The makings of a China-Latin love affair
By William Ratliff
The explosive growth of China's links to Latin America in recent years are but
the latest developments in a history that reaches back to the Spanish colonial
empire in the early-16th century.
In some ways the perceived benefits and liabilities have not changed much over
the centuries, though they are now on a far grander scale. A Spanish padre
wrote in 1669 that "one cannot imagine any exquisite article for the equipment
of a house which does not come from China". At the same time, however, Spanish
barbers in Mexico City petitioned the government to relocate
Chinese barbers to the outskirts of the city because they worked too much and
that constituted "unfair business practice" [1].
Only during the militant Maoist decade of the early-1960s to mid-1970s was
China's primary interest in Latin America, which was marginal, to overthrow
existing governments. Some in the United States and Latin America worry that
this rapidly rising China poses or will pose a security threat to the United
States and the region. Many also worry that the influx of Chinese, with their
different culture and institutions, will reduce the prospects for Latin reforms
that promote open markets, political democracy, and greater respect for human
and civil rights, including the rule of law. Responses to these concerns depend
on what the Chinese and Latin Americans want and get from their contacts and on
a realistic analysis of Latin America and broader Sino-US relations.
China's interests in the region include the following: to buy raw materials and
foodstuffs and to invest in the production and transportation of those products
to China; to export manufactures and other products to the region; to promote
stability there so that business contracts will be signed and honored by
predictable governments; to support a subtle reduction of the "unipolar"
position of the United States in the world; and to win political recognition
from the cluster of Latin American countries that still recognize Taiwan as the
"one China" [2].
Latin American countries want to sell China raw materials and manufactures to
guarantee their historically unstable economies a foundation of assured income;
to receive foreign direct investment (FDI) in many fields, including
infrastructure, without the "strings" that are attached to funds from Western
sources; to reduce economic and political dependence on the United States; and
perhaps to get some Chinese ideas on how to develop a national economy under
effective elitist leadership.
Drawing these interests together, Chinese Ambassador to Chile Liu Yuqin said in
March that "Latin American countries and China ... must make joint efforts to
face the great challenge of the globalized world". Chilean President Michelle
Bachelet, speaking for many Latin leaders, told President Hu Jintao during a
visit to China in April that her country and people realize that the 21st
century is in the hands of Asia, and especially China. In 2006 Chile was the
first country to sign a free trade agreement with China and in 2007 China
replaced the United States as the major recipient of Chilean exports.
Relations between China and Latin America today have progressed beyond
commerce, though trade and FDI are still primary objectives on both sides.
According to statistics reported by Jiang Shixue, deputy director of the
Institute of Latin American Studies (ILAS) at the Chinese Academy of Social
Sciences (CASS), one of the most important think-tanks advising the Chinese
government on Latin American policies, Sino-Latin American trade grew from $1.9
million in 1950 - just after the People's Republic of China (PRC) was formed -
to $343 million in 1965. Trade expanded to $475 million in 1975, $2.572 billion
in 1985 and $6.114 billion in 1995.
In November 2004, addressing the Brazilian legislature, President Hu predicted
that Sino-Latin American trade would rise to $100 billion by 2010, but in fact
it rose to $102.6 billion in 2007 with a surge of 42% over 2006. There are
important differences, however, in the spread of benefits in Sino-Latin
American trade. Some 60% is with Brazil, Chile and Mexico, and the latter has a
large deficit.
The countries exporting raw materials and foodstuffs, from oil and copper to
soya, are the ones with positive balances, while others - including Mexico and
some Caribbean countries that rely more on manufactures - are being swamped by
Chinese goods, limiting this lucrative relationship for some to a traditional
focus on only a few export products.
In April a high-level Chinese official reported that by the end of 2006 almost
$22.7 billion of China's FDI had gone to Latin America. While it is true that
billions in FDI has been promised to Brazil, Argentina, Ecuador, Peru,
Venezuela, Mexico and other countries, for exploration for and transportation
of raw materials and foods that China wants to buy, and other projects,
information on actual FDI paid out is "somewhat murky", as Robert Devlin, a
regional adviser for the UN Economic Commission for Latin America and the
Caribbean, puts it. A major portion of Chinese FDI in Latin America appears to
be "round-tripping", that is the funds are invested in tax havens in the
Caribbean and then sent back to China to take advantage of preferences given to
foreign firms [3].
The most debated issues with respect to China's expansion into Latin America
are (1) the security implications for the United States and the region, with
sub-set questions on Cuba and Venezuela, and (2) China's potential
anti-democratic impact on Latin American governments and social systems.
For starters, unlike the United States and Europe, China has no history of
invading and colonizing other countries beyond its immediate border, what is
today called Greater China. Also, China has publicly tried to avoid alarming
the United States because of the critically important Sino-US relations. The
deputy director of the ILAS has written that "China understands well that Latin
America is the backyard of the United States, so there is no need for China to
challenge the American influence" there.
After US Assistant Secretary of State for Western Hemisphere Affairs Thomas
Shannon talked with Chinese counterparts in Beijing in 2006, a top Latin
Americanist at the CASS in Beijing, Xu Shicheng, said Chinese policy "has no
ideological color nor is it directed against the interests of any other
country".
As analyst Gonzalo Paz has noted, China's activity in the region "hasn’t
sparked strong US reactions yet. Washington has either shown indifference or
has considered such activity relatively inoffensive". Indeed, in March, US
Deputy Assistant Secretary for East Asian and Pacific Affairs Thomas
Christensen said, "We believe that China can make positive contributions to
economic growth [in the region] ... through increasing both direct investment
and foreign assistance, and can serve as an exemplar of how pragmatic economic
policy and trade openness can lead to increased literacy, managed urbanization
and poverty reduction".
