China-Latin America Relations

1. China-Latin America Relations Contemporary Chinese Diplomacy Alejandra Vasquez Delama August 20th, 2008

2. China

3. The Evolution of Chinese Policy towards Latin America (Hongbo 2008) • Chinese Policy towards Latin America has gone through four phases: • Early Cold War Period, “Unofficial Diplomacy between People” was the policy and the main focus largely because China belonged to the Communist camp. • In the late Cold War Period (60’s), the policy became “Three World Theory and Look West” because China had bad relations with the US and was isolated geopolitically. • After the “Open and Reform” Period, the policy shifted to “Trade and Regional Powers First” because China wanted to emerge in the world stage and develop its economy. • In the 21st Century, “Taiwan Issues and Closer Trade Relations First” became the policy because China’s booming economy and the issue of Taiwan has became more important for China as a rising world power.

4. Chinese Policy towards Latin America • May 2001: China's efforts to expand its influence in Latin America can barely be described as a strategy. Its efforts to nurture new security and trade alliances have been an inch deep and a mile wide. Unless it backs up its rhetoric with hard cash and can offer the region the same or more than the United States, Europe and others, it will gain only a marginal influence in Latin America. • Jiang Zemin focused his efforts on Cuba and Venezuela. Both countries - Cuba under Fidel Castro and Venezuela under Hugo Chavez - have resisted American dominance and are areas Beijing views as its best hope for getting a foothold in America's backyard.

5. Chinese Policy towards Latin America • July 2005: Why did Chinese leaders choose late 2004 and early 2005 to make their whirlwind spending tour of several Latin American nations? They may well have noticed that Latin American governments no longer race to sign onto the US-backed Free Trade of the Americas agreement, as they did previously to the North America Free Trade Agreement in the 1990s. • Because the free-trade, free-market model failed to perform as predicted - in Argentina it led to bankruptcy - governments that question Washington's economic model now sit in Uruguay, Argentina, Brazil, Venezuela and Cuba. Bolivia and Ecuador may be next. • Latin America has said enough to the US development model. In Argentina, Brazil, Uruguay, Venezuela and Bolivia, presidents who adhered to the International Monetary Fund's notion of development have had to look for other jobs.

6. Chinese Policy towards Latin America • April 2006: If Latin America's economic ties with China do not undergo a structural change, the region will be unable to meet the Millennium Development Goals (MDGs), an Argentine expert said during the Latin Economic Forum held recently at United Nations headquarters. • “The relations between China and Latin America today represent a historic opportunity, given the enormous growth in Chinese demand for commodities and fuel”. “On the other hand, the current historical circumstances make it necessary for these countries to stop specializing in exports of natural resources and to enter the knowledge economy”. • Latin America’s Dilemma: while opportunities for exporting raw materials are better than ever, this “boom” is actually the worst thing that could happen to the region, because it ultimately entails the exhaustion of its natural resources.

7. Chinese Policy towards Latin America • April 2006: “Exporting commodities is a bad foundation for development, and is an unsustainable policy ... There are two regions of the world that have failed to grow since World War II: Africa and Latin America - the two that have specialized in commodities. That is not a coincidence”. • The 8 MDGs, established by the UN General Assembly in the year 2000 (intended to be fulfilled by 2015) are: to reduce extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat AIDS, malaria and other diseases; ensure environmental sustainability; and develop a global partnership for development. • So far, only Chile has met the target set under the first goal: to reduce by half the proportion of people living in extreme poverty, with 1990 poverty rates used as the baseline.

8. Chinese Policy towards Latin America • June 2007: In 2004, Chinese foreign direct investment in Latin America accounted for 40% of the total FDI. • On the other hand, Beijing's political and military influence has remained minimal. However, in recent years certain developments in Latin America have created an environment far more conductive to the expansion of Chinese political and military influence. The introduction of left-wing regimes hostile to the United States, particularly in Bolivia and Venezuela, has allowed China to begin to establish some meaningful connections with the region's armed forces. • When analyzing China's military relations with Latin America, most observers tend to dismiss it as insignificant and argue that it is likely to remain so for some time to come. Many have pointed to arms sales as a clear indicator of China's insignificant military position in the region.

9. Chinese Policy towards Latin America • June 2007: While Chinese arms sales to Latin America have been minuscule, they are not the only instrument available to a nation bent on expanding its military influence abroad. • Defense and military education is becoming an increasingly important, albeit largely unnoticed, instrument of Chinese defense policy. • Contrary to what some may expect, these courses are no longer being frequented just by officers from countries hostile to the US, such as Cuba or Venezuela. Various countries with traditionally close relations with the US such as Colombia, Chile and Argentina have also sent regular participants.

