Asia & Latin America

The Dialogue’s Asia & Latin America Program engages and informs academics, policy-makers, and private sector leaders from Latin America, the United States, and across the Asian region on evolving themes in Asia-Latin America relations. Our working group meetings, events, and publications seek to address areas of critical interest and to identify shared priorities on both sides of the Pacific. To receive our latest on Asia & Latin America, please sign up to receive our program newsletter.


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Much like in other parts of the world, China’s so-called “mask diplomacy” has been on the rise in Latin America and the Caribbean (LAC) as governments in the region grapple with Covid-19 and its many social and economic consequences. Having tracked China's offerings to the region in detail, we offer the following observations on the nature and extent of Chinese medical shipments over the past few months.

1. Chinese entities have delivered medical equipment and services to the LAC region nearly continuously since March.

Among the earliest publicly documented examples of Covid-19-related assistance to the region was a donation of testing kits to Peru’s Ministry of Health by BGI, a Chinese life science and genomics company, and its associated charity, the Mammoth Foundation. Other early donations included Chinese telecommunications firm Huawei’s shipment of two thermal cameras to Argentina for use by the country’s customs agency and the company’s coordination with several Central American countries on the delivery of what have been described in LAC media as AI-enabled diagnostic services.

Of China’s over two hundred transactions in LAC over the past few months, the majority have taken the form of donations, although many also involve the sale of Chinese personal protective equipment (PPE) to governments and municipalities across the region. Mexico, for example, reportedly ordered PPE in the amount of $56 million from China, to be delivered across a number of flights. Peru has even contemplated buying from China the sort of prefabricated, 1,000-bed hospital facility that was built over the course of ten days in Wuhan, China. While Chinese donations to LAC continue unabated, the purchase of Chinese equipment has proven increasingly difficult for at least some countries in the region as shipments are sometimes diverted to higher bidders.

2. China’s assistance has reached most countries in the region, including some of Taiwan’s diplomatic allies.

Since mid-March, China has sent shipments of medical equipment and/or offered technical assistance in combating Covid-19 to nearly every country in Latin America and the Caribbean.

Argentina has been a primary recipient of the many Chinese shipments to South America. According to Chinese embassy accounts, Argentina had received many tens of thousands of test kits, hundreds of thousands of medical facemasks, over 70,000 N95 masks, and many other types of PPE from China by mid-April. Although China has remained tight-lipped on the issue of debt restructuring in LAC, China’s ambassador to Argentina, Zou Xiaoli, also suggested in April that China is open to strengthening its financial policies with Argentina to “jointly confront Covid-related challenges.”

Recipients have also included a number of countries in the Caribbean, such as Antigua & Barbuda, Barbados, the Cayman Islands, Dominica, Grenada, and Jamaica. Among Caribbean nations, Cuba has been a primary recipient of medical aid from China, indicative of the special, historical bond between the two countries. Between March 20 and May 7, Cuba received many hundreds of thousands of facemasks, goggles, hazmat suits, and other supplies. China also reportedly donated ambulances to Cuba to help transport Covid-19 patients. Chinese media and Cuban officials strongly criticized US sanctions for delays in the arrival of Chinese shipments bound for Havana.

Beyond the delivery of aid to the island, Sino-Cuban medical cooperation has also come into focus as a result of the pandemic. An antiviral treatment, Interferon Alfa-2B, jointly produced by Cuban-Chinese joint venture Changheber, was among the medicines selected by the Chinese National Heath Commission to fight Covid-19 infections in China.

Chinese activity has also been reported in countries with diplomatic ties to Taiwan. In addition to Huawei’s early overtures in Guatemala, China also reportedly offered facemasks to Paraguay in late March, although Paraguay’s government looked to Taiwan instead for a shipment of medical supplies. Even so, a Paraguayan industry group known as the Agricultural Coordinator reportedly requested assistance from China in mid-April through a series of letters to China’s Ministry of Foreign Affairs and to the Chinese ambassador in Brazil.

