China hopes to play a much bigger role in Latin America

China hopes to play a much bigger role in Latin America

Last week, Chinese President Hu Jintao pledged that China will make a “concerted effort" to “establish a comprehensive cooperative partnership of equality, mutual benefit and common development" with Latin America, according to Xinhua news agency.

The Chinese President made his comments in Lima just before the 16th Asia-Pacific Economic Cooperation (Apec) summit. Hu’s words—and other recent developments—warrant careful attention because they clearly signal a relationship that will expand greatly in the years ahead.

Apec was the last stop in Hu’s journey to the West, a 10-day trip, which shows how much Beijing’s relations with the western hemisphere have changed from the “lie-low" strategy of Deng Xiaoping. This was Hu’s first trip to South America since November 2004, when he visited Brazil and Argentina en route to an Apec summit in Chile. That trip raised China’s profile in the region, but this latest trip, in a period of international financial crisis, confirmed China’s intention to play a more open, active, permanent and constructive role in the Americas, though some Latins have become doubtful or jaded.

The first-ever official policy paper on China and Latin America was released just before Hu’s trip. It outlines a range of programmes in the region, including cooperation in science, technology and education, and political exchanges at all levels.

Each side has a lot to gain. China’s interests in Latin America include buying raw materials and foodstuffs, ranging from oil and copper to soya beans; helping to develop Latin infrastructure to produce and deliver those products; and selling (some countries have charged “dumping") manufactures. Latin countries hope to sell raw materials and manufactures to develop their historically unstable economies; draw investments without the strings attached by Western powers; reduce dependence on the US; and perhaps get ideas on how to develop national economies under elitist leadership, still the norm in Latin America.

In a talk to the Peruvian Congress, Hu proposed ways to boost Sino-Latin ties, including increasing high-level exchanges of personnel to improve dialogue, trust and cross-cultural understanding. He also spoke about cooperation on overlapping international objectives and mutually beneficial cooperation on economic issues. Cultural differences, ignorance of each other and logistics are constant challenges.

Chinese leaders frequently cite the impressive growth of trade as evidence of improving ties. Sino-Latin American trade increased 10-fold over the decade through 2007, to $102 billion. In the first nine months of 2008 it increased another 52%. Still, put in perspective, this amounts to only about 5-6% of either China’s or Latin America’s total trade, and it has been much more beneficial for countries that have raw materials to sell (Argentina, Chile and Brazil) than those with more manufactures (Mexico). China’s first free trade agreement (FTA) was with Chile, which now exports more to China than to the US. China and Peru concluded an FTA during Hu’s visit.

Not all aspects of the economic relationship are positive, however. Confusion and disappointment over China’s misunderstood promises of foreign direct investment have been compounded by disingenuous reports from Beijing. One Chinese trade official claimed that $22.7 billion in FDI had been placed in Latin America by the end of 2006. If so, the vast bulk was plunked in tax havens in the Caribbean from whence it can be sent back to China to take advantage of preferences given to foreign investment firms. Also, some of Latin America’s problem may be that the Latins have failed to propose viable investment projects.

Other recent events that demonstrate China’s greatly increasing role in the hemisphere include Beijing’s new donor membership in the Inter-American Development bank, which for decades was considered a key weapon in the “US imperialism" arsenal. Almost half of China’s initial contribution of $350 million is earmarked for the micro-enterprises, and small- and medium-sized businesses, the Chinese for so long excoriated.

China also has a political agenda in Latin America. Hu’s trip took him also to Costa Rica, which last year switched its diplomatic recognition from Taiwan to Beijing, which it did not recognize before. Since half of the countries in the world that recognize Taiwan are in Central America and the Caribbean, China hopes its attention to Costa Rica, including the launch of FTA negotiations, will encourage others to follow suit.

In recent years, China has been second only to Venezuela in propping up the Castro brothers’ regime in Cuba with trade, investments and aid. On a visit to Havana, Hu contributed generously to Cuba’s hurricane reconstruction and met Cuba’s new leader, Raul Castro. He talked at length with Fidel, seen as an old “Marxist" whose ideas are wrong but who stood by Beijing in 1989 and must somehow be venerated for his stubborn refusal to give up.

Some around the hemisphere are concerned about China’s increasing attention to Latin America but, on balance, Beijing’s expanding links are largely in line with what the US has said China should do to become an active “stakeholder" in the modern world. Besides, China’s trade and investments in the US dwarf its links to Latin America.

China’s expansion into the western hemisphere is an inevitable development that must be watched carefully but cultivated as much as possible for everyone’s benefit. Indeed, if China has to seriously reduce its purchases of commodities from Latin America, many countries there will feel real pain. Hu’s trip to Lima shows that China can be an active force for good in the world’s economy. Especially today, in times of financial distress, its influence is a welcome one.

The Wall Street Journal

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The author is a fellow of the Hoover Institution at Stanford University