Wednesday, October 28, 2015

Evaluating Chinese impact in LatAm (Oct. 28, 2015)

Chinese influence in Latin America is much discussed already. The new issue of Nueva Sociedad has a host of articles focusing on the Chinese "landing" in Latin America and asks whether the Sino alliances are win-win or a form of "neocolonialism by invitation?" More specifically, whether China is contributing to the creation of exclusively commodity based economies or whether it's a partner in regional modernization. The answers are varied, but go into depth on an issue of primary relevance in regional diplomacy.

Chinese purchasing of commodities such as oil, copper and soybeans has been -- in large part -- responsible for the Latin American boom of the past decade. From 2000 to 2013, Chinese trade with Latin America rocketed from $12 billion to over $275 billion, reports Michael Reid in a recent Foreign Affairs piece.

In several countries China has displaced the U.S. as the biggest commercial partner, and Chinese investments and loans often come without the strict conditions that come with traditional financial market or IMF loans. Back in February a report from the China-Latin America Finance Database (a collaboration between Inter-American Dialogue and Boston University) showed that China's loans to Latin America rose 71 percent last year to $22 billion, a sum that exceeds last years' loans from the World Bank and the Inter-American Development Bank. (See Eduardo Romero's post on February 27.)

Of course such money buys influence.  A New York Times piece from July uses the case of Chinese investment of over $11 billion in Ecuador as an example of how the country deploys economic clout to win diplomatic allies and assure access to natural resources around the world. And Reid discusses how the Chinese interest in the region has permitted Latin American leaders to reject U.S. "diplomatic" overtures and mandates. 

Back to Nueva Sociedad: Yang Zhimin first goes into the question of who the players in this landing are, noting that there is the State, quasi-governmental organizations and companies themselves, all acting on different levels. He writes that the government applies a "top down" global strategy that includes policy plans aimed at orienting the development of bilateral economic relations, as well as favorable polices which include preferential loans. This strategy has created a favorable environment for Chinese companies, which exert a "bottom up" approach that feeds back into the government strategy. 

Food exports are a point of contention. Chinese interests are increasingly focused towards securing food for an expanding urban population -- but this is bumping up against Latin American barriers against foreign ownership of land and complaints of a focus on primary products without value added processes, says Adrian Hearn. Brazil, which provides China with 45 percent of its soybean imports, is an example of a growing mistrust regarding Chinese investment.

And in the same vein Luciano Dami├ín Bolinaga makes the case that Chinese investment in Argentina favors re-primarization of the economy -- focusing on soybeans and oil -- to the detriment of intraindustrial relations with Mercosur neighbors. 

Caribbean countries are increasingly dependent on Chinese imports, and the growing trade deficit could become a problem for the region. Dong Jingsheng argues that China should help Caribbean countries to diversify and that local production such as coffee or rum could be potentially lucrative exports. 
T
he case of investment in infrastructure shows another facet of the Chinese-Latin American relationship, but also of potential concern. Forty percent of Chinese loans to Latin American governments  over the past decade have been for infrastructure. But these call into question whether they will also involve an "exporting" of laxer environmental and social impact regulations. Bettina Gransow cites the examples of the Nicaragua Grand Canal (see Oct. 2nd's post) and Brazil-Peru railway that would cut through swathes of Amazonian rainforest. She calls on cooperation in the future to include better environmental and social practices, using China's desire to be perceived as a responsible global actor a leverage.

Other articles go more into depth on the case of mineral exports from Brazil and how relations with China have been reconfigured in this sector; while another piece looks at the soybean market between Argentina and China, as well as the flow of migrants from the latter to the former.

