Page 2 of 2 Beijing takes on Latin America
By Evan Ellis
Brazil's expanding trade with China is also giving Brasilia reasons to become
more interested in the affairs of its neighbors. In cities such as Manaus in
the interior of Brazil, the economics of importing factory inputs from the PRC
is greatly facilitated by routes linking the Brazilian Amazon to Pacific ports.
Projects currently underway include highway corridors from the Amazon River
over the Andes Mountains to the Peruvian ports of Paita and Ilo, as well as a
possible multi-modal corridor linking Manaus, with its free trade zone, to the
Ecuadorian port of Manta. In a similar fashion, Brazil's growing commerce with
China also heightens its stake in the trade policy and political stability of
its Pacific neighbors, as well as major infrastructure projects
affecting the economics of that trade such as the expansion of the Panama
Canal.
In addition to sustaining the "caudillo socialist" bloc and contributing to the
rise of Brazil, in a broader sense, Chinese investment and aid in Latin America
is undermining the primacy of the US role as an economic and social actor in
the region. This can be seen in the re-orientation of Latin America's trade
structure away from the United States, Latin American efforts to either please
or avoid offending China, and in the declining power of the United States as a
"reference model" for economic development and democracy.
With respect to trade structure, PRC financial deals to facilitate commerce,
such as the $10.2 billion debt swap with Argentina in March 2009, represent an
expanding challenge to the primacy of the dollar as an international reserve
currency. Brazilian President Lula explicitly argued for working with China to
move away from the dollar during his trip to China in May 2009.
Even before such challenges to the primacy of the dollar, however, the lure of
China as a market was arguably one factor that helped to permanently derail the
proposed "Free Trade Area of the Americas". Chinese bilateral free trade
agreements (FTAs) with Chile and Peru, and FTA negotiations with Costa Rica can
have the effect of moving the region away from a structure of trade
relationships and incentives focusing the region on the US, to a world in which
Latin American states are more independent global actors.
At the individual country level, such influence can be seen in Chile, the
foreign economic policy of which focuses on positioning the country as a
gateway between Asia and Latin America. A similar enthusiasm can be seen in
Peru, which hosted the 2008 Asia-Pacific Economic Cooperation (APEC) summit,
and in which the PRC has made important investment commitments in the oil and
gas sector, purchases of fishing fleets and fishmeal processing facilities, and
mines in Toromocho, Rio Blanco and Maracona. It is also evidenced in the desire
of countries such as Colombia and Costa Rica to tie themselves more closely to
the Pacific economic community by joining APEC.
In the realm of what has been called "soft power", the US is also losing
influence in the region where US initiatives conflict with Latin America's
desires to maintain a positive relationship with the PRC for economic reasons.
The decision by the Ecuadorian Correa government not to renew the agreement
giving the US access to the port city of Manta was a necessary step in inviting
the Chinese to develop the airport into a hub for trans-Pacific flights, even
though the two were probably never explicitly connected by the Chinese.
In the future, as Latin American regimes contemplate whether to allow
potentially intrusive cooperation with US law enforcement in areas such as
counter-narcotics, telecommunications, or banking, the impact of such
cooperation on attracting investment from partners such as the Chinese will
cast a growing shadow over their decisions.
The desire of Latin American leaders to court, please, or avoid offending the
PRC, is becoming increasingly evident. When Costa Rican President Oscar Arias
switched his country's diplomatic recognition from Taiwan to the PRC in May
2007, a key factor was his belief that the emergence of the PRC as a global
power made being on the "right side" of the China/Taiwan issue in Costa Rica's
interest [3].
The importance that Latin American leaders place on China can be discerned by
the number of its presidents who have led delegations to the PRC in recent
years: in addition to the six trips to China by Venezuelan President Hugo
Chavez and multiple trips by Ecuadorian President Rafael Correa and Bolivian
President Evo Morales, virtually all the rest, including President Lula of
Brazil, Colombia's President Alvaro Uribe, Mexican President Felipe Calderon,
Uruguay President Tabare Vasquez, and Costa Rican President Oscar Arias.
To date, the PRC has limited its attempts to exert influence over its Latin
American partners to areas tied to core Chinese interests, such as their
recognition of Taiwan or Tibet, the opening of their markets to Chinese goods,
and favorable or neutral positions with respect to China in forums such as the
Inter-American Development Bank and the World Trade Organization.
As China sinks more investment in Latin America, and becomes more dependent on
the region as a market and a source of supply, it is logical that China would
seek to motivate Latin American leaders to protect these interests. Although it
is difficult to imagine the PRC demanding that a Latin American state not
cooperate with the United States on police and security matters, it is
increasingly easy to imagine that such a state might think twice, if it
believes that a US presence could jeopardize a major PRC purchase or investment
in the country.
Finally, in the world of ideas in Latin America, the rise of China can become a
powerful force in derailing the US political, economic, and human rights agenda
in the region. The ability demonstrated by the PRC to sustain growth rates in
excess of 10% and recover rapidly from the global recession, by contrast to the
United States, which precipitated the financial crisis and continues to
contract, sends a powerful message to Latin American states that US-style
political pluralism may not be necessary for development, and in some
circumstances, may be detrimental to it.
Notes
1. Analysts have generally acknowledged that Chinese aid and investment in
Latin America is relatively small, compared to comparable investments by the
United States and the European Union. Cumulative aid from China to Latin
America from 2002 through 2007 was less than $25 billion, compared to $620
billion from the European Union and $340 billion from the United States over
the same period. Thomas Lum, et al China's Foreign Aid Activities in Africa,
Latin America, and Southeast Asia. Congressional Research Service. Doc. No.
7-5700. R40361. www.crs.gov. February 25, 2009. Nonetheless, such figures
overlook both the order-of-magnitude increase in Chinese aid to Latin America
that occurred in 2008, as well as the disproportionate impact that Chinese aid
has on the region because of the hopes of attracting even more such aid from
the PRC as an emerging market and rising power.
2. China has sold Venezuela 18 K-8 aircraft, which are designated as trainers,
but which can be given combat capability by outfitting them with missiles and
other munitions. Venezuela is also exploring the purchase of a more advanced
type of trainer from the PRC, the L-15.
3. Based on a series of interviews with Costa Rican government leaders in
January 2008. See R Evan Ellis China in Latin America: The Whats and Wherefores.
Lynne Rienner Publishers, 1989.
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