The increading influence of China in Latin America: challenge or opportunity?

2. 2
“The increasing influence of China in Latin America: challenge or opportunity?”
Executive Summary
• Over the last few years, China has been having increasing influence in Latin America - through investments (FDI), trade, politics
or even militarily; but U.S. – Latin America relations are not recent…
• Some argue this increasing "influence" may be harmful not only to the U.S. influence and hegemony over the region, but to the
region itself, as it may harm local industries and even threaten security;
• Brazil has been constantly complaining about the Chinese currency value, and is in the process of implementing tighter quality
requirements for Chinese products;
• The U.S. is also complaining about the Chinese currency and increasing trade deficits with China;
• My presentation aims at better understanding to what extent Chinese influence in Latin America has really increased, and if it
really poses a threat to the U.S. and/or the region, or if it actually provides an opportunity for the U.S. and Latin America to
engage in a "closer relationship", not only beneficial for both, but that also decreases and/or controls the importance of China in
the region.
Source: Analysis Rodrigo R. Coutinho.
Executive Summary

3. 3
Contents
1. Introduction
2. China – a threat (?)
3. China’s increasing trade with Latin America
4. Latin America in perspective
5. Latin American “cohesion” (?)
6. U.S. Latin American future prospects
7. A special “remark” on Brazil
8. Conclusion

4. 4
U.S. relations with Latin America, and U.S. influence over the region, have been
increasing since the XIX Century, both politically and economically
Comments
• Relationship between U.S. and Latin America has always been one of “ups and downs” – periods of closer and loosen ties;
• However, since end of XIX Century, relations have strengthened – Monroe doctrine (1823);
• Mexican American war (1835-1848);
• Spanish American war (1898) – possession of Puerto Rico and Cuba;
• Cuba’s independence (1902);
• Panama’s independence (1903) and the Canal of Panama (1903-1914);
• Cuban revolution (1959);
• Others (DR in 1965, Chile in 1973, Brazil in 1964, Guatemala in 1954, …);
• More recently, Washington Consensus policies (1990s);
• In regards to trade, in 1913 (Bulmer Thomas), the US represented:
• 32% of Brazil’s exports, 75% of Mexico’s, 94% of Panama’s, 85% of Puerto Rico; and 32% of LatAm’s, while UK 21%;
• 26% of all imports from the region, whereas UK 25%;
• 14% of the regions external debt and 18% of the region’s FDI.
1. Introduction
Source: Analysis Rodrigo R. Coutinho.

5. 5
Relations between Latin America and the U.S. have always increased and more
recently have increased more than with any other region in the world
Comments
• In 1929 (Bulmer Thomas), before the crisis, exports from LatAm to U.S. were of 34%, up from 30% in 1913; and imports were of
39%, up from 24% in 1913;
• Investments from U.S. in LatAm went from USD 1.6 million in 1914 to USD 5.4 million in 1929;
• More recently, according to the Council on Foreign Relations, in the period 1996-2006:
• U.S. trade with LatAm grew by 139% (U.S. exports to the region amounted to USD 223 billion in 2006);
• LatAm trade with Asia grew by 96% (China’s exports to the region amounted to USD 55 billion in 2006);
• LatAm trade with Europe grew by 95%;
• Still according to CFR:
• Latin America is U.S. main source of oil (30% of the total);
• Latinos represent 15% of the U.S. population and nearly 50% of newborn babies (therefore, U.S. population growth);
• Therefore, relations between U.S. and Latin America, despite everything, is continuously growing;
• But many still “manifest” against increasing influence of China in Latin America…
1. Introduction
Source: Analysis Rodrigo R. Coutinho.

6. 6
However, some argue the lack of attention from the U.S. towards LatAm has
provided the opportunity for China to increase its influence in the region
Comments
• According to Santibañes, lack of attention from U.S. to Latin America and increasing political and economic ties between China
and the region are increasing distance between Latin America and the U.S.;
• That allows China to increase its influence on the region and threaten U.S. hegemony in the region and threaten American
security through alliances with key states such as Brazil, Argentina and Mexico, who could be able to balance U.S. power;
• Stephen Walt believes there are four major variables to measure perceived levels of threat:
• Aggregate strength (size of economic capabilities, population, etc.);
• Geographical proximity;
• Offensive capabilities; and
• Offensive intentions.
• Walt also believes a weak state near a strong state might bandwagon, while a strong state far away might balance power through
local alliances;
• Therefore, one could say China is taking the opportunity the U.S. is giving to increase its influence in the region through strategic
partnerships…
2. China: a threat (?)
Source: Analysis Rodrigo R. Coutinho.

