China–Latin America Relations in the 21st Century: The Dual Complexities of Opportunities and Challenges (International Political Economy Series) 3030356132, 9783030356132

Table of contents :
cover
978-3-030-35614-9_BookFrontMatter
Acronyms
Contents
List of Figures
List of Tables
Notes on Contributors
978-3-030-35614-9_Chapter_1
Chapter 1: Introduction: Understanding China–Latin America Relations as Part of the Transition of the World Order
Understanding China–Latin America Relations as Part of the Transition and Transformation of the World Order
A New Core-Periphery Relationship
Two Lines of Interpretation
The Book’s Objective and Methodological Approach
The Chapter Contributions
Chapter Abstracts
References
978-3-030-35614-9_Chapter_2
Chapter 2: Advancing Autonomy? Chinese Influence on Regional Governance in Latin America
Introduction1
The Quest for Autonomy in Latin American Regional Governance2
Latin American Regional Governance: The China Factor
China’s Actions in Latin America: Advancing Autonomous Regional Governance?
Conclusions
References
978-3-030-35614-9_Chapter_3
Chapter 3: One Step Closer: The Politics and the Economics of China’s Strategy in Brazil and the Case of the Electric Power Sector
Introduction
The Logic Behind China’s Global Investments in Infrastructure: Context and Potentialities
The Economy and the Politics of Chinese FDI in Brazil
China in Brazil: Economic Presence Versus Political Influence
Chinese Participation in the Brazilian Electric Power Sector: Empirical Findings
State Grid Holding Brazil
China Three Gorges
Recent Trends
Final Remarks
References
978-3-030-35614-9_Chapter_4
Chapter 4: Cooperative Relations with China in Brazil’s International Politics: Scope and Interests of the Global Strategic Partnership
Introduction
Strong Asymmetries in Trade Relations
Chinese Investments: Regional and Sectorial Bets
COSBAN Agenda: The Brazilian Perspective
The Presidential Elections of 2014: Differences in the Orientation and Priorities of Foreign Policy1
Conclusion
References
Other Source
978-3-030-35614-9_Chapter_5
Chapter 5: A Goat’s Cycle: The Relations Between Argentina and the People’s Republic of China During the Kirchner and Macri Administrations (2003–2018)
Introduction
Elements That Support the Bilateral Relationship
A Goat, a Tiger6
Evolution of the Signing of Agreements
Analysis of the Kirchner Government Period (2003–2015)
The Legacy of the Kirchner Governments
Changes in Mauricio Macri’s Government (2015–2017)26
Conclusion
References
978-3-030-35614-9_Chapter_6
Chapter 6: China–Venezuela Relations in a Context of Change
Introduction
Chinese–Venezuelan Relations in Action
The Results
Explaining the Bilateral Relationship: International and Domestic Variables
Conclusion
References
978-3-030-35614-9_Chapter_7
Chapter 7: Chile and China, 2000–2016: The Humming Bird and the Panda
Introduction
Chile in Double Asymmetry
Chile–Asia Relations (2000–2016)
The Historical Pattern
Continuities and Changes in the Pattern of Chile–Asia Relations
Chile–China Relations
The Panda and the Hummingbird
The Bilateral Policy: Dialogue Between a Panda and a Hummingbird
Economic Policy: A Case of Simple Asymmetrical Interdependence?
Conclusion
References
978-3-030-35614-9_Chapter_8
Chapter 8: China and Argentina, Paraguay, and Uruguay: Similarities and Differences
Introduction
The Roots of Relation: Three Main Differences
Similarities and Differences
Diplomacy: A Key Difference
Strategic Relations Between a Great Power and Three Small Powers
The “Lost Decade” in Trade?
China’s FDI and Other So-called Investments in the Three Countries
Chinese Immigration
Conclusion
References
978-3-030-35614-9_Chapter_9
Chapter 9: Revisiting Chinese and Latin American Economic Development: An Unintended Consequence of Different Industrialization Strategies
Introduction
Objective and Analytical Propositions
The “Chinese Developmental State” and Its Export-Oriented Industrialization
The Flying-Geese Pattern of EOI Growth
The Chinese Developmental State: State-Market Embeddedness
Can the CDS Be Duplicated Externally?
Latin American Structuralism and Import-Substitution Industrialization
Import-Substitution Industrialization
EOI Versus an ISI Growth Model from a World System Perspective
Competition in Global Value Chains (GVCs)
Dialectics and Dynamism in the Capitalist World System: The Chinese Experience
The Impact of “Made in China” on the World System’s Stratifications
Made in China and Deindustrialization in the Core
Made in China and Deindustrialization in the Semi-Periphery and Periphery
Conclusion
References
978-3-030-35614-9_Chapter_10
Chapter 10: Conclusion: China and Latin America in the Global Political Economy: The Development of a New Core-Periphery Axis
China and Latin America in World Politics
The Win-Win Rhetoric: The Conceptual Axis of Chinese Public Diplomacy
The Sino-Latin American Partnership: South-South Cooperation or Business Is Business?
China’s Rise and China-Latin American Relations: Lessons for the Region1
References

