Influence of Chinese Entities and Infrastructure in Latin America.
Although the presence of Chinese corporations and workers in Latin America pales by comparison to that of the United States, it is growing and exerting an increasing weight in select countries.
Particularly in states such as Ecuador and Venezuela, Chinese corporations are becoming increasingly critical for the functioning of the extractive industries that generate significant portions of the state’s revenue. In Ecuador, Chinese petroleum and service companies directly operate seven oil blocks, are a partner in others through consortiums, and account for almost 40 percent of nonstate oil production, while China Railway Road and Tongling are ramping up for a $3 billion project in the recently opened Ecuadorian mining sector. In Venezuela, Chinese companies are one of the key actors maintaining oil production in the mature oilfields of Maracaibo and Anzoátegui, a vital current revenue stream for the Chávez regime. In the Orinoco belt in the south of Venezuela, Chinese investment, technology, and manpower, including Chinese-made drilling rigs, are a key to the development of that nation’s future oil potential, while a May 2010 agreement makes Chinese companies key players in the extraction of Venezuelan iron, gold, bauxite, and coal.
Although Chinese companies have yet to attain the level of “key employers” or have a major role in many Latin American communities, they play a growing role in strategically important sectors in many Latin American countries. For example, in telecommunications, the Chinese companies Huawei and ZTE are increasingly important product, service, and infrastructure providers,8 and in logistics, companies such as China Shipping, China Overseas Shipping, and Hutchison Whampoa play increasingly vital roles in Latin America’s foreign trade.
Ironically, Latin American Chinese communities have played a relatively limited role in this expanding influence. Although there are large, historically rooted Chinese communities in countries such as Peru, Ecuador, Panama, and Brazil, Chinese immigrants have traditionally sought to keep a low profile in these societies. The structure of these communities has also served to channel new Chinese immigrants into certain traditional occupations, such as restaurants, the retail sector, or farming, with the result that ethnic Chinese today have a fairly narrow involvement in emerging China–Latin America trade, even in key hubs for trade such as Colón, Iquique, or Ciudad del Este.
Beyond business ties, the PRC has an important and growing presence in the region’s military institutions. In addition to frequent visits by senior-level officers and defense leaders, Mexico and almost all of the countries of South America send officers to professional military education courses in the PRC, including a 5-month course for midgrade officers taught in Spanish in Beijing. Chinese-made clothing and nonlethal equipment are also becoming increasingly common within Latin American militaries. In addition, thanks to opportunities provided by the regimes of Ecuador, Venezuela, and Bolivia, the PRC has begun to sell sophisticated hardware in the region, such as radars and K–8 and MA–60 aircraft. As happened in commercial industries such as motorcycles, cars, and consumer appliances, Chinese military goods companies such as Norinco are likely to leverage their experience and a growing track record for their goods to expand their market share in the region, with the secondary consequence being that those purchasers will become more reliant on the associated Chinese logistics, maintenance, and training infrastructures that support those products.
Beyond Chinese corporations and military ties, the PRC is also taking on a progressively important role in regional institutions, such as the Organization of American States (OAS), Inter-American Development Bank (IADB), and United Nations peacekeeping operations in Haiti. Although the PRC has only observer status in the OAS, for example, its delegation is a strong contributor to the activities of the body.9 With respect to the IADB, China has leveraged its seat at the table as an opening for doing business in the region, such as the $10.2 billion currency swap with Argentina, which it signed on the sideline of the IADB’s annual meeting in March 2009. Also, through its initial financial contribution to the IADB, the PRC became part of a special committee overseeing loans to highly impoverished countries in the region, affording it expanded contacts with and subtle pressures over countries that do not currently recognize the PRC diplomatically, including Haiti, Honduras, and Nicaragua. In the case of Haiti, Chinese leverage is further bolstered by having had police forces on the ground there since 2006, through PRC participation in the United Nations Stabilization Mission in Haiti.
Brazilian President Luiz Inacio Lula da Silva and Chinese President Hu Jintao celebrate at closing of investment and trade seminar.