 3. A wide range of Chinese actors are engaged in China’s overseas Covid-19 response.

Though likely coordinated to some degree by Chinese authorities, China’s assistance to LAC and other regions is coming from a wide range of actors. For instance, many of the donations have come not from the central government in Beijing, but from local governments across China. One prominent practice is for Chinese cities to send assistance to their sister cities in LAC. Sister city linkages are one of many examples of China’s expansive subnational diplomacy. In other cases, large cities in China have shipped equipment to Chinese embassies in LAC or to LAC governments for broader distribution. For example, the city of Chongqing in central China delivered 1,000 protective suits, 1,000 surgical suits, and 5,400 N95 masks to Ecuador in early April, according to China’s embassy there. Suzhou, which is located in China’s Jiangsu province, donated 20,000 facemasks and 200 hazmat suits to Panama’s government later that same month. And the city of Nanjing donated 30,000 facemasks to Colombia.

Chinese firms, state-owned and private, have also been active participants in China’s overseas outreach. Chinese telecommunications firm Huawei has played an especially prominent role thus far, having made donations to numerous countries in the region. The LAC region is an important potential market for the company’s telecommunications equipment and services, especially as 5G technologies are deployed throughout the region.

Other donor companies range from biotech firms such as BGI and Huiying Medical to construction companies, generally with operations in recipient nations. State Grid Brazil, which owns much of Brazil’s electricity grid, donated 264 hospital beds to Rio de Janeiro, for instance. And in Argentina, Chinese companies Gezhouba, China Railway, and Shandong Gold Group made donations to those Argentina provinces where they have existing operations—Santa Cruz, San Luis and San Juan. In Colombia alone, Chinese companies Didi, China Railway Construction Corporation (CRCC), Huawei, and ZTE have all made sizable donations. Chinese multinational Alibaba and founder Jack Ma’s private foundation have also been active throughout the region, including by donating five ventilators to Peru, 15,000 test kits and 30,000 face masks to Antigua & Barbuda, and respirators and other equipment to Argentina.

Some overseas Chinese groups have also been active in providing equipment to their respective communities. The Chinatown community in Bogota reportedly donated food to needy families, for example. Members of El Salvador’s Chinese community donated 3,000 facemasks and other supplies to the country’s national police, according to a Twitter post from the local Chinese embassy. The Chinese community in Venezuela also reportedly donated equipment to certain Venezuelan localities in mid-April. And Chinese media reported that alumni from Cuban universities donated over 58,000 facemasks to the Cuban people. While the vast majority of these initiatives are organized by communities themselves, some have received support from local Chinese missions, which then frequently highlight these efforts as part of their own media outreach.

4. Sales and donations of Chinese PPE across the region have been accompanied by a campaign to shape the narrative on China and Covid-19.

Beyond coordinating donations and serving as an intermediary between buyers and sellers in China and LAC, China’s embassies have also worked to shape the narrative on China and Covid-19. In addition to cataloguing China’s assistance to the region, Chinese officials have also countered public commentary suggesting that the virus originated in China or that China’s domestic response to the virus was in any way deficient.

At times, China has taken an uncharacteristically aggressive approach to refuting what it considers to be misinformation about China and Covid-19. This included a very public diplomatic spat with Eduardo Bolsonaro, Brazilian Congress member and son of President Jair Bolsonaro, who blamed the China for the pandemic in a March tweet. Taking to Twitter itself, the Chinese embassy in Brasilia wondered whether the younger Bolsonaro had contracted a “mental virus” during a trip to the United States, noting the similarities between Eduardo Bolsonaro’s comments and those of some politicians in the US.

Chinese diplomats in Peru also traded barbs with Mario Vargas Llosa after the Nobel Prize winning writer published an opinion article in El Pais. In his article, Vargas Llosa suggested that the coronavirus had originated in China and noted that a free and democratic society would have handled the crisis differently. The Chinese Embassy in Lima responded on Chinese social media platform WeChat, reducing Vargas Llosa’s analysis to a “smear” campaign, which, according to the post, reflected “a lack of understanding and serious prejudice against China.”

Social media has indeed featured prominently not only in China’s rebuttals but also in China’s broader Covid-19 messaging. In fact, several Chinese embassies in the region including in Argentina, the Bahamas, Cuba, and Peru, set up Twitter accounts in the early months of the outbreak to communicate key messages directly to local publics.