Citation preview

China–Latin America Relations in the 21st Century The Dual Complexities of Opportunities and Challenges Edited by  Raúl Bernal-Meza · Li Xing

International Political Economy Series Series Editor Timothy M. Shaw University of Massachusetts Boston Boston, USA

The global political economy is in flux as a series of cumulative crises impacts its organization and governance. The IPE series has tracked its development in both analysis and structure over the last three decades. It has always had a concentration on the global South. Now the South increasingly challenges the North as the centre of development, also reflected in a growing number of submissions and publications on indebted Eurozone economies in Southern Europe. An indispensable resource for scholars and researchers, the series examines a variety of capitalisms and connections by focusing on emerging economies, companies and sectors, debates and policies. It informs diverse policy communities as the established trans-Atlantic North declines and ‘the rest’, especially the BRICS, rise. More information about this series at http://www.palgrave.com/gp/series/13996

Raúl Bernal-Meza  •  Li Xing Editors

China–Latin America Relations in the 21st Century The Dual Complexities of Opportunities and Challenges

Editors Raúl Bernal-Meza Department of International Relations National University Center Buenos Aires, Argentina INTE Arturo Prat University Iquique, Chile

Li Xing Jiaxing University Jiaxing, China Research Center on Development and International Relations Department of Politics and Society Aalborg University Aalborg, Denmark

ISSN 2662-2483     ISSN 2662-2491 (electronic) International Political Economy Series ISBN 978-3-030-35613-2    ISBN 978-3-030-35614-9 (eBook) https://doi.org/10.1007/978-3-030-35614-9 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: © Rob Friedman/iStockphoto.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To the memory of Steen Fryba Christensen. His dedication to knowledge and teaching encouraged us in the writing of this book. May his example help us to persevere in our work

Contents

1 I ntroduction: Understanding China–Latin America Relations as Part of the Transition of the World Order  1 Raúl Bernal-Meza 2 A  dvancing Autonomy? Chinese Influence on Regional Governance in Latin America 27 Thomas Legler, Mariano Turzi, and Eduardo Tzili-Apango 3 O  ne Step Closer: The Politics and the Economics of China’s Strategy in Brazil and the Case of the Electric Power Sector 55 Danielly Ramos Becard, Antônio Carlos Lessa, and Laura Urrejola Silveira 4 C  ooperative Relations with China in Brazil’s International Politics: Scope and Interests of the Global Strategic Partnership 83 Lincoln Bizzozero Revelez and Andrés Raggio 5 A  Goat’s Cycle: The Relations Between Argentina and the People’s Republic of China During the Kirchner and Macri Administrations (2003–2018)111 Raúl Bernal-Meza and Juan Manuel Zanabria

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Contents

6 C  hina–Venezuela Relations in a Context of Change147 José Briceño-Ruiz and Norbert Molina Medina 7 C  hile and China, 2000–2016: The Humming Bird and the Panda169 César Ross 8 C  hina and Argentina, Paraguay, and Uruguay: Similarities and Differences193 Eduardo Daniel Oviedo 9 R  evisiting Chinese and Latin American Economic Development: An Unintended Consequence of Different Industrialization Strategies225 Li Xing 10 C  onclusion: China and Latin America in the Global Political Economy: The Development of a New Core-­ Periphery Axis253 Raúl Bernal-Meza

Notes on Contributors

Danielly  Ramos  Becard is Associate Professor at the Institute of International Relations, University of Brasília. Raúl  Bernal-Meza  is Professor of International Relations at National University Center, Argentina, and Researcher at INTE, Arturo Prat University of Chile. Lincoln Bizzozero Revelez  is Professor at International Studies Program, Faculty of Social Sciences, University of the Republic, Uruguay. José  Briceño-Ruiz  is Professor and Researcher at The Latin American and Caribbean Research Center (CIALC) of the Universidad Autónoma de México. Thomas Legler  is Professor of International Relations at the Universidad Iberoamericana Ciudad de México. Antônio  Carlos  Lessa is Professor at the Institute of International Relations, University of Brasília. Norbert Molina Medina  is Professor of the Faculty of Humanities and Education and Researcher of the Center of African and Asian Studies of the University of the Andes, Mérida, Venezuela. Eduardo  Daniel  Oviedo  is Researcher at the National Scientific and Technical Research Council (CONICET) and Professor at the National University of Rosario (UNR), Argentina.

