China in Latin America: Is the Dragon Here to Stay?

By Ivanova Reyes & Amy Ruddle

Source: Based on Gallagher et al. (2012).

Source: Based on Gallagher et al. (2012).

As China has become a major importer of Latin American & Caribbean commodities, it has significantly increased its financing and investment in the region.  Data on Chinese investment is not complete, but we estimate that it reached 38 percent of the combined financing from the IDB and World Bank to the region during 2005-11, with Venezuela getting the most.  In 2010 China became the third largest outside investor in the region (behind the United States and the Netherlands), and it provided an estimated $22 billion in 2011 – approximately 13 percent of total investment flows to Latin America and the Caribbean.

This investment is likely to continue to grow.  The Chinese government provides tax breaks, lines of credit and other incentives for companies to invest in key industries overseas, and a great deal of its lending corresponds to “finance for assured supply,” such as a  $10 billion loan from the Chinese Development Bank to Brazil’s Petrobras in 2009 in exchange for 200,000 barrels of oil per day.  Currently, according to Gallagher et al. (2012), 72 percent of the Chinese lending to the region is in the oil and mining industries and in related infrastructure projects.  The remaining funds lent in recent years have gone towards other infrastructural developments (21 percent), and towards trade, finance, and communications (7 percent).  Latin American countries have implemented policies aimed to attract Chinese investment.  They generally impose fewer conditions than those demanded by international financial institutions and require less compliance with environmental standards.

Recent surveys indicate that citizens overall view the growing influence of China in the region as a positive thing.  Indeed, Vanderbilt University’s AmericasBarometer found in 2012 that 20 percent of respondents viewed China as already the most influential country in the region, and an average of 63 percent said it had a positive influence.  However, respondents see China as less trustworthy than the United States.  Across those nations polled, roughly 38 percent viewed China as “very trustworthy” or “somewhat trustworthy,” whereas 45 percent had similarly positive views of the United States.

Although the growing Chinese investment and trade may give Latin America and the Caribbean a great opportunity to generate growth, there are several challenges.  If Chinese participation in the mining and oil industries results in environmental degradation, indigenous rights advocates and community organizations already skeptical of commodity driven growth will increasingly confront Latin American states as well as foreign enterprises. In addition, Chinese concentration in the commodities industries has generated strong structural changes in Latin American economies, further relegating manufacturing to a secondary role and raising the possibility of Dutch disease, in which high commodity prices harm other exports by reducing the country’s competitiveness.  It has become commonplace to observe that South America is building a 21st century economy on a 19th century logic of primary product exports. A third concern is that, since Latin America as a region is the smallest recipient of Chinese investment in the world, China will turn elsewhere if governments start putting conditions on Chinese projects.  Ultimately, these concerns make a strong case for Latin American countries to cultivate stronger ties with the Chinese economy while remembering that China’s strategic interest in extractive industries may collide with each country’s own development strategies.

 

 

References

ECLAC. 2010. “Chapter III: Direct investment by China in Latin America and the Caribbean.” In ForeignDirect Investment in Latin America and the Caribbean. Retrieved November 2013, from http://www.eclac.cl/publicaciones/xml/0/43290/Chapter_III._Direct_investment_by_China_in_Latin_America_and_the_Caribbean.pdf.

Faughnan, Brian M. and Elizabeth J. Zechmeister. 2013. “What do Citizens of the Americas Think of China?” AmericasBarometer: Topical Brief, June 13.

Gallagher, Kevin P., Amos Irwin, and Katherine Koleski. 2012. “The New Banks in Town: Chinese Finance in Latin America.” In 30 Years of Inter-American Dialogue Report: Shaping Policy Debate for Action.

Zechmeister, Elizabeth J., Mitchell A. Seligson, Dinorah Azpuru, and Kang Liu. 2013. “China in Latin America: Public Impressions and Policy Implications.” Presentation of the LAPOP.

U.S. Credibility Takes Another Hit

By Fulton T. Armstrong

Photo credit: Chairman of the Joint Chiefs of Staff / Foter.com / CC BY

Photo credit: Chairman of the Joint Chiefs of Staff / Foter.com / CC BY

The domestic spying programs under the Bush and Obama Administrations further erode U.S. moral leadership in the hemisphere and probably beyond.  At crucial junctures since President Jimmy Carter made human rights a pillar of policy in Latin America, U.S. moral authority has been decisive in persuading regimes on the right and the left to open the way for pluralism and democracy.  Lecturing governments and militaries on the need to eschew torture, domestic spying, and other abuses, U.S. diplomats and politicians could have been charged with arrogance, but on these specific aspects of the U.S. government’s treatment of its own people, not serious hypocrisy. The U. S. had its racial and economic injustices, but trends were positive, and the country stood for the rule of law, skepticism of State Security officials’ penchant to use information for power, and a pretty solid respect for due process. Even before Carter, the Watergate scandal – and resulting resignation of the President and overhaul of the intelligence agencies – was a clarion signal that agencies created to monitor foreign affairs must keep their focus far off U.S. shores.

Latin American media have carried primarily factual stories revealing the “PRISM” program, which collects data from hundreds of millions of e-mails and other electronic communications each day and stores it for exploitation by targeters (now called “analysts”) on the lookout for alleged potential terrorists, based on secret profiling.  Some papers have reported that Director for National Intelligence Clapper lied to the U.S. Congress without batting an eyelash when asked directly if such activities were ongoing.  Coming after reports in recent years of the use of torture (and the impunity granted to the perpetrators), the so-called “extraordinary renditions” (and the cases in which kidnap victims were innocent), the use of “black prisons” (in which security services in new democracies were encouraged to circumvent their elected officials),drone attacks (even against U.S. citizens), and the continued detention of prisoners without trial at Guantanamo (giving human rights violations in Cuba a new meaning) have all been noted throughout Latin America.  PRISM may no longer be considered newsworthy.

The fact that British and American newspapers eventually brought the domestic spying programs to light may hearten some in Latin America, as evidence that an essential element of democracy – a probing press –shows signs of life despite reports of Justice Department harassment of the Associated Press and other media.  But sentient Latin Americans know the implications of PRISM – and what enterprising State Security “analysts” can do with years of data about even the most mundane aspects of potential targets’ lives.  The Obama Administration’s defense of PRISM as necessary to defend against supposed terrorists doesn’t sell well in a region that knows how information never sits unused.  The Bush Administration gave the Medal of Freedom to Colombian President Uribe, who deployed his secret intelligence agency to harass opponents and allowed his military to disappear thousands of youths.  The Obama Administration’s lectures to Venezuela, Nicaragua, Bolivia and Ecuador on the need to give more space to opponents – however warranted – ring sort of hollow when, in Latin Americans’ minds, it has nurtured its own Frankenstein state-security apparatus that lacks credible checks and balances.  Washington can argue that U.S. moral authority doesn’t matter, and that the “terrorist threat” it faces calls for extraordinary measures, but it will be a long time before an American statesman can wag his finger at a Latin American counterpart for doing the same thing.