Enter the Dragon? China's Presence in Latin America

On February 21, 2007, the Latin American Program and the Asia Program, along with The Johns Hopkins University School for Advanced International Studies (SAIS), hosted an event to examine the rapid expansion of trade and political relations between China and Latin America over the last decade. Latin American Program director Cynthia Arnson cited research indicating that trade between China and Latin America has grown at an annual rate of 24 percent since the early 1990s, almost three times the rate of growth for all trade in the region. Most of this increase is due to China's impressive growth rates of close to 10 percent per year, and the resulting demand for raw materials and agricultural imports. Arnson questioned, however, whether the importance of China's involvement in Latin America has been exaggerated, as well as whether Chinese and Latin American economic interests were complementary, particularly with respect to the manufacturing sector. Riordan Roett, director of the Latin American Studies Program at SAIS and editor of a forthcoming book on China and Latin America, described China's involvement in the hemisphere as badly handled diplomatically in some cases. In other regions, particularly Africa, China had engaged in "brilliant outreach" which was nonetheless subsequently criticized. China's future in Latin America is a matter of great speculation, he said, but constitutes one of the most interesting questions in the hemisphere in the 21st century.

Robert Devlin of the United Nations Economic Commission for Latin America and the Caribbean noted China's enormous success over the last twenty-five years in lifting its people out of poverty. This is due mainly to the effective and pragmatic implementation of structural reforms. China applies a "long-term strategic vision" to its productivity goals by investing approximately 1.2 percent of the country's GDP in research and development, a number that continues to grow. According to Devlin, China's advance in Latin America should serve as a "wake-up call." Latin America is quickly being overtaken by other developing countries; it must diversify its exports and organize regionally in order to compete globally. The hemisphere can garner valuable insights from the East Asian successes when considering how to strengthen partnerships between the state and the private sector, which mainly function as completely separate entities. Devlin supported creating Public-Private Alliances (PPAs) in Latin America as a vehicle for developing exports, building public sector capacity, and implementing structural reforms pragmatically and gradually, as the Chinese did.

Rodrigo Maciel of the Brazil-China Business Council confirmed that China's role in Latin America is based on trade and not military influence (as asserted by some in the United States). The strong trade relationship between Brazil and China is such that Brazil now holds a trade deficit with China; as of January 2007, China has become Brazil's second largest supplier. According to Maciel, the percentage of value added exports from Brazil to China continues to decrease, creating a need for Brazil to diversify its exports (the majority of which are oil or oil-related products, iron ore, and soybeans). China is also replacing Brazil as a supplier to other countries in the region. Maciel noted that Chinese President Hu Jintao's promise in 2004 of massive investment in Brazil had not been realized. Most Chinese investment up to this point has been in the Brazilian infrastructure that supports the commodity exports China desires, something that does not necessarily match Brazil's own economic interests.

Sergio Cesarin, Universidad Torcuato di Tella, Argentina, explained that geopolitically, many Latin Americans view China as an alternative to their reliance on the United States. Countries such as Cuba and Venezuela view China as a new ally, as they distance themselves from traditional partners such as Europe and the United States, and carry out a new, multipolar, foreign policy. The rhetoric of Chinese leaders, which promotes "development" instead of "free trade," has strengthened the possibility of a political dialogue between the "new left" leaders in Latin America and Hu Jintao's "progressive" Communist Party in China. Despite these positive interactions, a few shadows still cloud the future of the relationship. China views Latin America as a strategic battlefield in its fight against Taiwan; this could cause tension for those countries that have chosen to recognize the legitimacy of Taipei. On the bilateral level, positive relations between China and Argentina are due in part to the forty thousand Chinese immigrants living in Argentina. China also holds an enormous market share in manufacturing sector—a major concern for national industrial organizations in Argentina. They have called on the government to impose antidumping duties and adopt other measures to curb Chinese imports.

Shixue Jiang of the Institute of Latin American Studies, Chinese Academy of Social Sciences, stated China's presence in Latin America is part of China's global strategy; one objective is to help build a new, harmonious world order and to "fight against U.S. hegemonism." Another objective is economic--for China to avail itself of Latin America's resources--and a third is to battle against Taiwan's diplomatic presence. Jiang refuted critics of China's relationship with Latin America, asserting that China is not exploiting Latin America economically. Latin American economies are growing, and China, he claimed, contributes to this growth. He also wanted to clear up the misimpression that when Chinese President Hu Jintao visited Latin America in 2004, he promised 100 billion dollars of Chinese investment by 2010. Jiang claimed the media misinterpreted the remarks, and that in fact, President Hu had predicted that bilateral trade with the region would rise to 100 billion dollars by 2010.

Lanxin Xiang of the Graduate Institute of International Studies in Geneva pointed to a serious knowledge deficit between Latin America and China. He contrasted this with China's knowledge of Africa, indicating that China became heavily involved there starting in the 1950s and ‘60s. For a time, China paid particular attention to Latin America as it searched for political models that were successful in sustaining growth, especially studying Chile under Pinochet. All this was during the petrodollar boom, but when it went bust, the Chinese elite lost interest in the hemisphere. Xiang called for a three-way dialogue between China, Latin America, and the United States. China should stop hiding behind the notion that its presence in Latin America has nothing to do with the United States; it should instead avail itself of Europe's knowledge. According to Xiang, Spain is keen to be a bridge between Latin America and China.

He Li of Merrimack College, Boston, focused on the China-Taiwan rivalry in Latin America. Of 193 member countries in the United Nations, only twenty-four have full diplomatic relations with Taiwan, and half of them are in Latin America and the Caribbean. Losing that recognition, Li asserted, would cause serious damage to Taiwan's confidence as a state. Li noted that in the 1970s, Taiwan had much more influence in Latin America than China, but that situation is rapidly changing. In 1977, Taiwan's trade with Latin America totaled $477 million, while China's trade was less than half that. By 2004, although Taiwan's trade had increased to $7 billion, China's trade stood at $40 billion. In South America, only Paraguay has relations with Taiwan, but all countries in Central America recognize it. To strengthen relations there, Taiwan has recently concluded free trade agreements with Panama, Guatemala, and Nicaragua. Li also noted that Taiwan considers it essential to maintain diplomatic relations wherever it can in Latin America. For China, however, Latin America is important but still has lower priority than Asia, the United States, Europe, or even Africa.

Cynthia Watson, National War College, spoke to U.S. concerns over China's presence in Latin America. She said that Latin America remains the "forgotten region" for the United States, adding that the reason China's presence is rapidly increasing in the region is that the United States is focused on those parts of the world where it perceives a terrorist threat. She noted that China is acting in a calibrated and cautious way. The United States is most important country enabling China to maintain its economic growth, which is the key domestic priority for the Chinese Communist Party. As a consequence, she argued, China would back off in Latin America if any of its actions might hurt U.S.-China relations. Watson asserted that China is using soft power in Latin America in a way that the United States is not; this is a new phenomenon, as Washington is not accustomed to other states utilizing such soft power in our backyard. Watson asserted that Washington is consumed by Iraq and terrorism, and "all else is below the radar." If the United States is concerned about the growing Chinese presence in Latin America, asserted Watson, the United States should pay greater attention to the region.

Drafted by: Mark Mohr, Asia Program and
Jessica Varat, Latin American Program