There is evidence that US-dominated influence in Latin America is over, both politically and economically. In its stead, China has quietly positioned itself to fill the void in Latin American affairs. Situated on the banks of the Paraná River, Rosario is a mid-size city located approximately 300 kilometers north of Buenos Aires. Its strategic location makes it one of Argentina’s main hubs for international and domestic shipping, which has prompted the emergence of hundreds of local businesses to meet the needs of the city’s one million inhabitants. Many of the owners of these businesses commute from the peripheral southern edge of the city to do business in the vibrant center. Unlike their Bolivian, Paraguayan, and Argentine neighbors, they speak Chinese and hold Chinese passports.
The presence of Chinese communities in cities like Rosario is not surprising. Chinese immigration and adaptability is common worldwide. In 2006, reported Chinese remittances from abroad totaled over $22 billion, and the global Chinese Diaspora is estimated to be 40 million strong. What is noteworthy is the symbolism of their success: the ability of the Chinese to seamlessly integrate and flourish in business climates all throughout Latin America is symbolic in a region ever more open to trade with these business owners’ country of origin.
Traditionally, international trade in Latin America has meant trade with the United States. The geographic proximity and close political ties between the two regions dating back to the Monroe Doctrine of 1823, which was designed to monopolize US power in Latin America, have had a lot to do with that. As a result, Latin American governments and potential foreign trading partners other than the United States have historically been discouraged from trading with others by means of high tariffs on imports and exports and stringent regulations from Washington. Since the Roosevelt Corollary was announced in 1904 to stop German and British ships from sailing to Venezuela to collect debt payments, the United States has been the unofficial arbiter of all hemispheric affairs.
Although the United States will continue to play a vital role in the economic and political landscape of Latin America, there are a number of reasons to believe that the days of the United States’ ability to act with free reign are coming to an end. The inaction of the incumbent US president has a lot to do with that. The past eight years have been some of the most damaging for US-Latin American relations. The Bush administration’s neglect of the region, which has seen the president make only two perfunctory appearances (one at a Summit of the Americas meeting in Argentina in 2005 and another to Mexico, Guatemala, Brazil, Colombia, and Uruguay in 2007), has taken its toll politically. US popularity has sunk to all-time lows. The regional “leftist movement” that many have written about can owe part of its success to its leaders promising the end of U.S. influence and controversial Washington-advocated neoliberal economic policies in the region.
A Shift in International Relations
There is already evidence that US-dominated influence in the region is over, both politically and economically. In its stead, China has quietly positioned itself to fill the void in Latin American affairs. There are many developments that prove this. China and Peru are in the midst of free trade talks that could be signed as early as November, and Chile and China have had a free-trade agreement since 1 October 2006. In August, Argentina’s Banco de Inversión y Comercio Exterior (BICE) slashed interest rates in a move to directly encourage more investment from China Development Bank. On 1 September Paraguay reversed their decision to recognize Taiwanese sovereignty, and Alan Garcia of Peru has officially rejected Tibetan independence in an effort to show solidarity with the mainland Chinese government. Twelve days before he assumed the presidency in January 2006, Evo Morales met with Hu Jintao to discuss the two nations’ strategic importance and ideological similarities.
Certain nations have been much more vocal about their support of Chinese involvement. Ecuador, whose forced adoption of the dollar in 2000 to prevent a total collapse in the economy represents the extent to which the nation depends upon the US economy, is a perfect example. They recently signed a contract with Andes Petroleum, granting the Chinese owned multinational rights to explore potential sites for oil extraction. In perhaps the largest reversal of US influence in the region, Rafael Correa wants to use the extra long landing strip at the US Air Force base at Manta for a direct flight between China and Ecuador so that Ecuador can be “China’s gate of entry” into Latin America when the US lease expires next year. His November 2007 visit to Beijing is further evidence of the mutual cooperation between the two nations.
These are but a few of the instances of increased Chinese presence in Latin America. What they all signal is a shift towards multi-lateral cooperation with a nation other than the United States.
Sino-Latin American Relations in the Wake of the Global Financial Crisis
This emerging trend of increased cooperation between Chinese and Latin American governments will most likely continue, especially in light of the recent global financial crisis, which has hit Latin American markets hard. For years, the United States vigorously championed the principles of free-market economics to Latin American governments. Many of the IMF’s structural adjustment loans of the past decade blindly enforced free market fundamentalism, which governments were forced to adopt when planning economic policy.
Yet in spite of Latin America’s recent economic growth, it remains the region of the world with the largest gap between rich and poor. While a select few have benefitted greatly from high commodity prices, the vast majority has not, and the IMF is perceived in many nations as foreign interference that is out of touch with the daily realities of the people in the nation it is trying to help.
