By Riordan Roett
When President Hu Jintao made a state visit to South America in November 2004, a new stage in the relationship began. With stops in Argentina, Chile, Cuba and Brazil, the Chinese leader initiated a series of high-level exchanges between Latin America and the People’s Republic of China (PRC). These exchanges generally have emphasized trade and investment, but the recent trip of Venezuela’s President Hugo Chávez to China indicates broader foreign policy and geopolitical issues may be at stake for the United States. Although the presence of the PRC is not a threat to U.S. interests in the Western Hemisphere, there has been growing concern in Washington with regard to China’s intentions in strengthening economic and diplomatic ties with the countries of the region. In testimony during an April 6, 2005, hearing before the House International Relations Committee’s Subcommittee on the Western Hemisphere, which focused on “Relations Between China and Latin America/the Western Hemisphere,” the author presented the argument that China’s emerging presence in the region is driven primarily by economic interests. (A more somber evaluation of China’s goals is presented by June Teufel Dreyer in “From China With Love: PRC Overtures in Latin America,” in the Winter/Spring 2006 issue of Brown Journal of World Affairs.) Economic Imperative
China’s expanding presence in Latin America reflects the impressive growth of China’s economy in recent years. This requires a constant flow of energy resources and, with the emergence of a middle class in the larger cities, a steady supply of foodstuffs is an increasingly pressing necessity. Latin America is an important producer of both. In 2005, the Chinese economy grew by 9.9 percent, with similar or higher rates of growth in the preceding years; the goal of the government is to double the gross domestic product (GDP) by 2010. The country’s exports reached a record $762 billion in 2005, and China now ranks third in the world in total trade, following the United States and Germany—and replacing Japan, which has dropped to fourth place. Overall, China’s economy is the fourth largest in the world—today, only the United States, Japan and Germany are bigger economies. As the world’s fastest-growing economy, China imports 40 percent of its petroleum needs; that percentage is expected to increase in the years ahead. It must import 45 percent of its iron ore, as well as 44 percent of its requirements for nonferrous metals. China is also the world’s leading consumer of copper—it consumes 20 percent of the world’s supply—while soybeans and other foodstuffs are an essential part of the import profile annually. The trade surpluses of many of the countries of Latin America are generated by this growth of exports to China, and the region is becoming an increasingly important supplier for the continued growth of the economy of the PRC. To strengthen its links to the Latin American suppliers, China has signed energy deals with at least seven countries in the Western Hemisphere, ranging from the tar sands of Canada to natural gas fields in Argentina. China has announced that it will invest in a new $8 billion dollar railway in Argentina, an important infrastructure investment to facilitate the export of foodstuffs. It also will acquire a stake in that country’s Pluspetrol oil and gas firm. In Bolivia, China announced a $1.5 billion investment in oil and gas exploration in the state-run oil company, YPF. In Ecuador, China has purchased $1.4 billion dollars in assets from EnCana Corporation, a Canadian oil company, which is of interest because of that country’s two main oil pipelines. (David Zweig and Bi Jianhai provide a good overview of the resources strategy of the PRC in “China’s Global Hunt for Energy,” in the September/October 2005 issue of Foreign Affairs.) There are pluses and minuses in this sort of relationship. Many fear that Latin American countries’ efforts to diversify their economies will be stifled by a resort to commodity and natural resource exports; the drive to produce more sophisticated goods may lose impetus as governments seek short-term windfall profits from trade links to China. There are implications for the region’s work force as well, as commodity and raw material goods do not require a sophisticated, educated workforce. The need to upgrade the skill sets of the hemisphere’s workers may be downgraded if the emphasis is on bulk harvesting and production of foodstuffs and minerals. Another consequence of China’s expansion in the region is the desire by Beijing to sell manufactured goods in Latin America. These are generally produced with much lower wages than are earned by workers in Latin America, and domestic producers fear being undercut by China’s cheap, mass-produced manufactures. Concerns also have been raised about the environmental threat posed by rapid and often careless mining practices, and, as China begins to invest in productive enterprises in the region, the question of workers’ rights has been highlighted. Unions are generally strong in Latin America; they are nonexistent in China. How will Chinese entrepreneurs react to the presence of organized labor in many of the areas in which they will become primary investors in the future? Diplomatic Initiative