News Briefs

  • Cuba obtained record support for its annual U.N. General Assembly resolution condemning the U.S. embargo against it: 191-2. Only the U.S. and it's traditional voting ally, Israel, voted against the resolution. There was speculation over what the wording of this years' resolution would be, given that it's the first since the two countries reestablished diplomatic ties earlier this year and have been working on rapprochement since last December. There was a rumor that the U.S. might abstain for the first time if Cuba would change the wording. Such a move might isolate the U.S. Congress and pressure it to lift the embargo, reports the BBC. But Cuba was unwilling even to discuss the subject, according to an administration official cited in theWashington Post. The resolution adopted yesterday added language welcoming renewed ties and recognizing Obama's desire to end the embargo, reports Reuters. But U.S. officials criticized the resolution, saying it doesn't adequately reflect the steps forward taken over the past year. Cuban Foreign Minister Bruno Rodriguez acknowledged U.S. efforts to lift the "blockade," as it's called in Cuba, but said the measure is still in full force and at an important human cost, reports the Miami Herald. Despite the new relaxation of certain trade regulations, Cuba says there has been an intensification of other aspects of the embargo, including billions of dollars in fines against third-country banks for using U.S. currency in trading with Cuba.
  • Jimmy Morales, the new president-elect of Guatemala, is fleshing out his promise to switch up politics as usual. He promised yesterday to keep former army officers out of his cabinet, with the exception of the Ministry of Defense. The commitment is targeted at concerns regarding military influence in his National Convergence Front party, which was founded by army vets. The army has been accused of major human-rights violations during the country’s three-decade civil war, reports the Wall Street Journal. He also said he plans to end overpricing in the government's purchase of medicines and major political overhauls aimed at increasing accountability and transparency in government and political parties.
  • While Guatemala navigates the success of it's protest movement, Hondurans are worried their missing their chance for political reform against endemic corruption. Local Indignados want an Honduran version of the International Commission Against Impunity In Guatemala (CICIG), and instead got an OAS mission which will largely focus on recommending justice system reforms writes Louisa Reynolds in Foreign Policy. "The Honduran people don’t want any more diagnostics. We’re very clear about the fact that this country is plagued by rampant corruption and impunity," Indignados spokesperson Ariel Varela told Honduran news site Criterio. The movement has called for a nationwide civic strike and protest on November 4.
  • The Honduran newspaper Tiempo says it's temporarily shutting down due to "economic asphyxiation" after the government froze the bank accounts of owner Jaime Rosenthal in the wake of U.S. Treasury accusations that he and family members laundered money for Central American drug syndicates through accounts in the United States, reports theAssociated Press. The Rosenthals reject the allegations. (See Oct. 8th's post.)
  • El Salvador's national prosecutor's office arrested an evangelical pastor and 28 alleged members of Mara Salvatrucha, one of El Salvador's two major gangs that operate in the historic central district of the capital. Rev. Pedro Antonio Jimenez de Leon is accused of working street corners in the city with others, carrying bibles and collecting extortion money and pretending the funds were church offering, reports the Associated Press
  • Mexico's love affair with soda has contributed to a growing obesity epidemic. Looking to stem the problem, the government created a a national tax of about 10 percent on sugary drinks two years ago. Evidence is starting to show that the national experiment in trying to force people to healthier alternatives is working (see June 24th's briefs). The tax on sugary drinks has been held up as an example for other countries to follow, especially as diseases like diabetes and obesity boom in the developed and developing world alike, reports The Guardian. But a new proposal in Congress, approved by the lower chamber last week, would cut the tax in half for drinks that contain less than five grams of sugar per 100 milliliters. The idea is to push producers to put less sugar in drinks say legislators, but opponents say it represents behind-the-scenes maneuvering by soda companies and that the change would mainly benefit brands that are marketed to children, reports the New York Times
  • Two French pilots sentenced to 20 years in jail for smuggling 700 kilos of cocaine into the Dominican Republic in a private plane escaped the island by speedboat. The Attorney General of the Dominican Republic, Francisco Dominguez, said yesterday that they would work through diplomatic channels to seek the pilots' extradition from France, reports Reuters. But the French government says it will maintain its tradition of not extraditing citizens, reports the Associated Press.
  • The Ecuadorian capital, Quito, awarded a $1.5 billion contract to build part of its metro to a consortium led by Brazilian conglomerate Odebrecht SA and Spain's Acciona SA, reportsReuters. The deal comes as Odebrecht's CEO and other senior executives are in jail in Brazil on accusations of leading a "cartel of engineering firms" that allegedly overcharged Petrobras and used the funds to bribe politicians and executives.
  • Celebrating diversity in Brazil: a parade of young women in the World Indigenous Games in Brazil celebrated the varied facial features, body types and adornments of native peoples from across the continent. The fact that the event took place at all marked something of a watershed, said organizer Tainara da Silva to the Associated Press. "Before, the elders didn't want to show their womenfolk in public," said Silva, an agronomist who started organizing beauty contests on her home reservation a few years ago. "But that's changing. They now see that this is a way of valorizing our culture and traditions."

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