Hopes for the PRC to Serve as a Counterweight to the United States and Western Institutions. China’s historical status as a “leader of the developing world” positions it as the natural ally of the new generation of Latin American populist leaders, such as Hugo Chávez, Rafael Correa, and Evo Morales. During his first trip to Beijing after being elected president, for example, Morales proclaimed himself to be a “great admirer of Mao,” while Chávez has exclaimed that Mao and South American revolutionary icon Simón Bolívar would have been “great friends.” While these leaders may primarily be seeking Chinese investments and commodity purchases, the position of the PRC as a geopolitical “alternative” to the United States shapes the way that they court the Chinese.
In permitting such hopes, the PRC has, to date, been careful not to associate itself directly with the anti-U.S. activities or rhetoric of these regimes, so as not to damage its strategically important relationship with the United States and the West. Nonetheless, the relationship cannot avoid some flavor of the relationships between the Soviet Union and its Latin American client states during the Cold War. Bolivia turned to China to purchase K–8 combat aircraft, for example, after the United States blocked its ability to procure aircraft from the Czech Republic.
China as a Development Model. The tremendous, sustained economic growth that the PRC has enjoyed since opening up to the world in 1978 has caused many in Latin America to look to China’s integration of capitalism and authoritarian politics as a development model, even while the U.S. combination of liberal democracy, free markets, and privatization is increasingly seen as ineffective for solving the region’s endemic problems, such as corruption, poverty, and inequality. For traditional Latin American elites, the Chinese model is particularly attractive because it suggests that it is possible to achieve prosperity and growth without relinquishing political power.
As with other Chinese sources of soft power, the impact of the “Beijing Consensus” in Latin America relies on perceptions rather than realities; differences between the two regions—including the relative submission to authority in the Chinese work culture, Chinese willingness to save rather than spend, and another part of the world serving as the market for Chinese exports—make the Chinese success story difficult to repeat in Latin America.
Affinity for Chinese Culture. The PRC has actively promoted Chinese culture and language throughout the world, including through such landmark events as the 2008 Olympics in Beijing and 2010 World Expo in Shanghai, visited by an estimated 5 million foreign tourists,12 as well as establishing more than 282 Confucius institutes worldwide, including 20 in Latin America. Cultural exchanges are a featured part of China’s dealings with Latin America, consistent with the “nonthreatening” character that Beijing wishes to emphasize in these interactions.
Despite PRC “marketing efforts,” by contrast to the global impact of U.S. culture, Chinese culture is arguably one of the PRC’s weakest levers of soft power in Latin America, with interest in Chinese culture arguably reflecting, more than driving, China’s influence in the region. Although some Chinese culture is reaching the Latin American mainstream, perceptions of it in Latin America are generally limited and superficial, sometimes based on media reports or experiences with ethnic Chinese living in those countries. Such perceptions are often mixed, including respect for the Chinese work ethic, a sense of mystery regarding Chinese culture, and often a sense of mistrust arising from the perceived differentness of that culture and commercial competition from Chinese products.
China as “the Wave of the Future.” Perhaps China’s greatest source of soft power is the most intangible. China’s emergence as a key global player is a phenomenon that has assumed almost mystical proportions within Latin America. The rapid growth in PRC trade with and investment in Latin America, and the expansion of contacts at all levels, only reinforce the perceived significance of “China’s rise,” as observed from Latin America.
In addition to opportunism for commerce, Latin America’s belief in the rise of China and its globally transformational implications draws the attention of the people and leaders of the region to the PRC and shapes their course of action. Costa Rican president Oscar Arias, for example, established regular diplomatic relations with the PRC as a necessary part of ensuring the relevance of his country as an international actor.
At the popular level, the rise of China is most likely behind a swelling interest in the Chinese language in the region. The dedication of 5 or more years by students to gain a basic capability in the Mandarin language and its character set, for example, is arguably driven by their calculation that the ability to communicate in Chinese will be fundamental to the pursuit of opportunities in the PRC, and with Chinese businessmen and government officials, in the future.
Use of Chinese Soft Power
One of the most important questions associated with the rise of China is how it is likely to use its growing soft power. Although such an endeavor is, by nature, speculative, Chinese interests and patterns of behavior to date suggest the continued use of that influence in at least the following areas:
■ diplomatic recognition of Taiwan
■ access to Latin American markets
■ protection of Chinese investments in and trade flows from the region
■ protection of Chinese nationals
■ working against the consolidation of U.S. influence in the region and its institutions.
