Can China Make New Friends in LAC?Sep 8 2016
The following was originally published by Latin Trade on September 7, 2016. Myers contributes a monthly column on China-Latin America to Latintrade.com.
Although Chinese firms trade with and invest in nearly every country in Latin America and the Caribbean to some degree, they have tended to focus their efforts in only a handful of primarily South American nations. Chinese policy bank (China Development Bank and China Export-Import Bank) finance has traditionally been directed toward Venezuela, Ecuador, Brazil, and Argentina, for example.
Foreign direct investment is also largely directed toward these countries, although considerable attention has been paid to opportunities in Peru, Chile, Panama, Mexico, Cuba, and elsewhere.
Because Chinese deal-making in Venezuela, Ecuador, Argentina, and Brazil has been facilitated in many cases by strong government-to-government and even personal relationships, the new political conditions in these countries have created uncertainty some for Chinese entities.
China’s relative carte blanche in Cristina Kirchner’s Argentina has been replaced with a still friendly, but more cautious approach by Mauricio Macri. The Argentine president promised to review the various deals approved by his predecessor in pursuit of an increasingly “mature” relationship with China. Chinese hydroelectric projects in Argentina are being altered somewhat as a result.
Despite over a decade of support for Venezuela’s Chavistas, there is little doubt in Beijing that Venezuelan president Nicolas Maduro’s time in office is limited. With this in mind, Chinese officials have already reportedly reached out to the Venezuelan opposition. China’s foreign policy professionals are now tasked with determining what a future Venezuelan leadership will look like and whether it will be friendly toward Beijing.
Chinese President Xi Jinping will very likely assess Ecuador’s political and economic environment during a visit to the country following his participation in the mid-November APEC Summit in Lima, Peru.
Brazilian President Dilma Rousseff’s impeachment is also of concern to China, which has had a productive, if not perfect, relationship with Brazil’s Worker’s Party (PT) since Luiz Inácio Lula da Silva’s time in office. In advance of this week’s G20 Summit in Hangzhou, China, Rousseff’s replacement, Michel Temer, has indicated considerable interest in maintaining a strong China-Brazil relationship, however.
Latin America’s constantly evolving political dynamics are good reason for China to diversify its partnerships.
There is already some evidence of both sectoral and geographic diversification of Chinese investment and finance throughout the region. Chinese commercial banks and companies are exploring opportunities for investment in a wider variety of sectors. Many are active in a numerous countries. In Colombia, where China has had a relatively minimal presence, Chinese companies have secured some key contracts, including participation in the country’s 4G transport infrastructure initiative and possibly in the development of a portion of the Buenaventura port on the country’s Pacific coast.
Recent difficulties in countries such as Venezuela and Argentina may somewhat impede further progress, however. Citing concerns about political risk and complex regulatory environments, Chinese companies are increasingly apprehensive when investing in the region, despite much in the way of Chinese government support for new, increasingly diverse projects.