The past month has seen the collapse of many pillars of the American economy, and with them, absolute faith in the free-market financial system in general. Terms such as government regulation and oversight were huge no-nos in the gospel preached by free-market economists to Latin American governments. Now these same governments are seeing the United States economy brought to its knees with direct government-sponsored financial support as the only viable option to re-circulate credit. Latin American leaders have been quick to point out the hypocrisy, but interestingly have also offered solidarity for the American people, showing that all faith in the US is not lost.
The global financial crisis could turn out to be the straw that broke the camel’s back for US-regulated economic policy in Latin America. Mounting tensions and disillusionment with failed policies and a system that still has not benefited most will only be exacerbated by the collapse of what were once considered sound institutions. As a result, Latin American governments, already warming to China because of China’s huge market potential and need for commodities to fuel their industrial boom, may look farther east.
While China is certainly not immune from the crisis, they represent an alternative foreign investment option where there historically has been no choice for Latin American nations, who rely heavily upon the export of their natural resources. China, whose economic miracle is based largely on the success of their sovereign wealth funds and success despite being a communist regime may also serve as a role model: in a certain sense, they are the ones who are making it without bending to US influence. There is also the contention that there is an ideological similarity between Chinese and Latin American governments which may facilitate trade and strengthening political ties.
From Oil to Banks to Tourism: The Rise of Chinese Soft Power
It has long been documented that Chinese interest in Latin America has been due in large part to the region’s abundance of raw materials, such as oil and copper. China’s spotty history of resource extraction in Africa, including Sinopec’s (a major Chinese oil company) activities in nature preserves in Gabon and illegal logging in Cameroon, should be cause for alarm for environmentalists and governments alike. Growing Chinese influence in Latin America has been one of the few regional issues Washington has concerned themselves with throughout the current presidency. This shift will almost certainly continue, and the next US president will have to deal with it in a much more proactive fashion than president the outgoing President has.
Given China’s interest in procuring not only resources but also economic and political influence throughout the world as they increasingly become a global superpower, it is possible that the weakening of the US financial system and US neglect of the region may lead to more immediate Chinese soft-power influence. In many ways, it is already happening. In 2007, 24 Chinese companies expanded into Guatemala as a means of increasing ties between the two nations. The Central American nation has a $1.1 billion dollar debt to the Chinese, and, as many Latin American governments past can affirm, debt is oft associated with compliance with the policies of the nation to whom the debt is owed. However, as of now this is not a concern, as the major Latin American economies actually have trade surpluses with China due in large part to China’s insatiable demand for raw materials. Nevertheless, China is reaching out wherever it can, and governments across the region are accepting the invitation for strengthened political and economic ties. Chinese sovereign wealth funds have bought shares in banks in Argentina and bid to build a subway system in Bogotá. The Chinese and Mexican governments have pledged to increase bi-lateral trade by 1000% in the next 7 years.
It is unlikely that China will replace the US as the most influential superpower in the region any time soon. Geography and history are two obstacles that take time to change. Newly budding diplomacy between Chinese and Latin American nations may be a refreshing relief from previous US-dominated dialogue, but it is still in many cases in the preliminary stages. There is also the issue of trade. Latin America still remains a minor player in Chinese trade. Trade with the region totaled $102.6 billion dollars in 2007, which makes up only a fraction of their over $2 trillion dollar international trade. Further complicating matters is the added speculation that the exportation of manufactured goods could hurt manufacturing industries in Latin America, which may cause leaders to balk at any large deals.
What is interesting to note is that although trade is so little, it has grown exponentially in recent years. The $102.6 billion dollar figure represents a 46% increase from 2006. Governments from Brazil to Peru to Mexico have all pledged increased economic cooperation with the Chinese, which has alerted US officials.
China, one of the United States’ main economic and political rivals in the 21st century, is encroaching upon territory that has historically been strictly under US influence and control by means of closer political ties and economic investment. What makes this so interesting is that the US can do little to stop it. Joint Venezuelan-Russian naval exercises slated for next month in the Caribbean are a small example demonstrating that the U.S.’s capacity to micro-manage Latin American international affairs is waning.
A combination of a potential recession in the United States, Washington’s decreased role in Latin American affairs, and Latin America’s warming to increased Chinese political and economic influence means that the United States will have to adopt a revised policy towards its southern neighbors or risk creating a further polarization with a region they cannot afford to alienate.
Eliot Brockner is an independent media analyst covering the Latin America region. Based out of New York, he has most recently worked from Venezuela, Colombia and Argentina, focusing on issues of security and political policy. He has contributed for ISN Security Watch and is a regular contributor for Latin American Thought at www.LatAmThought.org. He can be reached at Ehb1123(at)Hotmail.com.
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