Although the Chinese government repeatedly states its commitment to noninterference in the internal affairs of partner nations, in reality the PRC is as interested in such issues as any other outside country. Only the issues that the PRC focuses on, and the ways in which China applies pressure, differ.
Diplomatic Recognition of Taiwan. For the PRC, the government of Taiwan represents an important issue of political legitimacy and internal security. Currently, 12 of the 23 nations in the world that diplomatically recognize the government of Taiwan are found in Latin America and the Caribbean. Although the People’s Republic of China does not publicly threaten to block investment in or loans to countries that do not recognize the PRC, China repeatedly emphasizes the issue in its public diplomacy in the region, and makes such investments and market access difficult for those countries that do not recognize it, while simultaneously nurturing expectations regarding the opportunities that diplomatically recognizing the PRC could bring. When Costa Rica changed its diplomatic recognition from Taiwan to the PRC in May 2007, for example, it received an aid package that included an $83 million soccer stadium, the purchase of $300 million in government bonds, various highway, public works, and aid projects, and a $1 billion joint venture to expand the country’s petroleum refinery, as well as PRC aid in facilitating access to Chinese markets by traditional Costa Rican products such as coffee. In part, such Chinese generosity was directed toward the other countries in the region that still recognized Taiwan in order to demonstrate the types of benefits that could be made available if they too were to change their diplomatic posture.
Although the PRC and Taiwan have informally agreed to refrain from the use of economic incentives to competitively “bid” for diplomatic recognition, since Costa Rica’s switch, the allure of the PRC has prompted declarations of interest in changing diplomatic posture by Panamanian president Richard Martenelli, Paraguayan president Fernando Lugo, and Salvadoran president Maricio Fuenes—although all did so prior to assuming office.
Access to Latin American Markets. Latin American markets are becoming increasingly valuable for Chinese companies because they allow the PRC to expand and diversify its export base at a time when economic growth is slowing in traditional markets such as the United States and Europe. The region has also proven an effective market for Chinese efforts to sell more sophisticated, higher value added products in sectors seen as strategic, such as automobiles, appliances, computers and telecommunication equipment, and aircraft. In expanding access for its products through free trade accords with countries such as Chile, Peru, and Costa Rica, and penetrating markets in Latin American countries with existing manufacturing sectors such as Mexico, Brazil, and Argentina, the PRC has often had to overcome resistance by organized and often politically well-connected established interests in those nations. In doing so, the hopes of access to Chinese markets and investments among key groups of businesspeople and government officials in those nations have played a key role in the political will to overcome the resistance. In Venezuela, it was said that the prior Chinese ambassador to Venezuela, Zheng Tuo, was one of the few people in the country who could call President Chávez on the telephone and get an instant response if an issue arose regarding a Chinese company.
Protection of Chinese Investments in and Trade Flows from the Region. At times, China has applied more explicit pressures to induce Latin America to keep its markets open to Chinese goods. It has specifically protested measures by the Argentine and Mexican governments that it has seen as protectionist: and, in the case of Argentina, as informal retaliation, China began enforcing a longstanding phytosanitary regulation, causing almost $2 billion in lost soy exports and other damages for Argentina.
China has also used its economic weight to help secure major projects on preferential terms. In the course of negotiating a $1.7 billion loan deal for the Coco Coda Sinclair Hydroelectric plant in Ecuador, the ability of the Chinese bidder SinoHidro to self-finance 85 percent of the projects through Chinese banks helped it to work around the traditional Ecuadorian requirement that the project have a local partner. Later, the Ecuadorian government publicly and bitterly broke off negotiations with the Chinese, only to return to the bargaining table 2 months later after failing to find satisfactory alternatives. In Venezuela, the Chávez government agreed, for example, to accept half of the $20 billion loaned to it by the PRC in Chinese currency, and to use part of that currency to buy 229,000 consumer appliances from the Chinese manufacturer Haier for resale to the Venezuelan people. In another deal, the PRC loaned Venezuela $300 million to start a regional airline, but as part of the deal, required Venezuela to purchase the planes from a Chinese company.