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China`s Expanding Relations With Latin America And The Caribbean

By Odeen Ishmael

CaribWorldNews, CARACAS, Venezuela, Thurs. June 25, 2009: The recent visit of Brazil`s President Luiz Inacio `Lula` da Silva to China in May 2009 reflected the Asian nation`s expanding economic and political influence in Latin America and the Caribbean.

One year ago, the Brazilian government had announced that China would surpass the United States as its major business partner. The results of Da Silva`s visit verified this after the two nations signed 13 agreements, including a $10 billion loan from the China Development Bank to Brazil`s state oil company Petrobras. Petrobras also concluded a deal with a subsidiary of China`s oil refiner Sinopec for the export of crude oil. A major commercial agreement will also see the beginning of huge poultry exports to China.

Brazil`s two-way trade with China, one of the few economies still growing despite the global crisis, reached US$3.2 billion in April, surpassing the $2.8 billion trade total with the US. So far this year, Brazilian exports to China grew 65 percent over the same period in 2008, rising from $3.4 billion to $5.6 billion.

At the beginning of November 2008, China`s priority to LAC was highlighted in a policy paper issued by the country`s Foreign Ministry. And to emphasize this priority, later that month, its President Hu Jintao traveled to Costa Rica, Cuba and Peru to highlight his country`s growing power and influence in the region. This was a follow-up of to his Latin American tour in 2004, which resulted in expanded investments, trade, and diplomatic and military exchanges.

China`s policy paper on LAC says that the Chinese government views its relations with Latin America and the Caribbean from a strategic plane and seeks to develop a comprehensive and cooperative partnership featuring equality, mutual benefit and common development with countries in the region. It goes on to explain the importance of the bilateral cooperation in  trade, investment, finances, agriculture, infrastructure, resources and energy, tourism, customs, quality inspection, culture and education.

Some political observers feel that the diplomatic outreach in LAC is also aimed at urging the 11 nations in the region that maintain diplomatic relations with Taiwan to shift their recognition to China. Costa Rica in 2007 severed connections with Taiwan, and so did Grenada and Dominica.

It is obvious, too, that the establishment of leftist governments in many countries in LAC has aided in strengthening bilateral diplomatic relations. But the embrace of China also comes from LAC as part of its broader inter-regional diplomacy which has seen expanded relations with Europe, Asia, Africa and the Middle East, while maintaining its traditional connections with the United States.

China`s links with LAC centers on trade and are propelled by an ever-increasing demand for natural resources. Trade shot up from $12.6 billion in 2000 to $102.6 billion in 2007, and was expected to reach $150 billion last year. In 2008, China`s top 10 trade partners in the region were Brazil, Mexico, Chile, Argentina, Peru, Venezuela, Panama, Colombia, Costa Rica and Cuba. Significantly, China is now the third largest trade partner of the region.

The country`s main exports are computers, telecommunications equipment, clothing, shoes, electronics, motorcycles and cars, while most imports are agricultural goods and raw materials such as crude oil, iron ore, copper, tin, tungsten, molybdenum, aluminum and nickel. 

The Asian giant is also investing heavily in the region. Its investments reached $1.89 billion in 2007, much related to the infrastructure building, extraction of national resources, manufacturing assembly, telecommunications, and textiles.

In addition, it has science and technology agreements with 13 regional states and these led to more than 100 research projects in agro-, bio- and information technology. These agreements have resulted in an earth-resources satellite project with Brazil, with three satellites launched to date; and another with Venezuela which saw the $400-million communication Simon Bolivar satellite launched in October 2008.

Energy concerns play an especially important role in China`s Latin-American diplomacy. In addition to the energy agreement with Brazil, Beijing is also exploring energy deals with Venezuela, Ecuador, Bolivia, Peru, Colombia and Argentina. With regard to Venezuela, China is expected to invest billions of dollars in a heavy oil development project in the Orinoco belt. As a result of this cooperation, Venezuela has begun to receive oil drilling platforms and oil tankers it ordered from China. Currently, Venezuela is the seventh largest source of Beijing`s external oil supplies.

But the Chinese government is also showing attention to the smaller economies of the region. For instance, tiny Dominica which cut relations with Taiwan has been offered US$122 million in assistance over a period of six years.

And in Guyana, which always maintained a `one-China policy,` Beijing funded the building of an International Conference Centre and was involved in the construction of a modern sugar factory in the eastern part of the country. Chinese investors are also involved in the forestry sector. Further, in October 2008, the Import-Export Bank of China facilitated a concessional loan of approximately US$40 million to finance the development and expansion of Guyana`s electricity transmission and distribution system. Then in November 2008, Bosai Minerals Group, a Chinese mining company, announced that it would invest US$1 billion to build an alumina plant in the country. However, a start to this project has not yet materialized due to the current global financial crisis.

China`s diplomatic and economic closeness to LAC was marked in 2004 by its achievement of observer status in the OAS, and in October 2008 when it became a full member of the Inter-American Development Bank. It has also been a member of the Caribbean Development Bank since 1998 possessing a 5.77 percent capital stake, and has emerged as a significant donor to the Caribbean sub-region, earmarking US$1 billion this year for various projects.

At other multilateral levels, China has held numerous discussions with the Rio Group and has established a dialogue mechanism with MERCOSUR, the Andean Community, and the Caribbean Community (Caricom).

In the military sphere, China offers training courses for military officers in its staff academies and sells helicopters, artillery, anti-air and anti-ship missiles and light assault weapons to some Latin American and Caribbean countries, while purchasing anti-tank, anti-air missiles and avionics from Brazil.

Significantly, in September 2004, China sent a `special police` peacekeeping contingent to Haiti – an ally of Taiwan – marking Beijing`s first deployment of forces ever in the Western Hemisphere.

Despite the expansion in political, economic and diplomatic ties between China and LAC, some negative aspects of economic activities, in particular, have persisted when viewed from the LAC perspective. Some trade analysts say that Chinese goods are dumped without duties into many markets, with Mexico and Argentina particularly hard hit by China`s flood of low-end manufacture exports. This, they add, has resulted in the rise of anti-China sentiments.

Further, the view has been constantly maintained that China`s involvement in the region could pose a future threat to US influence in the region. And while many political and business leaders in Latin American and Caribbean countries welcome new Chinese investments, others are concerned that their domestic industries and their US export markets will be overwhelmed by cheap Chinese imports. It is hoped that with the advancement of closer diplomatic and business relations between China and LAC, solutions to such problems will become matters of priority.

[The writer is Guyana`s ambassador to Venezuela and the views expressed are solely his.]