China, CELAC & China-LAC Relations

˙ China & Latin America

The first ministerial meeting of the China-CELAC forum opens today in Beijing with members expected to discuss cooperation between Latin America and the Caribbean and China as well as the creation of institutions between the 33-member bloc and China. The presidents of Venezuela, Ecuador and Costa Rica are among the leaders attending. What is the state of China-Latin America relations? With China’s slowing economy and Latin American economies facing lower prices for their commodity exports, to what extent will China and Latin American countries be able to help each other economically? What does China stand to gain politically from closer engagement with Latin America and the Caribbean?

Jorge Heine, Chile’s ambassador to China

The China-CELAC forum could not come at a better time. Just after November’s APEC summit in Beijing, which signaled a much more assertive foreign policy on the part of China, and as the event that kicks off the Chinese diplomatic calendar year, it has raised high expectations. Since the turn of the century, China’s trade with Latin America has boomed, going from $10 billion in 2000 to $257 billion in 2013. This had a significant impact on Latin America’s growth. For Brazil, Chile and Peru, China is now their top trading partner (as is the case for 124 other countries around the world). Yet, as China’s growth has dampened from 10 to 7 percent a year, and the Chinese economy moves into the so-called ‘new normal,’ the region’s growth has also slowed, to 1.3 percent in 2014. Thus, the challenge now is to add significant investment and cooperation flows to trade, giving the impetus needed to Sino-LAC links. As China’s outward direct investment may overtake incoming foreign direct investment for the first time in 2015, this is quite feasible. In turn, President Xi Jinping’s strong interest in a region he has visited twice in his two years in office indicates an awareness of the potential for collaboration between China and LAC in the forging of a new, multipolar world order in the new century.

Beatrice Rangel, member of the Advisor board and director of AMLA Consulting in Miami Beach

Currently, China’s Latin American play is purely about economics. With time, this will certainly change. Economic integration has proved to gradually affect culture and politics. But, as of now, China’s single interest in Latin America is procurement of vital inputs and resources for its development. One must always remember that the Western Hemisphere represents about 25 percent of the world’s energy resources. And no matter what China’s rate of growth is, the country has energy deficits. Although China is working hard to reduce energy consumption, improve energy efficiency and facilitate growth of renewables, the country has yet to meet its energy development targets. In the interim, cozy relations with Latin America do not hurt. CELAC is a good platform to operate in Latin America. Upon the death of Venezuelan President Hugo Chávez, CELAC has become a character looking for a script. China can fill that void by means of using the organization to better secure its economic interests, wrapping them in the nice foil of international cooperation. We have seen this happen before as world powers seek order.

Margaret Myers, director of the China and Latin America program at the Inter-American Dialogue

China is an increasingly important economic partner for Latin America. Although the Chinese economy has slowed somewhat in recent years, trade and investment in LAC are on the rise. Chinese President Xi Jinping expects to scale up China-LAC trade to $500 billion by the end of the decade. Chinese investment in the region should also grow, especially in the form of mergers and acquisitions in the extractive and agricultural sectors. China is, moreover, a major source of financial support for many LAC nations, and a lifeline for both Venezuela and Ecuador. These two countries are among the top recipients of Chinese finance, with Venezuela having received upwards of $50 billion in Chinese lending since 2005. It comes as no surprise, then, that Maduro and Correa turned to Beijing this month, in the midst of falling oil prices. China-LAC engagement in the coming years will largely be shaped by China’s domestic demand, as it has been for more than a decade. The region’s commodities and export markets still drive the economic relationship. In that sense, the China-LAC dynamic is still largely influenced by the tenets of the ‘going-out’ strategy, with diplomatic overtures (including the China-CELAC forum) supporting key economic objectives. The relationship will also be increasingly shaped by China’s progress toward implementing critical economic reforms. Recent reform-minded changes to overseas investment policy have already opened the door for more in the way of overseas deal-making. And plans to support the country’s small- and medium-sized enterprises could change somewhat the makeup of Chinese investors in the region.

Anton Edmunds, president & CEO of The Edmunds Group International, LLC

The relationship between China and Latin America and the Caribbean is evolving into one where China may well be less inclined to try to manage the more than 150 bilateral agreements that it has signed with countries in the region, and instead determine under which arrangement it can advance an agenda with the region. As to whether a China-CELAC mechanism can serve to do this is uncertain, considering how fragmented the countries of Latin America and the Caribbean are in terms of their development, social and political agendas. A more formal China-Latin America and Caribbean arrangement will also have to navigate the overlapping agendas of the alphabet soup of entities already established to advance cooperation within and outside of the hemisphere. For Latin America and the Caribbean, gone are the days of China’s largesse through grants and free stadiums. China today is a slowing economy whose leaders will be focused primarily on domestic growth and employment. A mature and pragmatic relationship with the larger regional economies will center around market access for Chinese goods and services, with raw materials to be exploited from these countries continuing to be key. Smaller economies in Central America and the Caribbean will however be relegated to the sidelines with sporadic initiatives the best they can expect. That said, a key plank of China’s political agenda, which is to be active within this hemisphere, will ensure a presence. While the bulwark against Taiwan’s influence may no longer be needed, Chinese interests align with those of some Latin American countries in a common desire to try to keep the United States in check. China as an economic power provides cover, with well-known positions on non-interference in internal matters by external parties (notably the West) undoubtedly appealing to many.