The major states of Latin America long have maintained formal diplomatic relations with the PRC. As part of the economic and trade expansion in Latin America, the Chinese government is increasing its diplomatic presence in the region. Younger and better-trained diplomats are now standard in China’s embassies in the major Latin American capitals. Tourism is expanding and Chinese “Confucius Centers” have begun to appear-—these are entities that promote Chinese language training, cultural understanding and people-to-people relations. An important goal of the PRC is for the remaining countries in the hemisphere that maintain diplomatic relations with Taiwan to withdraw recognition. Twelve states in the hemisphere continue to recognize Taiwan, most of them small countries in the Caribbean and in Central America (Paraguay is the only country in South America to do so). Taiwan has cultivated the 12 countries with generous foreign aid packages for many years, but Beijing has clearly indicated that any country that seeks to do business with the PRC will need to accept the one-China principle—i.e., that Taiwan is a province of the mainland republic, and countries need to diplomatically recognize that reality. How aggressively will Beijing pursue that policy? And will it raise the possibility of a political problem with the United States, a staunch supporter of the current geopolitical situation between Taiwan and mainland China? Taiwan has strong support in the U.S. Congress, and successive administrations of both political parties have continued to support the autonomy of Taiwan. On the multilateral front, China has gained observer status in a number of regional organizations, including the -Organization of American States, the Inter-American Development Bank and the Association for Latin American Integration. Beijing is actively pursuing -political dialogues with the Common Market of South America (MERCOSUR-), the Andean Community, the Rio Group, the Latin American Parliament and CARICOM, the Caribbean organization of economic cooperation. China is an active member of the G-20, a group formed to defend the developing countries’ agricultural export opportunities in the face of persistent subsidies and protection in the European Union and the United States. The G-20’s spokesperson is generally the foreign minister of Brazil. In an effort to restart negotiations in the Doha trade round of the World Trade Organization, the trade ministers met in Rio de Janeiro in September. The meeting did not provide any new impetus for resolving the agricultural impasse between developing countries and industrial nations, but it did provide an opportunity for China to clearly indicate that on agricultural policy it favors the position of its G-20 colleagues. Brazil appears to be the principal interlocutor of the PRC in South America. The chairman of the Standing Committee of China’s National People’s Congress (NPC), Wu Bangguo, recently completed a six-day official visit to Brazil. It was reported in the Chinese press as a consolidation of a strategic alliance between Beijing and Brasilia. Wu met with President Lula da Silva and the leadership of the Brazilian Congress and later signed an agreement for the exchange of information between the NPC and the Brazilian legislature, the first such agreement signed with a Latin American country. During a meeting with Wu, Brazilian Congressman Ney Lopes, president of the Latin American Parliament, stressed that the parliament, and he individually, favored the one-China principle and opposed any effort to declare Taiwanese independence. Wu thanked the congressman and the parliament for that diplomatic gesture. In an important signal that China was mindful of the need to recognize Brazil’s diversified economy, an agreement was signed to purchase 100 jet planes from EMBRAER, the Brazilian manufacturer. The agreement will cost approximately $2.7 billion. Other agreements were signed for Chinese investment in the aviation, telephone and infrastructure sectors. EMBRAER’s leadership announced that it was expanding its dealings with its Chinese counterpart, Avic II. The Venezuelan Card
Elected in 1998, President Hugo Chávez is considered a “headache” for Washington decision-makers. His close, personal relationship with Cuba’s President Fidel Castro is a clear irritant. For instance, Venezuela has been crucial in mitigating the impact of the American embargo against Cuba with subsidized petroleum, the purchase of a wide range of goods made in Cuba and the employment of thousands of medical doctors and other personnel in Venezuela. Hu Jintao, during his 2004 visit to the region, included a stop in Havana on his agenda. Quietly, the PRC has been supportive of Cuba’s efforts to neutralize the embargo. Chávez paid his fourth visit to China in August. The trip was part of his drive to win a seat on the U.N. Security Council this year. The United States opposed Venezuela’s candidacy and proposed Guatemala instead. However, Guatemala recognizes Taiwan, therefore precluding any possibility of Beijing’s support of the U.S. candidate. During his August visit, Chávez received the endorsement of Beijing, as he had received Russia’s endorsement during a visit to that country in July of this year.