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NOTES ON CONTRIBUTORS

Andrés Raggio  is Researcher at International Studies Program, Faculty of Social Sciences, University of the Republic, Uruguay and a PhD candidate at University of Salvador, Argentina. César  Ross  is Professor and Researcher at the Institute of Advanced Studies (IDEA), and Director of the Doctoral Program in American Studies, University of Santiago de Chile. Laura Urrejola Silveira  is a PhD candidate at the Institute of International Relations and Researcher at the Center for Asia-Latin American Studies, University of Brasília. Mariano  Turzi is Professor of International Relations at CEMA University, Argentina. Eduardo Tzili-Apango  is Professor and Researcher at the Universidad Autónoma Metropolitana-Xochimilco, México City. Li Xing  is Professor and Director, Research Centre on Development and International Relations, Department of Politics and Society, Aalborg University, Denmark. Juan  Manuel  Zanabria is an economist specialized in Regional Integration Processes, Coordinator of Mercosur’s Cultural Information System, Buenos Aires and Senior Researcher at the Cultural Information System of Argentina.

Acronyms

AIIB ALADI AVIC2 BRI BRICS CBERS CDS CELAC EMBRAER EOI FDI GDP GSC GVC ISI LATAM MERCOSUR NIEs OAS OECD PT SOEs WTO

Asian Infrastructure Investment Bank Latin American Integration Association The Chinese aeronautical company Belt and Road Initiative Brazil, Russia, India, China and South Africa China-Brazil Earth Resources Satellites Capitalist Developmental State Community of Latin American and Caribbean States Brazilian Company of Aeronautics S.A. Export-oriented industrialization Foreign Direct Investment Gross Domestic Products Global Supply Chain Global Value Chain Import-substitution industrialization Latin American Common Market of the South Newly Industrializing Economies Organization of American States Organization for Economic Cooperation and Development Workers’ Party (Brazil) Chinese State-Owned Enterprises World Trade Organization

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List of Figures

Fig. 4.1

Fig. 4.2 Fig. 4.3 Fig. 4.4 Fig. 4.5 Fig. 5.1 Fig. 5.2

Fig. 5.3 Fig. 6.1 Fig. 6.2

Bilateral trade in goods between Brazil and China in billions US$, 2000–2015. (Authors’ own elaboration using data from World Integrated Trade Solution (WITS)—World Bank and COMTRADE)89 Brazil’s trade balance with China in billions US$, 2000–2015. (Authors’ own elaboration using data from World Integrated Trade Solution (WITS)—World Bank and COMTRADE) 90 Brazil-China exports concentration, accumulated first four products (%), 2000–2015. (Own elaboration using data from WITS—World Bank and COMTRADE) 91 Announced investment of Chinese capital in Brazil per year in millions US$, 2004–2015. (Authors’ own elaboration using data from RENAI) 93 Top projects announced by Chinese capital in Brazil by division, 2004–2015. (Authors’ own elaboration using data from RENAI) 94 Bilateral treaties between Argentina and China by type of treaty (2004–2015). (Authors’ own elaboration using data from the International Trade of the Argentine Republic) 115 Structure of the bilateral treaties between Argentina and China by type of treaty (2004–2015). (Authors’ own elaboration using data from the International Trade of the Argentine Republic)117 Exports, imports, and total trade balance between 2003 and 2015. (Authors’ own elaboration using data from ALADI) 119 China’s exports to Venezuela 153 China’s imports from Venezuela 154 xiii

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List of Figures

Fig. 6.3 Fig. 6.4 Fig. 7.1 Fig. 7.2

Fig. 7.3

Fig. 7.4

Fig. 7.5

Fig. 7.6

China’s imports of fuel from Venezuela 155 China’s oil imports from Venezuela 155 Double asymmetry of intermediate states. (Source: Elaborated by the author) 173 Total trade with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December figures were calculated from the average of the previous months using the formula (months/8) × 12)177 Total trade with China, Japan, and South Korea, 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months, using the formula (x/8) × 12) 178 Exports with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12)178 Imports with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12) 179 Total trade with China, Japan, South Korea, Asia, and world aggregates 2000–2016 179

