China-Latin America ties are often seen as Beijing-Washington-strategic-chess related. Nevertheless that perception is wrong as Beijing and the subcontinent are truly developing stronger and direct ties unrelated to any triangular consideration.
A non-geostrategic pragmatic relationship with political consequences
China and Latin America (also called the subcontinent) are developing a new bilateral approach based on extraordinary trade and investment, both increasing and certainly paving the way to upgrading political ties in the non-distant future, a process which is a change of historic dimensions, in spite of the Latin America chapter within the frame of China-US ties.
On July 13, 2015, Director-General of the Department of Latin American and Caribbean Affairs of the Ministry of Foreign Affairs Zhu Qingqiao and Deputy Assistant Secretary of State for Western Hemisphere Affairs Francisco (Paco) Palmieri of the US Department of State co-chaired the seventh bilateral consultation round on Latin American affairs between the two foreign ministries in Washington D.C. It is merely a consultative level talk, thanks to the extreme courtesy of Beijing following the extreme curiosity of Washington.
Indeed in the post-Cold War order the subcontinent highly appreciates principles proclaimed by Beijing, such as non-interference, collaboration, pragmatism, persuasion, strategic patience, multilateralism and multipolarism, most of them not embraced by Washington (1).
China has become indispensable as a source of growth for Latin America. The value of bilateral trade grew 22 times between 2000 and 2014. Last year, two-way trade hit 263.6 billion U.S. dollars and China's investment in the region also went up to more than 80 billion dollars. Six months ago in Beijing, leaders of the Community of Latin American and Caribbean States (CELAC in Spanish), a 33-country bloc, gathered for the first time for a two-day forum. In a magnificent context, Chinese president Xi Jinping pledged that Chinese direct investment in Latin America would reach $250 billion over the next decade while predicting that annual bilateral trade could hit $500 billion.
Could, thus, Beijing’s approach to the subcontinent be considered as a pivot strategic move of the kind of US pivot to Asia? Clearly not. First, there is no unilateralism from Beijing’s side. For example, there are no Chinese armed forces periodically exercising, let’s say in Panama or Mexico, as conversely US does by signing political and security agreements with some of China’s neighbours and by deploying and redeploying forces in front of her coasts.
Second, at multilateral level there are no political and security arrangements in the subcontinent like the ones China has with her Eurasian partners in the frame of the Shanghai Cooperation Organization (SCO). There are neither border defence cooperation agreements nor joint military exercises, and not a common response to drug trafficking either, a dimension which Washington deals with together with some of its continental neighbours.
Nevertheless, meaningful political change in China-Latin America ties stemming from material interaction is ad portas. By combined population Brazil, Chile and Peru - countries for which China is already a first commercial partner -, represent most of South America, and consequently in that subregion China is already its first commercial partner, surpassing the US and Europe. As for Latin America as a whole China is its second commercial partner (slightly behind the US). Even Central America and the Caribbean, just decades ago within the space of US uncontested hegemonic influence, are showing patterns of change. In 2008 Costa Rica recognized Beijing out of pragmatic considerations, thus displacing Taipei, one of Washington’s closest allies in Asia.
Also, like SCO member partners do, several South American countries are replacing the US dollar in bilateral trade and soon significantly at multilateral level by using both, local currencies and the Chinese yuan. The most recent agreement with China, signed in May, establishes that Chile's central bank and the People's Bank of China are clearing a path for the use of the Chinese yuan in South America, including a swap agreement about to facilitate exchanges of a maximum of 2.2 trillion pesos ($3.6 billion) for three years.
Some bilateral and multilateral tasks ahead (including BRICS)
In 2008 Chinese government launched its first ever policy paper on Latin America and the Caribbean region. Ever since, Beijing has increased its first-hand knowledge of the subcontinent, enabling China a permanent updated strategy. Conversely, the subcontinent still has not come up with the implementation of any document similar to a common policy paper.
Nevertheless, there are signs that Latin America’s little progress in key long-term strategic areas might be about to change. First, CELAC Cooperation Plan 2015-2019, launched last January in Beijing, provides in principle an appropriate and more sophisticated institutional framework to advance bilateral ties.
Second, it remains to be seen the impact of BRICS as a new synergy factor for China-Latin America ties. Here the initiative will be on the Brazilian side and the attention will focus on its still pending continental leadership. Indeed the challenge ahead for Itamaraty’s diplomacy will be balancing its global new role with a potential renewed presence in South America. Actually Brazil has spent most of the last decade playing global, rather than regional, relatively neglecting MERCOSUR and particularly South America’s Asia Pacific neighbours (including Chile, Peru, Ecuador and Colombia).
Chinese president Xi Jinping has proposed increase connectivity between BRICS and South America. Ufa’s BRICS declaration in July 2015 asserted that its New Development Bank (NDB) “shall serve as a powerful instrument for financing infrastructure investment and sustainable development projects in the BRICS and other developing countries and emerging market economies” (2). Xi also proposed NDB’s close cooperation with financing mechanisms such as the Asian Infrastructure Investment Bank (AIIB). In both banks coincide Brazil, China, Russia, and India.
There is wide space for action, indeed. Latin America still should address several gaps to reinforce its China connection, including diversity exports, apply high-tech into manufacturing and develop infrastructure and communications. The infrastructure projects are key to allow the great connectivity needed for a large scale interaction with the East.
And while it is true that there is a truly “maritime Silk Road” going ahead as exchanges with China go by sea where no infrastructure other than ships is necessary, East-West transport within Latin America has become a key factor to make the difference. First of all, raw materials from South America’s hinterland are difficult to channel to its main ports, and secondly, Atlantic nations such as Venezuela, Brazil, Uruguay, Paraguay and Argentina could dramatically lower costs through both planned and in-the making “bioceanic corridors” crossing the Amazonas jungle and the Andean mountains to reach the Pacific Ocean (3).
Latin America is not a single political entity, its strategic raw materials are various and unevenly distributed throughout its geography, thus China’s impact varies from country to country and group of countries. In any case, its impact will contribute to Latin America’s integration being BRICS New Development Bank a powerful tool for connectivity as long as Brazil plays intercontinental at continental level first.
Has Beijing the intention to compete with Washington for a greater sphere of influence in the region? Although perhaps unavoidable in this very decade, it will not necessarily replace - although significantly weaken - US influence in the subcontinent.
Most likely during some years several Central American and Caribbean countries will continue more US-tied oriented by trade, politics, migration flows and culture than the rest of Latin America. Meanwhile, while the US will continue reaffirming its condition as second Spanish-speaking country in the world after Mexico as well as receiving further cultural influence from the South, the direct economic and political impact from China at both bilateral as well as multilateral level via Beijing’s interaction with the subcontinent, will have an influence in China-US ties.