China and Latin America: Economic Ties

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CHICAGO — During the week of July 13, Chinese President Xi Jinping traveled through South America and met with leaders from Brazil, Venezuela, Argentina, Cuba, Peru, Ecuador and Bolivia. These meetings indicate a strengthening of Chinese-Latin American trade relations; and as Latin America’s second in line trading partner, China may soon be competing with the United States for the top spot. The country spends 13 percent of its foreign investment in Latin America, and trading between China and Latin America has made huge leaps in the past 15 years, from values of $12 billion in 2000 to $261 billion in 2013.

“The two have developed a really symbiotic relationship over the last decade,” says Eric Farnsworth, Vice President of the Council of the Americas and Americas Society, in an interview with CCTV. “They are both now equally important to each other.”

China is also interested in South America as new energy source, especially as political and economic uncertainties in the Middle East intensify. As conditions in Iraq worsen, China’s investment in upstream oil field development in the region has become threatened, and the country is desperately trying to diversify their sources of supply. Venezuela is now China’s top supplier of oil in the Latin American region.

In addition, China has invested in Latin American infrastructure. The Chinese company CNR Corporation Ltd. was a major beneficiary of Rio de Janeiro’s efforts to improve its railway systems prior to the 2014 World Cup and upcoming 2016 Summer Olympics. President Jinping is now promoting plans for a trans-continental railroad from Peru’s western coast to Brazil’s east coast, working closely with leaders from the two countries. This type of partnership and cooperation is China’s way of showing goodwill toward other developing nations. It has also served to increase cultural exchange between China and Latin America, and has allowed the establishment of Confucius Institutes in the region. There are currently 32 such institutions in Latin America.

China has unique and important relationships with each of the countries Jinping visited this week. In Cuba, President Raúl Castro has openly talked about his support of a Chinese model of government. He says capital city Havana supports China’s political rise and would like to evolve from an orthodox Marxist-Leninist state into a state more like the Deng Xiaoping model, with a strong ruling party that has the ability to implement new, important reforms. China and Cuba have always been strong allies, and this relationship is increasingly significant for China; with the planned expansion of the Panama Canal, Cuba’s trade influence will grow.

Venezuela is China’s number one debtor in Latin America, and 6 percent of Chinese imports come from the country. China is particularly interested in capital city Caracas, as Venezuela’s foreign policy is aimed at diminishing United States influence in the region.

In Argentina, Jinping is focused on geoeconomic and geopolitical issues. Ten percent of China’s soybeans come from Argentina, but China is also interested in the country’s shale gas reserves.

China’s unique relationships with countries in the Latin American region could be bad news for Brazil, who has struggled to create regional hegemony in the continent. The two countries could become rivals in the area.

During the trip, Jinping attended a BRICS summit in Brazil where leaders from Brazil, Russia, India and South Africa agreed to create a development bank and crisis reserve fund that would rival Western-dominated financial institutions.

“We are going to continue working on increasing our bilateral trade partnerships,” Jinping said at the summit. “We’d like to focus cooperation on oil, electricity, mining, agriculture and other areas of investment. We want to establish strategic partnerships in infrastructure like railways. Also, we want to enhance cooperation and finance technology and Internet.”

Rachel Reed

Sources: The Diplomat, Deutsche Welle, CCTV 1, CCTV 2
Photo: Voice of America

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