10. Chinese Policy towards Latin America • June 2007: While Chinese arms sales to Bolivia have been negligible, donated military material has not. Since President Evo Morales came to power, China has donated significant quantities of military equipment to Bolivia ranging from non-lethal logistical materialas well as combat gear such as medium-range artillery and assault rifles. • The most significant arms transfer, if reports are correct, is China's replacement of 38 Chinese HN-5 shoulder-launched air-defense missiles that were reportedly taken out of the country by a US CIA operation.  A few years before the alleged CIA operation, some found their way to the Revolutionary Armed Forces of Colombia (FARC) narco-guerrillas, who used them against US-made helicopters operated by the Colombian Army. The Chinese missiles proved to be very effective against the choppers, hence the reported CIA operation to take them out of Bolivia.

11. Chinese Policy towards Latin America • June 2007: Even in the area of arms sales, the situation may be slowly changing because of sophisticated Chinese sales strategies. In 2005, China signed a contract with the Venezuelan government to supply three JVL-1-type radars. The contract also included the provision of a complete command and control system, spare parts, training, technical assistance and the lease of a communication satellite, all for the modest price of US$150 million. • While making little, if any, profit, the provision of weapons at "friendship prices" may slowly allow China to penetrate a new market and build goodwill among the region's military forces. Venezuela's government has also shown considerable interest in Chinese missile and electronic-warfare equipment. China has also sold air-defense artillery and military bridges to Ecuador. • + China's military relations with Cuba.

12. Exports 2006: ECLAC/UN Statistics Argentina Brazil Chile Mexico Venezuela

13. Exports 2006: ECLAC/UN Statistics for Chile

14. Chile – Trade Agreements • Free Trade Agreements:Panama (2008), Japan (2007), China (2006), United States (2004), Canada (1997), Mexico (1999), Korea (2004), Central America (Costa Rica, El Salvador, Guatemala, Nicaragua), EFTA (2004: Iceland, Liechtenstein, Norway, Switzerland). • Acuerdos de Asociación: European Union (2003), P4 (2006: New Zealand, Singapore, Brunei Darussalam, Chile). • Acuerdos de Complementación: Argentina, Bolivia, Colombia, Ecuador, Mercosur, Peru, Venezuela • Acuerdos de Alcance Parcial: India • Current Negotiations: Malaysia, Ecuador, Australia, Turkey

15. Exports 2008: ProChile Statistics for Chile ProChile: http://www.prochile.cl/servicios/estadisticas/reporte04.php?anno=2008

16. Imports 2008: ProChile Statistics for Chile ProChile: http://www.prochile.cl/servicios/estadisticas/reporte04_imp.php?anno=2008

17. http://www.cinver.cl/archivos/NT2.xls

18. Maritime Transportation • CSAV:www.csav.cl • Sea transport services can be divided into 7 main segments: • Container Transport • Vehicle Transport • Solid Bulks Transport • Reefer Cargo Transport • Cement Transport • Oil and Derivatives Transport • Chemicals and Gas Transport • CSAV, through its subsidiary Norasia Container Lines Ltd., offers services on the East-West traffics between Asia and North Europe, Mediterranean, Persian Gulf, the Indian sub-continent and North America. Source: AXS ALPHALINER TOP 100, January 2000 and January 2007http://www.logisticsmgmt.com/article/CA6488186.html

19. IMD World Competitiveness Yearbook 2007 – Ranking (55 countries) IMD- International Institute for Management Development - Switzerland

20. IMD World Competitiveness Yearbook 2007 – Per Capita Income less than US$10.000

21. IMD World Competitiveness Yearbook 2007 – Evolution for Latin American Countries IMD- International Institute for Management Development - Switzerland

22. IMD Competitiveness Report 2007 – Competitive Diamond

23. IMD Competitiveness Report 2007

24. Transparency International: Global Corruption Barometer 2006 http://www.transparency.org/publications/gcr/download_gcr#download

25. Corruption Perceptions Index 2006 (163 countries)

26. Chilean Business in China (ProChile Shanghai) • Chile is the Latin American country with the higher number of companies with subsidiaries in China. However, even though this is a great advantage of Chile over other Latin American countries, Chile only has 8 companies with presence in China. • The Chilean business failures in China had occurred because one or several of the following reasons: • Some Chilean businessmen have not been able to deal with the Chinese style of doing business (guanxi) nor with the particularities of the Chinese consumers. • Some Chilean investments done in the West part of China failed because of the frequent changes in “the rules of the game” that many local governments do (much more frequent and unexpected when compared with the East part of China).

27. Chilean Business in China • Some Chilean businessmen underestimated the issue of the credit given to their clients because they thought that those credits could be easily recovered as they are in Chile. • The Chilean businessmen come to China with the idea of being owners of 100% of their companies in China, without realizing that in China the best way to do business is to allow themselves to have local partners and to rent (instead of owning) the factories needed to produce.

28. China

29. Latin America