the trade war. But protracted U.S.-China tensions are expected to have lasting negative ef­fects on the global economy. The LMF estimates slowing global growth in 20 19, including in third markets, based in large part on U.S.-China trade ten­sions. Ongoing economic uncertainty could also weaken Latin American cur­rencies if populations there invest in U.S. dollars to avoid the effects of local currency devaluation. A decoupling of the tech sector will also affect option and prices for tech consumers across the globe.

U.S. conce rns about Chi na have increasingly " rea l world" impli ca­tions for Latin American cou ntries, whether in terms of rising prices for the region' con. umcr , or as regional governments arc encouraged to avoid engagement with China in favor of partnership with the U.S . and other traditiona l al lies. There are indeed

some drawbacks associated with the Chinese model, including evidence of a continued lack of due diligence in certain China-financed infrastructure projects, for examp le. China' env i­ronmental impact is also izable give n the extent of Chine e trade and invest­ment in extractives and infrastructure. But U.S. pre sure to limit the regio n's economic option and partne r hip s could also have unfortun ate co nse­quences for Latin America ' economic growth and well-being.

U.S. interests in Latin Amer ica­includin g vi -a-vis China -a rc best served by strengthening U.S .-Latin America tics rather than highlighting China's flaws.As China approaches the region with extensive investments and attractive , cooperation -ba ed policy, the U.S. mu t take a similara pproach to the region, focu ing on area in which the U.S. can make a real and "mutually beneficial" difference while working with the region to en urc that procure­ment and other procc scs arc fair and Iran parent. Despite the geogra phic distance, China recognizes the appeal of inclusive rhetoric and development­oriented policy to Latin American gov­ernments- maybe better than the U.S. at this juncture.

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discussion questions

I.T~e U.S. ~as a long and sometimes troubled relationship with Lat'.n America. In what ways does China's engagement with the regro~ drffe~ f~om that of lhe U.S.? ls China likely to be viewed as an tmperiahst or hegemonic power in the region?

2· How ~i g~t China's economic partnerships in South America affect Chrna s_ relations with the U.S .• especially amidst ongoing trade negot1auons? In what ways will shifting trade patterns affect U.S. tics to the region?

3. Huawei is_well posi_tioned to sell 5G and other technology to many countries rn Laun America and the Caribbean. The com­pany_ is unlikely to be banned from forthcoming 5G roll-outs despite U.S. warnings about the security implications of Chi­ne e telecommunications technologies. Arc there any realistic measure that the U.S. could use to limit the sale of Chinese 5G infrastructure in the region? Should it u e those measure ?

suggested readings

Myers, Margaret and Wise, Carol. Th e Political Economy of China- Latin America Relations in the New Millennium. 302pp. London. UK: Routledge, 2016. In this book. China-Latin America relations experts Margaret Myers and Carol Wisc examine the po­litical and economic forces that have underpinned Chinese engage­ment in the region, as well as the ways in which these force have shaped economic sectors and policy-making in Latin America.

Jenkins, Rhys. How China is Reshaping the Global Economy: Development Impa cts in Africa and Lalin America .. 432 pp. Oxford. UK: Oxford University Press. 20 19. //ow China i1 Re­shaping the Global Economy looks at the factors which led to rapid econo mic grow th in China and the way in which thi\ has affected global manufacturing, commodity markets. the inter­national presence of Chinese companies, :ind financial glows.

Galla gher, Kevin P .. The Chin a Tr iangle: Lalin America 's China Boom and the Fate of the Washington Consensus. 256 pp. Oxford. UK: Oxford University Pre;s, 20 I 6. In The China Triangle, Kevin P. Gallagher trace; the development of the China­Latin America trade over time and covers how it has affected the ce nturies-o ld (and highly unequa l) U.S.-Latin American re­

lation~hip .

4. As China's economic engagement deepen. Latin America, Beijing's potential innuence over regional affairs is likely to expand. To what extent has China already affected political outcomes in the region? Should China be held accountable for economic and political turmoil in Venezuela?

5. To what extent does Chinese economic engagement result in support for China ·s interests in international organizations. such as the United Nations?

6. China maintains a policy of non-interference in the dome tic affairs of sovereign nations. This extends to the provision of credit to Latin American governments. China ·s loans have few policy conditions in comparison to loans from major interna­tional financial institutions. Chinese state banks have also lent exten ively to countries in the region with limited access to international financial markets. To what extent is China's model of lending beneficial to Latin American governments? Is China responsible for high rates of sovereign debt in Latin America?

Denoon, David B. H. China, The United Statcs,and the Future of Latin America: U.S- China Relations Volumn Ill . 432 pp.

cw York, NY: YU Press.2017. This volume draws upon a variety of policy expert , focusing on the viewpoints of South American and Caribbean scholars a, well~ scholars from outside states. China's new global reach and its ambitions. a, well as the U.S. response. arc analyzed in detail.

Ray. Rebecca. Gallagher. Kc,in and Lopez. Andres. China and Sustainabl e Dcvlopmcnt in Latin America: The ocial and Environmental Dimension. 382 pp. New York. 1Y: Anthem Press. 20 17. China and S11stai11able De1·elnp111e111 in Larin America documents the social and environmental impact of the China-led commodity boom in the region.

Roett, Riordan and Pal. Guadalupe. Latin Ameri ca and the Asian Giant : Evolving Ties with Chinn and India. Washing­ton, D.C.: Brookings Institution Press.20 16. In the yean; ,in~c China has adopted a "going global" strategy to promote its over­seas investment. expand export marl,,cts. and gain much-needed access to natural rc,ourcc, abroad. Sino-La tin American relation, have both deepened and broadened at an unexpectedly rapid pace.

Don't forget : Ballots start on page 98llll

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To access web links to these readings, as well as links to additional, shorter readings and suggested web sites,

Go TO www.fpa .org/great _decision s and click on the topic under Resources, on the right-hand side of the page.

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