As so often happens in politics, Chávez overplayed his hand when he spoke at the annual meeting of the U.N. General Assembly in October. Denouncing President George W. Bush as “the devil,” he lost crucial support from developing countries who see the United Nations as an important multilateral forum. Panama emerged as a reasonable compromise candidate, and Guatemala and Venezuela withdrew. The Venezuelan standdown was seen as a strategic diplomatic loss for Chávez. Perhaps of most concern to the United States was Chávez’s announcement in Beijing that he wishes to triple Venezuela’s crude-oil exports to China by 2009, reaching 500,000 barrels a day, from the current level of 150,000 barrels a day. Nonetheless, there are several reasons to be skeptical that Chávez will be able to achieve that goal. First, oil production in Venezuela is declining, due primarily to no new investment in the sector. Second, Venezuelan crude is difficult to process and special refineries are needed. Third, transportation will be complicated and expensive. But Chávez’s gesture was clearly aimed at Washington—in spite of the deteriorating relations between the two countries, Venezuela remains the major supplier for the American market. As a byproduct of the China visit, the Venezuelan government announced that China had agreed to invest about $5 billion in energy projects by 2012. The PRC also agreed to build 13 oil-drilling rigs and 18 oil tankers. China will help Venezuela build a $9 billion railroad line, construct 20,000 housing units and create a fiber-optic network for the government. In 2005, China began work on a communications satellite for Venezuela that is expected to orbit in 2008. The growing ties between China and Venezuela inevitably will create tension in Washington. While the government of China is unlikely to directly challenge U.S. interests in the region, Beijing now sees itself as a growing world player. In working with developing countries such as Brazil and Venezuela, it demonstrates its solidarity with the developing world and offers another diplomatic and economic option for the countries in the Western Hemisphere. Implications for the United States
China’s expansion in the Western Hemisphere is a new reality. The issue is whether or not the PRC has interests and ambitions that will affect the important bilateral relationship between Beijing and Washington. China regularly argues that its role in world affairs will be peaceful. (See Zheng Bijian’s “China’s ‘Peaceful Rise’ to Great Power Status” in the September/October 2005 issue of Foreign Affairs). Increasingly, the United States views China’s international role as significant. Washington has called for China to take a more active role in world trade talks, and the U.S. Treasury Department supports an increase in the voting rights of China in the International Monetary Fund in order to give that country a greater stake in global financial stability. Furthermore, China and the United States have a high--profile agenda on key issues such as North Korea and Southeast Asian security. The emergence of China as an increasingly active player in the Western Hemisphere is a new element in the relationship between Beijing and Washington. At the moment, the interests of China are multiple but peaceful. Investment flows are important for the long-range economic development of the region. Positive trade balances, due to the export of raw materials and commodities, are very welcome in a region with low tax collection and even lower savings rates. Taiwan, while a difficult and often emotional question, has thus far yielded to high-level diplomatic exchanges. Clearly there is no Chinese military or intelligence threat in the Western Hemisphere at this time. In the short term, the most likely scenario is that of a “peaceful rise” as a world power. The implications of that assertion are that the PRC will not find it in its interests to appear to challenge the United States in the hemisphere. But as an emerging global actor, the region has now attracted the attention of Beijing, and that fact needs to be included in future U.S.-Latin American relations. Riordan Roett is the Sarita and Don Johnston Professor and director of Western Hemisphere Studies. | 