US policy itself has sometimes thrown the door open to China's still restrained
entry into military contacts in the region, prompting National War College
Professor Cynthia Watson to remark, "If Washington is not interested in having
a sustained, deep and satisfying, mutually respectful relationship with Latin
America, the latter will turn elsewhere". The security issue must, of course,
be investigated constantly by intelligence agencies and other researchers, but
conclusions must be drawn with balance and knowledge of broader issues of
Chinese and Latin American history and politics.
China has become deeply involved in Cuba as the island's second-most important
trading partner after Venezuela, but also to some degree in intelligence
gathering, at a level, however, that does not seem to greatly upset Washington.
Without pushing, it also offers an adaptable model for carrying out productive
post-Fidel economic reform while leaders retain their political power.
Yet in the words of Mao Xianglin, an ILAS Cuba specialist, "Socialist Cuba can
catch up with and surpass others only by moving rapidly to break out of its
intellectual straitjacket and intensifying its reforms". Venezuela's Hugo
Chavez has tried without success to get China to join an anti-American front.
Though it is exploring oil and other matters, on balance China has more to lose
than gain from Venezuela's efforts to destabilize the region and promote
economic ideas that will certainly only make countries poorer and more
unstable.
Does or will China undermine democracy in Latin America? This is a hard case to
make because Latin Americans have had almost 200 years of independence to
establish truly representative democratic governments and productive market
economies if they wanted them, but they have only rarely and incompletely come
close to doing so. Even though a slight majority of Latin Americans say
democracy is the best system of government, a considerable majority say it does
not work for them.
Thus, much of Latin America today is again flirting with caudillo (strong-man)
populism, exemplified by Chavez in Venezuela, but also by his acolytes in
Bolivia, Ecuador and Nicaragua. When one recalls that Mexico and Peru also very
nearly went "Chavista" in their last elections, and Argentina is semi-Chavista
today, you see the strength of this Latin love affair with paternalism and
Messiahs who promise to right the innumerable "wrongs" that have characterized
Latin society since even before colonial times [4]. China's preference lies
with governments that succeed, and thus their relations have developed most
rapidly and smoothly with Chile, and secondarily with Brazil.
Word has seeped out of Washington that at the Shannon meetings in 2006 the
Chinese promised not to meddle in Latin politics. Last year the author asked a
top Chinese Communist Party (CCP) official working in international affairs if
China wanted to get involved changing political systems in Latin America. He
said "No. Why should we? We are perfectly happy with a system controlled by
elites that keeps real popular involvement to a minimum, so long as they do not
crash and continue to enforce the agreements made with us."
If Latin leaders, however, ask the Chinese for ideas, Chinese leaders will
certainly accommodate them. Indeed, the Chinese make it a point of developing
party and legislative connections with leaders of all political inclinations in
all countries, if possible. As Jiang Shixue has noted, Chinese and Latin
political leaders "exchange views on strategies to improve governance, the
management of party affairs, political modernization and socioeconomic
development" [5].
The challenges for Latin American countries in the years ahead include
investing the profits from China trade and FDI, and using the inspiration of
the Chinese example, to lay a long-term foundation for national well-being,
cultivating whatever traditional cultural and civic values do not prevent the
development of broadly based economic progress. This will mean both rejecting
the temptations of hopeless and disruptive Chavista populism and carrying out
more than half-hearted reforms, both changes that would also benefit China and
the United States.
China needs to reduce logistical problems of long distances, perhaps in part by
more joint Latin ventures for the United States and Latin markets, cultivate
greater common cultural ground, not least by increasing cultural institutes,
and the like. Assuming the continuation of something like China's current
development trajectory, and a lasting major US role in the Western Hemisphere,
the two large nations could work together to promote a more stable and
prosperous region that would benefit themselves and Latin Americans as well.
Traditionally, it has been easier to blame someone else for the region's
seemingly intractable and widespread poverty and inequalities and today many
Latin Americans have made the Chinese their "favorite villain," as Korean
analyst Won-ho Kim wrote in a Mexican paper in 2004. In the end, Latin
America's failure to develop more responsive political - and more productive
economic - systems was not Britain's or America's fault in the past, and it is
disingenuous at this stage to suggest that it will be China's fault in the
future.
Dr William Ratliff is a fellow at Stanford University's Hoover
Institution and an adjunct fellow at the Independent Institute.
Notes
1. W L Schurz, The Manila Galleon. New York, 1939. Evelyn Hu-Dehart,
"The Chinese of Peru, Cuba and Mexico". In R Cohen (ed), The Cambridge Survey
of World Migration, Cambridge University Press, 1995.
2. Today Beijing has formal diplomatic relations with 21 of the region's 33
independent nations, meaning that the Caribbean basin contains the largest
concentration in the world of countries that still recognize Taiwan as the "one
China".
3. Robert Devlin, "China's Economic Rise", in R Roett and G Paz (eds.), China's
Expansion into the Western Hemisphere: Brookings Institution Press,
2008, p.115. Also see M Sullivan, "Latin America and the Caribbean. In China's
Foreign Policy and "Soft Power" in South America, Asia and Africa. Washington:
Congressional Research Service.
4. On this see L Harrison, Culture Matters. New York, 2000; A Vargas
Llosa, Liberty for Latin America. New York, 2005; H Wiarda, The Soul of
Latin America. New Haven, 2001; L Rubio, Institutions or Culture?
Miami: University of Miami, Center for Hemispheric Policy, 2007.
5. Jiang Shixue, "The Chinese Foreign Policy Perspective", in Roett, China's
Expansion.
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