President Alan Garcia and his Brazilian counterpart 
Chinese President Hu Jintao (2nd R), Russian President Dmitry Medvedev (2nd L), Indian Prime Minister Manmohan Singh (1st L) and Brazilian President Luiz Inacio Lula da Silva (1st R) pose for a photo as they meet at Toyako in Hokkaido, north Japan, on July 9, 2008. (Xinhua Photo)
Argentina military police clash with farmers who staged a road blockade to protest a controversial export tax.William Ratliff is Adjunct Fellow at the Independent Institute, Research Fellow at Stanford University's Hoover Institution. Published by the Jamestown Foundation, China Brief, and reprinted with permission.
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." 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.
REALISTIC ANALYSIS
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-U.S. 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."
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.
CHILE-CHINA FTA
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” (La Nacion [Santiago], March 2). 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 (China Daily, April 14). 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 (Nueva Sociedad 203, May/June 2006). 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 percent over 2006. There are important differences, however, in the spread of benefits in Sino-Latin American trade. Some 60 percent is with Brazil, Chile and Mexico, and the latter has a large deficit (Latin Business Chronicle, March 24). 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 Basin 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.
CHINESE FDI
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 (China Daily, April 16). 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.
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.
NO IDEOLOGICAL COLOR
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-U.S. 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 (Nueva Sociedad 2003, May/June 2006). After U.S. 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” (Nueva Sociedad 203). As analyst Gonzalo Paz has noted, China’s activity in the region “hasn’t sparked strong U.S. reactions yet. Washington has either shown indifference or has considered such activity relatively inoffensive” (Asian Perspective, No. 4, 2006). Indeed, in March U.S. 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” (Testimony to U.S.-China Economic and Security Review Commission, March 19).
U.S. 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” (Testimony to U.S.-China Economic and Security Review Commission, March 18). 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.
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