7. 7
On the other hand, some argue China and the U.S. have complimentary interests
in the region, and not conflicting ones
Comments
• There are indeed increasing ties between China and the region:
• China has bilateral agreements with Chile, Peru and Costa Rica;
• China is the major trading partner of Brazil, Chile and Peru; and is in a close second place in Argentina and Colombia;
• China has been granted “market economy status” by several Latin American states, what makes it more difficult to prove
dumping practices within the WTO;
• FDI from China in the region is growing, especially in industries of interest to China, such as oil and mining (e.g.. Sinopec
and PetroChina and SVA, Gree and Foxconn plants in Brazil).
• However, Arturo Valenzuela believes China could contribute to prosperity in the region, while still consistent with U.S. interests;
• And Ellis believes U.S. and China share interests in the region, in three areas:
• Strengthen the rule of law and administrative efficiency in the region;
• Create a secure and stable environment for all; and
• Achieve efficient and effective commercial infrastructure.
• Therefore, there would be enough interests between U.S. and China in the region to forge a win-win, constructive partnership…
2. China: a threat (?)
Source: Analysis Rodrigo R. Coutinho.

8. 8
China’s declared objectives towards Latin America do not seem like a threat, but
increasing trade is a reality, yet not as significant as some think of
• According to the Chinese government, its objectives in increasing relationship with Latin America are:
• Politically, to support each other and become reliable and all-weather friends;
• Economically, to realize complementary advantages and become cooperation partners based on mutual benefit;
• Culturally, to communicate closely and to establish a constructive pattern of dialogue.
• According to a recent Americas Quarterly edition:
• Exports from LatAm to China increased from USD 5.4bn to USD 91.1bn from 2000 to 2010 (~17 times);
• Imports from China to LatAm increased from USD 7.1bn to USD 91.0bn in the same period (~13 times);
• China’s FDI in LatAm were of USD 10.5bn, and total stock of FDI is at USD 43bn;
• Still according to the same magazine, between 1990 and 2010:
• In LatAm, imports from LatAm increased from 13% to 19%, while from China from 1% to 14%;
• In the U.S., imports from LatAm increased from 13% to 18%, while from China from 3% to 19%;
• In the E.U., imports from LatAm remained stable, while from China went from 1% to 8%.
• Overall, China is the 3rd major trading partner of LatAm, is the world’s largest exporter and 2nd largest importer (therefore, in
Latin America, they are still behind their world averages…).
Comments
3. China’s increasing trade with Latin America
Source: Analysis Rodrigo R. Coutinho.

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Increasing trade with Latin America, especially with China, has been significantly
tied to the current situation in the region
• Across Latin America, some countries have been developing steadily for a while now:
• This is the case especially for Chile, Brazil, Colombia and Peru;
• And that development has been responsible for attracting huge amounts of investments to the region;
• Still, in most Latin American countries, democracy is a consolidated reality;
• Yet, development in the region has been fostered by exports of goods, especially commodities, of what China is the largest
importer; therefore, increasing relations with China;
• However, a lot has yet to be done regarding:
• Inequality, which despite decreasing in some countries (e.g.. Brazil) is still very high;
• Education and training;
• Institution-building and improving;
• Increase security; etc..
Comments
4. Latin America in Perspective
Source: Analysis Rodrigo R. Coutinho.

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However, the countries from LatAm still differ from one another, their economic
development are in different stages, and politically present different challenges
• According to Reid, the Andean countries are culturally very different from the southern cone ones; Bolivia, Guatemala and
Ecuador have large indigenous population, Colombia is very mestizo, and Peru is somewhere in between; Venezuela, Brazil
and Cuba have larger black and mulato populations;
• Some countries in the region (namely Brazil and Mexico) were able to develop a large and diversified manufacturing industry,
largely thanks to their domestic markets, while others remained mostly producers of raw materials;
• And, today, following the periods of colonialism, neo-colonials, the ISI strategies, and Washington Consensus, we can somehow
group the countries in the region in a few clusters (Edwards and myself):
• A populist category – Venezuela, Ecuador, Bolivia and Nicaragua (I would add Argentina to this group);
• A group of countries that will neither fell into populism nor implement pro-competition policies and institutional reforms
needed to spur productivity growth – he includes in this group most of Central America, Brazil (I would not) and
Argentina;
• A group which will embrace the innovative, productivity-based path to development and prosperity – he includes in this
group Chile, Peru, Colombia, Costa Rica, and eventually Brazil and Mexico;
• I would add another group, formed by the satellite countries, which move according to their larger neighbors – Paraguay,
Uruguay, etc.;
• And another, with uncertain future due to drugs and increasing violence – Hondura, Nicaragua, Guatemala, Mexico, etc..
Comments
5. Latin American “cohesion” (?)
Source: Analysis Rodrigo R. Coutinho.