  List of Figures 

Fig. 7.7

Fig. 7.8

Fig. 7.9

Fig. 7.10

Fig. 7.11

Fig. 7.12

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Imports from China, Japan, and South Korea 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12) 180 Exports to China, Japan, and South Korea 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12)180 Total number of Chile–China interactions 2000–2013. (Source: Elaborated by the author, based on information contained in the annual reports of the Ministry of Foreign Affairs of Chile, period 2000–2013) 183 Interactions by dimension Chile–China 2000–2013. (Source: Elaborated by the author, based on information contained in the annual reports of the Ministry of Foreign Affairs of Chile, period 2000–2013) 184 Total trade with China 2000–2016. (Source: Elaborated by the author, based on the Monthly Newsletter information of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12) 185 Exports and imports with China, 2000–2016. (Source: Elaborated by the author, based on the Monthly Newsletter information of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12) 186

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List of Figures

Fig. 9.1 Fig. 9.2 Fig. 9.3

The flying-geese model of East Asian economic relations. (The left side is author’s own drawing; HKTDC Research, 2012: 7) 230 The global “Made in China” strategy. (A revised and extended figure based on Wong, 2013: 288, Fig. 2) 241 China-US trade in 2017. (Source: U.S. Census; MarketWatch, June 15, 2018) 244

List of Tables

Table 2.1 Table 2.2 Table 5.1 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 8.5 Table 8.6 Table 8.7 Table 8.8 Table 8.9 Table 8.10 Table 9.1

Main partners of China in Latin America 41 China’s presence and status in Latin American regional organizations43 Sown area, production, and yield of soybeans in Argentina 120 Comparative select economic indicators: 2017 197 Argentina–China bilateral trade: 2008–2017 (millions US$) 203 Paraguay–China bilateral trade: 2008–2017 (millions US$) 204 Paraguay–Taiwan bilateral trade: 2008–2017 (millions US$) 204 Uruguay–China bilateral trade: 2008–2017 (millions US$) 205 Trade between China and the three countries: 2008–2017 (millions US$) 207 China’s outward FDI flows to Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) 208 China’s outward FDI stock in Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) 209 China’s FDI stock in Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) 210 Project lists of International Cooperation and Development Fund in Paraguay 212 Top 5 China-Latin America exports and imports, 2011–2015 245

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CHAPTER 1

Introduction: Understanding China–Latin America Relations as Part of the Transition of the World Order Raúl Bernal-Meza

This book was conceived of and proposed by my dear friend Steen F. Christensen and me. It is the result of several years of mutual cooperation, during which time we wrote together a number of book chapters and texts that we presented at international conferences in various countries. Steen passed away just after we had submitted the proposal for this book to Palgrave Macmillan. It was the spirit of Steen and the support of Timothy Shaw and the editors at Palgrave that helped me continue with this project. I have tried to maintain, in this Introduction, the ideas and opinions I shared with my friend regarding relations between China and Latin America and their consequences. To my great joy, my friend Li Xing, who was also Steen’s closest colleague at Aalborg University, is acting as the second editor on Steen’s behalf. I am grateful for the appreciation and

R. Bernal-Meza (*) Department of International Relations, National University Center, Buenos Aires, Argentina INTE, Arturo Prat University, Iquique, Chile © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_1

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intellectual respect of my colleagues for Steen and I am grateful to them for having supported me so that I could continue, in Steen’s honor, our project.

Understanding China–Latin America Relations as Part of the Transition and Transformation of the World Order This book deals with relations between China and Latin America from an international political economy perspective. As we point out later in the book, China has become an indispensable partner country for Latin American countries and in particular, to those of South America. This fact reaffirms the opinion of Li Xing (2010) that China is increasingly performing the role formerly played by the United States as an “indispensable country” in the world. The place that China occupies today reflects one of the central characteristics of the world as studied by Paul Kennedy (1987), that is, in the rise and fall of great powers. China represents the rise of a new great power. Our contributors offer an understanding of the new North-South axis in the current international political economy by studying relations between China and Latin America through a number of national case studies on China–Latin America relations. Their analyses allow us to understand the impact these relations have on these countries and the role that they play in China’s global development strategy. These are, of course, relations between a new center (core) and semi-peripheral and peripheral countries, and the analyses explore the ways in which this new power is gradually taking over the role of economic hegemon played by Great Britain in the nineteenth century and the United States in the twentieth century. The country examples focus on the South American sub-region and thus highlight the experience of this sub-region, while at the same time putting this into the wider perspective of Latin America. The economic relations between China and Latin America have developed within the framework of a world capitalist economy, whose mode of accumulation was superimposed on communism. The history corresponds to the period described by Karl Polanyi (1944/1957) as the “great transformation in world history”: the emergence of market capitalism under different varieties of capitalism. Li and Shaw (2013) applied this interpretation to their analysis of China–Africa relations, which is relevant to the