5. Regional audiences have had varied reactions to China’s coronavirus-related outreach.

Though difficult to measure, China’s Covid-19-related outreach has so far had a mixed effect on public perceptions of China in LAC. Many in the region are exceedingly grateful for Chinese assistance and have even publicly praised China for its extensive and timely donations. Mexican Foreign Minister Marcelo Ebrard tweeted “Thank you China!!!” following a late March delivery of masks, respirators, and test kits from the Alibaba Foundation, for example. Others have noted the efficiency with which China managed its own health and economic crises.

In other cases, China’s outreach has been a source of controversy. For example, Mexican officials noted that that much of the equipment that they are now buying back is equipment that Mexico originally sold to China, and that Mexico is buying the equipment back at a much higher price. Some in the region have also worried about the quality of Chinese equipment, after shipments of low-quality goods to Europe set off a number of related controversies. In Argentina, some diagnostic tests for Covid-19 were deemed ineffective by the country's Ministry of Science.

China’s efforts to shape the narrative on China and Covid-19 have also met with some resistance from local populations. Anti-China sentiment is especially prominent in Brazil, encouraged by President Jair Bolsonaro’s own confrontational relationship with China. Following China’s heated exchanges with Brazilian politicians, anti-China banners appeared in Brasilia reading “China Lied, People Died,” and “China Virus,” according to the Financial Times. Despite growing Brazil-China tensions, Chinese companies and organizations have nevertheless continued to provide assistance to Brazil, including in the past few weeks, as Brazil’s Covid-19 crisis has intensified.

Margaret Myers is director of the Asia and Latin America program at the Inter-American Dialogue. Ricardo Barrios is senior analyst at RWR Advisory, a risk analysis firm. The authors are grateful to Wazim Mowla for his research assistance. 

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In 2014, the Chinese government released its plans for the construction of a Social Credit System, which will be fully implemented by the end of 2020, according to the Chinese government. Though often associated with Beijing’s efforts to tighten its grip on individual freedoms through facial recognition and other technologies, this system is better understood as a sort of credit scoring mechanism, employing modern technology and a complex ratings system to monitor and guide the conduct of market participants, including companies and individuals. Full implementation of the system is expected to have extensive effects not only on Chinese businesses and people, but on the many foreign companies operating in China or hoping to access to the Chinese market. This includes a growing number of Latin American companies, such as Alfa Group, Bimbo, Cemex, Embraco, Embraer, and Vale, among others.

Defining Social Credit

Although plans for the Social Credit System were released in 2014, the concept of social credit has been referenced by Chinese scholars and officials since the late 1990s, according to consultancy Trivium China, when a Chinese Academy of Social Sciences report captured the attention of China’s leadership. More recently, a think tank associated with China’s National Development and Reform Commission published a book entitled “Credit of a Great Nation,” (大国信用), which links the behavior of individuals—and the organizations employing them—to market stability.

China's efforts to monitor and rate individual behavior have received far more attention from international media and human rights groups than the corporate system, although implementation of the latter is far more advanced. The monitoring of individuals is still relatively experimental and remains largely decentralized. Certain municipal and provincial governments have developed their own criteria for evaluation, which vary rather considerably on a case-by-case basis. Chinese individuals are nonetheless feeling the effects of localized evaluation systems. Nearly 23 million “discredited” people were restricted from buying plane and train tickets in 2018, for example, according to a report from the Credit Reference Center, which is charged with running the Social Credit System. Depending on the locality, individual credit is affected by everything from evading military service to being in arrears on payment of goods.

Monitoring Businesses

The part of the system that assesses the performance and behavior of companies—both foreign and domestic—is comprised of several topic-specific ratings (e.g. tax, customs, and environmental protections) and compliance records on anti-monopoly activity, pricing, and licenses, for instance. While the ratings have introduced some new requirements, including company accountability for the behavior of business partners, such as suppliers and service providers, according to a EU Chamber of Commerce in China and Sinolytics report, most are based on regulations that have been in place for a matter of years. According to the same report, the system ensures that the ratings of individual employees—especially those at the managerial level or serving as legal representatives to a company—can impact a company’s rating. A company's malfeasance can also affect the personal scores of its employees.