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U.S. - Latin American relations have been changing, and still present potential for
improvement, but some obstacles need to be overcome
• According to the Inter-American Dialogue, the hemispheric relations have changed due to seven major reasons:
• Brazil’s rise – with increasing influence in regional affairs, effective political leadership and skilled diplomacy;
• Mexico’s challenge – uncertainty in regards with future economic performance and increased violence;
• Overall progress – economic and social advances, fiscal management and social policies;
• Pragmatic politics – centrist, directed at economic growth, social progress and democratic governance;
• New forms of regionalism – UNASUR, CELAC, etc., which don’t curtail U.S. influence;
• Citizen insecurity – criminal violence, arms trafficking and illegal cash flows;
• U.S. reversals – important setbacks in its regional and global standing, ongoing wars, financial crisis, increased
inequality and dysfunctional politics (what CFR calls dysfunctional U.S. politics: immigration, drug policy and Cuba)
• And, still, Latin America presents huge room for improvement in its relation with the U.S.:
• Latin America (especially Brazil) has more “environmental capital” than any other region in the world – biodiversity, fauna,
flora, fresh water, etc.., has the world’s largest reserves of arable land, immense reserves of important commodities, from
oil and natural gas to metals and foodstuffs, among many others…
• However, “looking ahead”, U.S. needs to put aside dysfunctional politics, expand trade, investment and energy cooperation, and
ease protection of agriculture; after all, US buys 40% of the region’s exports and is responsible for 40% of the FDI investments
in the region, and 33% of its exports are directed to the region (though well below 55% of a decade ago).
Comments
6. U.S. - Latin American future prospects
Source: Analysis Rodrigo R. Coutinho.

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As a special “remark”, it is also notable the increasing leadership Brazil is having
over the region, what also presents an opportunity for the U.S.
• According to CFR, economic and social transformation led Brazil to become the cornerstone of South American growth and
stability, and a significant power on the world stage; still, CFR believes it to be an integral force in the evolution of a multipolar
world, in a leadership position in Latin America and in the world;
• Not to mention Brazil exercises an increasing influence in “regional forums” such as UNASUR, SELAC and Mercosur;
• Still, CFR remarks similarities with the U.S. in respect to ethnicity, the respect for democratic values and rule of law, individual
rights, religious freedom, diversity and equality;
• Therefore, CFR suggests a more mature relationship between the U.S. with what they call “the new Brazil”, which should
include, but are not limited to:
• More open and regular communication;
• Expand channels of communication on trade and monetary policy (especially with respect to China);
• Deepen bilateral understanding and cooperation in issues such as education, innovation, health care and infrastructure;
• Communicate more openly in sensitive issues, such as trade, market access and subsidies.
• In addition to that, Brazil and China compete in the production of manufactured goods to the U.S. market;
• U.S. have a huge and increasing trade deficit with China, while a surplus with Brazil; and Brazil has deficit with U.S. and surplus
with China; and U.S. and Brazil not necessarily compete in agricultural goods.
Comments
7. A Special “Remark” on Brazil
Source: Analysis Rodrigo R. Coutinho.

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Therefore, I believe China presents not a challenge but an opportunity to the U.S.,
especially through strategic partnerships with key “actors” from the region
• I understand there is an increasing relationship between China and Latin America, especially in regards to trade, for obvious
reasons; and that this cooperation will increase in other issues if the U.S. does not will to change some of its policies towards
the region (e.g.. transfer of technology for military cooperation, immigration, drugs and Cuba);
• However, I don’t believe the increasing influence of China in the region jeopardizes the relationship between U.S. and Latin
America – they share common values (as seen earlier), are geographically close, and most importantly, although trade has
increased between China and Latin America, trade between U.S. and Latin America had, in fact, increased – according to CFR,
it has grown faster than virtually any other region in the world, reaching nearly USD 1 trillion, and Latin America represents
nearly a quarter of all U.S. exports (or USD 350bn), more than three times exports from U.S. to China;
• In addition to that, I believe U.S. will, and in fact is, reacting – there have been increasing talks and visits between U.S. and
Latin American countries (especially with Brazil, Chile, Colombia, and a few others);
• Therefore, I believe China’s increasing “influence” in Latin America represents more of an opportunity than a threat to U.S. –
Latin America relations, especially when it comes to energy security, public security, poverty, and migration, and trade;
• But I believe the best way to do that would be through strategic partnerships with the region’s leaders and countries with, at the
moment, more affinity to the U.S. – Brazil, Chile, Colombia, Peru, Costa Rica, etc..
• However, sensitive issues should be put aside, for a while…
• To The Economist, “all in all, this is a pretty good time to be an American… it is a pretty good time to be a Latin American”
Comments
8. Conclusion
Source: Analysis Rodrigo R. Coutinho.

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“What is at stake is the future of inter-American relations, which today are generally cordial but lack vigor and purpose”.
Inter-American Dialogue