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China–Latin America case because Latin America is also part of the current Chinese periphery, and perhaps its most important segment. Keohane and Nye (1977) and Gilpin (1987) had anticipated the predominance of economic competition over the political-strategic that had marked the previous bipolar order. In both works, the alliance of the ­capitalist powers was seen as key to the triumph of capitalism, and cooperation between them became an essential instrument for the survival of capitalism. From then on, different scholars (Fukuyama, 1992; Rosecrance, 1986) argued about the evolution of capitalism while agreeing that world competition would take place within the framework of the capitalist mode of accumulation. China acquired power as a “trading state” under the new order of the post-Cold War period, even though its development process, based on the a capitalist model of accumulation, had been initiated by Deng Xiaoping upon the death of Mao before the end of the Cold War, when China did not participate in the bipolar conflict. In this way, two processes of world political economy of the last part of the twentieth century came together, in line with the earlier interpretation of Polanyi. Keohane and Nye (1977) and Gilpin (1987) analyzed the structural elements of the world system in which the relations studied in this book are inscribed: the contemporary phase of capitalism, known as “globalization”, and the end of the Cold War order. This change transferred to the sphere of the economy what from 1945 to 1991 had been the predominance of the realistic vision in international relations. Security, not the economy, had been the most important item on the agenda of the international system in the period 1945 to 1991. Now the focus on the politics and security of international relations was transferred to the sphere of the economy. As noted by Bayne and Woolcok (2003, 2007), the end of the Cold War witnessed the predominance of international expansion and negotiation in the field of economy over the security agenda. In the post-Cold War era, the global situation initially revolved around one superpower, the United States, with an international economy heavily biased toward the developed countries and the economic powerhouses of the United States, Europe, and Japan, the so-called “Triad” (Hirst & Thompson, 1996). However, the process of economic globalization gradually led to a reconfiguration of the global economy, characterized by the rise of emerging markets or, more broadly, of the global South. International relations scholars now debate whether the diffusion of power in the global system is leading toward a transition in the global order. According to Lima and Castelan (2011), the consequence of these developments has created an interesting imbalance

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between the global order and the balance of power in the global system. As Christensen and Bernal-Meza (2014) argue, China may pose a challenge to the hegemony of the United States, although it is not set to challenge the capitalist order as such. These developments have challenged some of the dominant interpretations of the global system based on a liberal world order under US hegemony, and a world organized around a North-South divide, following the demise of the East-West divide of the Cold War. The rise of China is arguably the most notable aspect of these broad processes. Its sustained economic growth over the last three decades is the greatest challenge to the world order since the end of the Cold War (Li, 2010: 149), but is a particular challenge for the modernization processes of Latin American societies. The Chinese economy is now significant in relation to all world regions and economies at all levels of development, the core, the semi-periphery, and the periphery. Academics generally refer to relations between China and Latin America (and Africa) as South-South or East-South relations, and/or as relations between the semi-periphery and periphery as well as between the semiperiphery and semi-periphery (Li & Christensen, 2012; Pieterse, 2018), and a growing literature focusing on these relations has emerged. During the era of British hegemony, predominantly in the nineteenth century, the international economy was characterized by a division of labor, a topic on which David Ricardo theorized, praising the benefits of the specialization of work. This specialization had been initiated geographically through colonialism, driven by European expansion from the end of the fifteenth century and which had been imposed on Latin America for three centuries. This specialized specialization followed professional specialization, whose maximum expression would be the industrial revolution. These two stages shaped what Aldo Ferrer (1996) called “the history of globalization”, from the origins of the world economic order and the stage following the industrial revolution to the Second World Economic Order (2000), in which he analyzed in particular the effects of both stages on the periphery of the world and, in particular, on Latin America. The political and economic crises of the 1930s, which began with the crash of 1929, profoundly affected the Latin American economies, prompting several of them to begin an industrialization process. But the crisis of capitalism challenged the mainstream thinking of traditional classical and neo-classical economics, because the crash and its consequences had shown that the primary exporting countries were at the mercy of the global