An especially challenging feature of the system for domestic and foreign companies is its use of joint sanctions. This feature, though not yet fully operational, requires that government authorities levy sanctions based not only on the ratings they are directly responsible for, but also in response to negative ratings issued by other government bodies and private credit rating agencies. The coordination of sanctions is based on Memoranda of Understanding (MoUs) among government authorities.

Although sanctioning mechanisms are still being developed, China’s eventual capacity for joint sanctions will have extensive implications for businesses operating in the country. For example, if a company fails to comply with tax requirements to the point of being listed as a heavily-tax-regulation-violating entity (a D-level tax rating) by the State Administration of Taxation, the company could also be treated as a distrusted customs enterprise by the General Administration of Customs. Said company could also face sanctions from other government bodies, including those responsible for business licensing or other critical approvals. The average inspection import-export rate for a “distrusted customs enterprise” (海关失信企业) can be as high as 98.12 percent, significantly impacting a company’s day to day operations.

To enable the application of joint sanctions, data is fed into a central system that informs government entities on the creditworthiness of a corporation or an individual. This central database, known as the National Credit Information Sharing Platform, has been operational since 2015 and is run by the National Development and Reform Commission (NDRC) and its think tank, the State Information Center. Last month alone, the NDRC rated 33 million Chinese businesses, despite some challenges collecting third-party data. Earlier this year, Chinese tech firms Tencent and Alibaba, refused to turn over customer loans data to Baihang, a government-backed credit scoring company that aims to consolidate national credit scoring data.

Implications for Latin American Companies

Once fully applied, China’s Social Credit System will have far-reaching consequences for both domestic and foreign firms. Given their already numerous barriers to entry in the Chinese market, the challenges for Latin American businesses will be especially pronounced. Although China’s new foreign investment law, which will take effect on January 1, would appear to improve the investment environment for foreign companies, full application of the Social Credit System will make it exceedingly difficult and costly for business to comply with Chinese regulations. The new regulatory landscape could be especially prohibitive for Latin American and other small and medium-sized enterprises (SMEs), which in many cases will not have the resources necessary to keep up with new policy and related requirements.

Looking ahead to 2020, support from Latin American governments, industry organizations, and chambers of commerce will be increasingly critical as businesses aim to navigate China's regulatory environment. The Social Credit System's effectiveness will intensify as Chinese entities collect more data on companies and individuals and as communication among China’s various regulatory bodies improves.

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Como parte de un esfuerzo más amplio dirigido a evaluar el desarrollo de la infraestructura china enAmérica Latina y el Caribe (ALC), el programa de Asia y América Latina del Diálogo Interamericano ha recopilado datos sobre la multitud de carreteras, puertos, ferrovías y demás proyectos de infraestructura de transporte que han recibido el apoyo y la inversión de China desde el 2002. Estos acuerdos se encuentran en varias fases de desarrollo, desde meros conceptos hasta redes completamente operativas. Ciertos proyectos han sufrido retrasos prolongados o han sido cancelados por completo.

No obstante, la magnitud de la actividad china en este sector es considerable, con proyectos en marcha por toda la región, incluso en Centroamérica y el Caribe. Hasta el momento, las compañías y los bancos chinos han indicado interés en aproximadamente 150 proyectos de infraestructura de transporte en ALC y han entregado una porción considerable de los mismos. Con la llegada de la Iniciativa de la Franja y la Ruta a Latinoamérica, los gobiernos de la región buscarán apoyo por parte de China para sus proyectos de transporte.

Nos complace compartir los siguiente cinco puntos claves de nuestra base de datos y el mapa correspondiente.

1. China ha aumentado su construcción de infraestructura de transporte en ALC durante los último cinco años.

Con el desembarque de la iniciativa china de la Franja y la Ruta en la región de América Latina y el Caribe, se espera que las inversiones chinas atiendan algunas de las necesidades de transporte más apremiantes de la región. A medida que los gobiernos de la región firman acuerdos de cooperación sobre la Franja y la Ruta con Pekín, la región buscará apoyo adicional de los bancos y las compañías de construcción chinas, las cuales han invertido extensivamente en carreteras, ferrovías, puertos y otras infraestructuras de transporte por casi dos décadas.

