China: The Force Reshaping Latin America

MARÍA JULIANA GONZÁLEZ JÁUREGUI

Shanghai

Seminario; GR:EEN GEM PhD Summer School; 2012

Erasmus Mundus GEM PhD School, GR:EEN FP7 Research Project y Fudan University

Relations between China and Latin America are witnessing a profound transformation. Sino-Latin American cooperation in both regional and sub-regional instances has flourished and it is changing the political economy landscape at a rapid pace. In this new context, China has rapidly displaced established players in the region like the United States and the European Union. Latin America has stood out as an issue of growing relevance for Chinese global rise. As an important provider of energy resources, foodstuffs and raw materials, Latin American region has received special attention from China. The new government and Communist Party leadership, headed by Hu Jintao since 2002, has developed an important diplomatic strategy so as to strength bilateral ties with the region. This has not been the case of Latin American countries as they have not still designed an integral regional policy towards China. China has established an aggressive strategy of engagement in regional organizations initiating dialogues with Mercosur, the Andean Community of Nations, the Latin American Integration Association, the Caribbean Community and the Forum for East Asia-Latin America Cooperation. In addition, China joined the Organization of American States as a permanent observer and the Inter-American Development Bank (IADB) as a donor member. Besides, China is part of informal interregional organizations where Latin American countries also participate of: the Rio Group, the BRICS and the G20, among others. Furthermore, the Chinese government launched its first ever policy paper on Latin America and the Caribbean region in 2008. Beyond a call to deepen the economic ties with the region, the document looks at some general issues regarding political, security and defense cooperation, as well as cultural and social aspects. Growing economic links have been paralleled by closer relations between China and Latin America in multilateral organizations. Chinese leaders have been emphatic on the friendly nature of bilateral ties with Latin American countries and have expressed their desire to develop and reinforce bilateral cooperation with the region as a way to reach mutual benefits. This is part of China’s support to the objective of constructing a multipolar world. In fact, China has shown special interest in the enforcement of bilateral cooperation with Latin America and the Caribbean in multilateral, regional and sub-regional institutions. China’s involvement with the IADB is a relevant example of Chinese commitment to promote sustainable economic development in Latin America. The Export-Import Bank of China and the Agricultural Bank of China joined the IADB Trade Finance Facilitation Program as confirming banks in 2010, contributing to economic and financial integration. Additionally, the IADB and the Export-Import Bank of China are advancing in the creation of an investment platform for the region. The investment mechanism, that is expected to be operational this year and will mobilize $1 billion, will finance private and public sector projects in Latin American countries. Chinese future investments are intended to cover not only infrastructure, but also equity investments in mid-cap companies and in the natural resources sector, especially agribusiness and forestry ventures. The paper analyzes China’s intense engagement in the region during the period 2002-2012. The main argument is that the principal reason that has encouraged Chinese involvement in the IADB is the diversification of investment in Latin America. Reflections about China’s desire to play a pivotal role in boosting financial and economic cooperation as well as trade with the region will be determinant. Initially, we will develop how regional institutions are being reshaped since China’s appearance in Latin America. We will detail China’s involvement with multilateral, regional and sub-regional organizations. In the second section, we analyze specifically the role of China in the Inter-American Development Bank and discuss the benefits and costs for Latin American countries. Finally, I will offer some conclusions about China’s real intentions behind its growing involvement in multilateral and regional institutions.