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demand for commodities, over whose prices and export volumes they had no control. It was against this background that Raúl Prebisch (1949, 1951), formulated his theory of the deterioration of the terms of exchange. Prebisch’s work gave rise to systemic-structural thinking, whose modeling was later applied to the “world system” theories developed by Wallerstein (1975, 1984) and Arrighi (1985, 1998), by sustaining his vision of political economy in construction. The semi-periphery had emerged as a result of the processes of modernization and industrialization, and had been joined by a group of countries from the 1930s onward, including several from Latin America, that is, Brazil, Argentina, Mexico, and Chile. Prebisch started from the observation that in international trade between peripheral countries and central (or industrialized) countries, the latter appropriated most of the fruits of technical progress, which led to a deterioration in the terms of trade between primary goods and manufactured goods because the rate of growth of productivity in manufactured production is higher than in the production of primary goods. This increase in productivity should be transferred to the prices of industrial products, thus causing them to drop, due to the lower value added to each unit produced. However, the fall in the prices of industrial products did not occur because the agents of production, workers, and entrepreneurs in the industrialized countries, thanks to their political-organizational force, blocked the operation of the market, preventing the spread of technical progress at the international level, and producing a constant deterioration in the terms of trade. In short, the prices of industrial products did not decrease proportionally to the increase in productivity and the price paid for raw materials tended to decrease as a proportion of the price of manufactured or industrial products. In summary, Prebisch demonstrated how, in the trade relations between peripheral and core (or industrialized) countries, the latter appropriated the greatest part of the economic benefits of technical progress. It is possible that in China the reading of the history of the world economy as mentioned above has influenced the search for a capitalist path of industrialization and scientific-technological development. Hence, in the late 1970s, Deng Xiaoping promoted the Four Modernizations, whose success, under an alternative model to classical capitalism characterized by communist authoritarianism (Becker, 2014), projected China toward modernization and the construction of a subsystem of international relations that would be functional to its development as a global

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power. China reached its current position as the second leader in the world economy by following an export-oriented industrialization model, in which economic relations with different regions of the world-core, semi-­ peripheral, and peripheral countries played different roles. Latterly, Latin America has been part of China’s political economy strategy and the Chinese development model. However, historically there was little interaction between China and Latin America, because their relationships were between peripheral countries with low industrialization and development levels. However, this situation changed drastically due to Chinese modernization, and Latin America became a function1 of Chinese development. China’s quest for global economic primacy has given Latin America an important role in China’s international strategy. As Cesarin (2016: 53) points out, “the Chinese objectives in the region converge with their global aspirations as a rising power; the will to project power towards the American periphery and access essential natural resources to sustain its economic growth.” China has entered a political space that was historically dominated by the United States, while it has also strengthened its presence in what China considers its vital space: Southeast Asia (from Japan to Indonesia, from South Korea to Vietnam and the Philippines). The United States is beginning to react to this challenge—for the moment on the economic front—and is warning Latin American countries about the danger that Chinese investments represent for them.2 Latin America provides China with raw materials for its industry (minerals and oil) as well as food and other commodities for domestic consumption. In turn, it imports capital goods, equipment, manufactures, and financial capital from China. This type of relationship, which reproduces similar models of subordinating and dependent complementarity that occurred previously in Latin America—in the nineteenth century with Great Britain and the twentieth century with the United States and other developed capitalist countries (Europe and Japan)—must be interpreted according to Prebisch’s theory about the deterioration of the terms of trade. As Margulis (2017) argues, the theoretical contribution of Raúl Prebisch within the field of international political economy (IPE), or global political economy as Margulis calls it, is of great significance within IPE theory. This book contributes analyses inspired by the contribution of Prebisch to IPE theory, an aspect that is often neglected in the literature on China–Latin America relations from outside the region.

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A New Core-Periphery Relationship In order to identify the two opposing but complementary segments of the world political economy, namely development and underdevelopment, after World War II, economic and political historians labeled the relationship as “North-South”, under the framework of the discussions taking place on development in the United Nations. But these two axes were modified during the last decade of the twentieth century. Jan Nederveen Pieterse (2011) calls attention to an East-South turn in the global system, as economic power has increasingly shifted toward Asia and the Global South. China is a central component in this shift. From being a semi-­ peripheral country in the East Asian economic sphere—compared to Japan, South Korea, and Taiwan—thanks to its internal transformations, its high GDP growth rates, higher than 10%—particularly between 1990 and 1997—and the structure of its economic relations developed with Africa and especially with Latin America and other backward regions of the world, China has generated a huge impact on its own domestic economic development, its consumer market, and on the world economy. As Chunlai (2009: 4) notes, “another source of economic growth is external demand. China’s fast-growing exports have been its major external demand and have contributed to its economic growth. After the entry into the WTO, net exports as share of GDP have increased rapidly, increasing from 2.6% in 2002 to 7.7% in 2007. Consequently, the contribution of net exports to China’s GDP growth has also increased significantly (…). Apart from the direct contribution of exports to China’s economic growth, there are also a lot of indirect economic activities generated by the export sector.” In 1990, China was of little relevance to the international economic activities of Latin America. Trailing behind the United States, the European Union, and even Japan, China was less important to the Latin American economy (in terms of trade and investment) than South Korea or Taiwan. However, over the next 20 years it moved to the center (core) of a new core-periphery relationship with Latin America, giving rise to a new period of deterioration in terms of Latin American trade and causing a huge challenge to Latin America’s development opportunities. This negative situation arose from two complementary factors: the effects of the deterioration of the terms of trade and the effect of the primarization3 and re-­ primarization4 of the Latin American economies, since specialization prevents productive modernization.