Nuevas inversiones por China en el área de infraestructura de transporte dependerán de numerosos factores, entre ellos el desarrollo político y económico de la región y la agenda de reforma nacional de China. Actualmente, la actividad China en el área de la infraestructura de transporte permanece a un nivel relativamente alto. Según nuestros datos, aproximadamente 40 por ciento de los proyectos de construcción respaldados por China han comenzado dentro de los últimos cinco años. Durante este período, los bancos y las compañías chinas también han expresado interés en numerosos otros acuerdos que aún se encuentran en etapa de elaboración.

2. De los varios proyectos en la cual China ha expresado interés, alrededor de la mitad se han materializado.

Desde el 2002, China ha mostrado interés en el desarrollo de unos 150 proyectos de infraestructura de transporte en América Latina y el Caribe. A partir del 2018, casi la mitad de estos proyectos se encuentran en la fase de construcción. Algunos han sido cancelados o retrasados, pero la mayoría se encuentran bajo estudios de viabilidad financiera y técnica de parte de gobiernos o compañías, o tienen que ser adjudicados a desarrolladores específicos. Ciertos proyectos, tal como el Corredor Ferroviario Bioceánico Central, no han logrado superar la fase conceptual.

 

3. China ha sido más exitoso en la adquisición y construcción de instalaciones portuarias en ALC.

Las compañías chinas han expresado un interés considerable en la construcción de carreteras por la región—los proyectos de carretera conforman aproximadamente un tercio de nuestros datos recopilados—pero dichas compañías han sido más exitosas a la hora de negociar acuerdos relacionados a facilidades portuarias. Actualmente existen unos casi veinte proyectos de este tipo en proceso o ya completados. Estos proyectos varían considerablemente en cuanto a tipo y escala, e incluye tanto dragados y la expansión de acuerdos para la construcción y/o la operación de puertos enteros. En otros casos, las compañías chinas han adquirido instalaciones de puertos existentes. Por ejemplo, la naviera COFO adquirió dos terminales del puerto Santos en Brasil en el 2014 y 2015 mediante su compra de una participación mayoritaria en la empresa holandesa Nidera y la rama entera de materias primas de la hongkonesa Noble Group.

4. Las compañías de construcción chinas están participando en toda la región, pero con un enfoque particular en Bolivia, Brasil y Jamaica.

Tomando en cuenta exclusivamente el número de proyectos individuales siendo desarrollados en ALC, Bolivia luce como el destino principal para los inversores chinos. Desde el 2013, las compañías chinas se han adentrado en más de veinte proyectos de carreteras y puentes en Bolivia. Entre las compañías llevando a cabo estos proyectos figuran los gigantes de construcción China Harbour Engineering (CHEC) y China Railway Construction Company, al igual que la gran petrolera china, Sinopec, y Sinohydro, la cual también ha sido responsable de las construcción de represas hidroeléctricas en el país.

Aproximadamente trece acuerdos han sido sugeridos en Jamaica y Brasil, pero la nación caribeña ha mostrado mayor progreso. China Harbour y China Exim Bank fueron responsables de casi todos los acuerdos relacionados al transporte de China en Jamaica.

5. China Harbour se destaca entre sus pares en ALC.

China Harbour Engineering Company mantiene una ventaja cómoda como la compañía de infraestructura china más activa en América Latina, donde ha establecido una presencia en gran parte de la región. La compañía ha estado envuelta en alrededor de un cuarto de nuestros proyectos de infraestructura de transporte documentados. China Harbor tomó parte en la expansión de Colon Container Terminal de Panamá, la cual en el transcurso de dos años agregó un cuarto muelle al puerto. Otros proyectos incluyen el Manzanilla Container Terminal en México y el North Abaco Port en las Bahamas. A pesar de su considerable huella en la región, la compañía sigue siendo controversial, principalmente por la prohibición de su empresa matriz, China Communications Construction Company (CCCC), por el Banco Mundial.

El Diálogo agradece a Ricardo Barrios, Ruiyang Huang, Izabella Zox y Bob Zeng por sus contribuciones.

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