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29/06/2011 | China Looks Beyond Natural Resources in Latin America

Iain Mills

China's expanding economic engagement with Latin America has been largely based on securing access to the continent's abundant natural resources. But despite the opportunities presented by the wave of Chinese capital, concerns have arisen over the asymmetric and one-dimensional nature of China's relations in the region, which generally conform to the classic center-periphery model. Chinese Vice President Xi Jinping's recent three-country tour of the continent was aimed at addressing these concerns, outlining a blueprint for how China's incoming leadership intends to deepen its international relations and consolidate recent economic foreign policy gains.

 

In 2010, more than 90 percent of China's $180 billion trade and investment in Latin America was resource-based. The sheer scale of this number means China has emerged as a genuine counterbalance to U.S. primacy in the region -- economically, at least. But, as in other regions, China has been less successful in cultivating the auxiliary ties necessary to consolidate and secure new supply-chain connections, a key strategic objective as the country enters an era of unprecedented dependence on basic-commodity imports.

Along with the general prominence of the "China threat" paradigm in international discourse, a diverse range of more localized concerns have also arisen as Chinese engagement has expanded into Latin America. These include environmental risks, particularly to sensitive Amazonian ecosystems; the potentially destabilizing impacts of low-cost Chinese imports on regional economies, as in Brazil; and political differences, often complicated by the legacy of previous diplomatic tensions, as is the case with Cuba or Paraguay.

However, during Xi's recent tour of Cuba, Uruguay and Chile, resource deals were conspicuous by their absence. Instead, Xi's priorities were improving lukewarm relations with Cuba as the island prepares for a period of economic reform, and deepening nonresource trade and cooperation with Uruguay and Chile. 

The agreements signed during the visit reveal a concerted effort to improve perceptions of China's posture and the future trajectory of its relations in the region. In Cuba, for example, China committed to providing the Castro regime with interest-free loans, economic aid and irrigation repair machinery. The agreed expansion of Chinese firms in the island's oil and gas production yields negligible direct benefits for Beijing and can be seen more as more a goodwill gesture that doubles as a strategic toehold in the Caribbean oil and gas industry.

Xi's second stop was Uruguay, a relatively resource-scarce regional player that has seen a significant warming of ties with Beijing in recent years. In Montevideo, the Chinese signed $580 million of deals in Uruguay's wool, dairy and soybean sectors, as well as other accords related to science and technology cooperation, tourism and cultural exchange. Agriculture is another area where Beijing faces domestic supply pressures and is targeting overseas assets. As the New Zealand experience shows, these can evolve into a solid basis for wider Chinese economic interaction with agriculture-based national economies.

But China's emerging strategy was most evident in Chile, Xi's final destination. Chile is already China's second-largest trading partner in the region and has benefited considerably from the Asian giant's growing resource demand. Following a period of sustained diplomatic efforts from both sides, relations now seem ready to develop beyond their previous center-periphery structure. In Santiago, Xi's focus was on expanding the Chile-China Free Trade Agreement to service industries and on deepening economic and cultural relations. At the same time, Chilean Defense Minister Andres Allamand was in China meeting top military brass and attending the Shangri-la Summit, a major development in Chinese military ties with one of Latin America's most established democracies.

Xi's tour demonstrates that Beijing is aware of concerns surrounding its global rise and persistent doubts over the sincerity of its intentions in bilateral ties beyond access to natural resources. But the desire to move beyond the center-periphery model is not purely for perception's sake. With the trend of scarcity in global resources set to worsen, China needs to be sure its new economic relationships can be maintained over time -- particularly if and when developed economies return to strong economic growth and Beijing faces greater competition on large-scale international resource deals.

An important additional benefit for Beijing's policymakers is that more sophisticated foreign relations can help catalyze their attempts to move toward a higher-value domestic economy. While resources are clearly a key basis for this, China also needs imports of goods and services, above all advanced managerial and research capabilities, to effect this change. International relations that go beyond hard assets into the service sector and associated softer skills will also bolster Beijing's ability to engage and debate with the international community, increasing the likelihood that China will fulfill its national and international ambitions. 

After a torrid year for its international relations generally, Xi's tour had something of the feel of a relaunch for "Brand China" and the unveiling of a new catalogue for students of its international diplomacy. Xi is widely tipped to be China's next leader, and with Latin America being one of the regions where China's international relations are expanding most rapidly, his strategy there offers a blueprint for how China intends to evolve and secure its international relations in the next phase of its economic and geopolitical rise. Indeed, we may have just witnessed a critical evolutionary step in Chinese diplomacy.

Iain Mills is a Beijing-based freelance writer.

World Politics Review (Estados Unidos)

 


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