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As Pieterse (2011) points out, one of the sets of relations to be considered in order to understand changes in the global economy are relations “between semi-periphery and periphery, East-South or South-South relations, such as between China and Africa and Latin America, which is the theme of a fast growing literature”. The contributions made by the authors of this book confirm Pieterse’s interpretation, in which China is the ­industrial core for peripheral Latin America, which exports primary products and imports industrial goods and capital (loans and direct investments). Since 2005, Chinese banks have granted more than US$ 141 billion in loans to countries and state-owned companies in the region, a figure that exceeds the combined loans of the World Bank and the InterAmerican Development Bank (Liss, 2018: 11). Three elements sustain this core-periphery relationship: (1) the harmony (compatibility) of interests between Latin American exports based on primary products and the importation of capital goods and manufactures; (2) complementarity, derived from asymmetric economic and commercial interdependence; and (3) the transformation of Latin America into a function of Chinese economic and political development. The first two are explained by complementarity and asymmetric interdependence. The third is explained by Latin America’s adoption of the agenda of Chinese political interests, by, for example, not questioning the violation of human rights, considering Taiwan as part of China, not questioning the annexation of Tibet, and supporting China’s entry into the WTO. From an economic perspective, this path started with the recognition of China as a market economy. The support given by Latin America to China for its entry into the WTO turned out to be a negative factor for Latin America. According to Ferrando (2016), since China entered the WTO in the year before the international financial crisis (2008), Chinese exports to the region have increased by 34%. This growth coincides with the increase in China’s share of world exports (Chunlai, 2009). A network of political interests—which China supported with a discourse that promoted South-South cooperation, based on a community of interests with the developing countries of which it was a part, which was disseminated via a public diplomacy based on the win-win principle—was intertwined with the image that China represented in the economic sphere, symbolizing opportunities for development and a possible economic model for contemporary Latin America (Bernal-Meza, 2012a, 2016, 2017; Corkin, 2014; Oviedo 2012a, 2012b; Yang, 2013; Yun, 2013).

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The effects of China’s commercial presence, becoming the main partner of the South American countries (first trading partner for Brazil, Chile, Peru, Venezuela, and Uruguay first import partner for Paraguay, and the second trading partner for Argentina and Colombia), have been diverse. In the first place, it has had a negative influence on regional economic integration processes because it displaced the regional industrial suppliers, Brazil and Argentina, which had begun a process of industrialization during the 1930s. Second, the process of economic relations made China the most important international partner, displacing members within the region. The deterioration of intra-South American trade produced by trading with China transformed the Asian giant into a staunch destroyer of South American trade integration (Oviedo, 2016). It also impacted on Brazil’s objectives of becoming the center of a productive industrial and political subsystem. China introduced a profound imbalance into the region and on the role played by Brazil in South America (Bernal-Meza, 2012a, 2012b, 2016; Dussel, 2016; Medeiros & Cintra, 2015) by becoming a key player in the involvement of Latin America—and particularly of South America— in the international economy. China’s entry into the political economy of South America displaced Brazil from its preponderant position within the bloc, as well as in the regional context. Hiratuka (2016) points out that “China consolidated itself as the region’s main trading partner as of 2009, but this situation is associated with a typically inter-sectorial flow with very low levels of participation of industrial products in exports, beyond a very high concentration in a few products. By contrast, imports are dominated by more technologically sophisticated products, and the degree of concentration is not as high. At the same time, China promotes the geographic integration of South America, financing the infrastructure of the bioceanic corridors, the processing and export zones, the rail nodes and the construction of tunnels and ports” (Cesarin, 2016: 71). But China does this for the benefit of its own commercial network, even though in the immediate future there will be improvements in the infrastructure development of Latin American countries. As we have noted, the Chinese economy has increasingly grown its role in the region, all of which has a great impact on regional modernization objectives, deepening the specialization patterns of the Latin American countries, and placing limits on the future role of Mercosur as a platform for the productive transformation and expansion of dynamic comparative advantages, both inward and outward from the region (Beckerman & Moncaut, 2016).

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Although what seem to stand out in the China–Latin America relationship are its commercial aspects, with their impact on the economic performance of Latin American countries, the path of this relationship was not initiated by trade, and has not developed in a linear direction. According to Ferrando (2016), China–Latin America relations have been and are political and economic, and their analysis involves three aspects which characterize the different stages that can be divided into different periods of time: diplomatic, commercial, and trade agreements. In fact, China and Chile signed in 2019 a protocol5 that strengthens the free trade agreement between both parties signed in 2005. Chile is the first country in the world to negotiate a deepening of a bilateral trade agreement with China. This trilogy of links shows a relationship between economy and politics, which began with the reincorporation of China into the United Nations, which regained its permanent place in the Security Council in 1971, giving rise to diplomatic recognition by the Latin American countries, with the exception of Paraguay and some Central American countries. Chile and Peru recognized the People’s Republic of China in 1970 and 1971 respectively, before the United States. According to Ferrando (2016), this first stage has a strong political component, in the context of the Cold War, and the Chinese should be recognized as the representation of a single China. The second phase begins in the 1990s and is consolidated by China’s entry into the WTO in 2001. The third phase is that of free trade agreements, beginning with Chile in 2006, and which China has only subsequently established with Peru and Costa Rica. During the first phase, Chinese global political interests predominated in the definition of the Latin American bilateral and multilateral agenda and this trend continued during the second phase, which was strongly marked by a commercial component (Ferrando, 2016). The Chinese objective with respect to the WTO was an issue that linked the first with the second phase. The Latin American countries, with the exception of Brazil, do not have global interests in terms of a world policy. Being a global player, in a position of power, is not in the capabilities or objectives of the countries of the region. Neither the region as a whole nor countries considered individually—for example, Brazil—has anywhere near the same impact on the world economy and politics as China currently has on the world system. Therefore, Chinese and Latin American interests in the realm of international politics are very different and are likely to remain so in the foreseeable future. This observation poses questions about the image of a

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China that shares with Latin America a common vision from the perspective of both being developing countries and members of the world of the South. Latin America and the Caribbean experienced very significant growth in exports to China, which between 1992 and 2013 expanded at a rate of more than 12,000%, from US$ 1067 million in 1992 to US$ 133,140 million in 2013, while at the same time Latin American export specialization grew (Ferrando, 2016). Chinese diplomatic presence in Latin America was strengthened with its incorporation into various regional organizations, such as the Inter-American Development Bank, as an observer at the OAS and ALADI, as a partner in dialog with CELAC (Community of Latin American and Caribbean States), in Mercosur, the Andean Community of Nations, and the Pacific Alliance. Latin America is not, however, China’s main trading partner, since neither export nor imports exceed 7% of China’s total foreign trade. Of this percentage, four countries—Brazil, Chile, Argentina, and Mexico—represent around 75% of Chinese exports to the region. However, according to Beckerman and Moncaut (2016), the relationship of China with these four countries has been more dynamic than with the rest of the world. This relationship with the region is very important internally for China because Latin America is an effective partner in its productive-export model, which improves the stability of the Chinese political system by increasing the per capita income of the Chinese population. The sustained growth of its economic-commercial and financial relationship with Latin America, with its positive returns for China, brings political certainty, while its Latin American partner pays for its own imports and its indebtedness to China with its primary exports. This is, however, a trap that threatens the autonomy and development of the Latin American productive system due to the high primary specialization involved. Although Oviedo (2016) has described Argentina’s relationship with China, defining it as “the paradox of food”, this description can be applied to all Latin American countries with primary exports to China and which maintain trade deficits with it. According to the author (Oviedo, 2016: 273), Although Argentina is an agro-exporting country and China a major importer of food commodities, Argentina transferred huge amounts of foreign currency to China via trade deficit, causing the reduction of international reserves and the instability of the currency. At the same time, China appears as a factor of solution of the problem through the signing of the

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agreement on exchange of currencies (swaps) and the granting of loans that in the short term stabilized Argentina’s critical financial situation. In this way, the already consolidated core-periphery model in the commercial sphere was added [to] the Argentine dependency on Chinese capital, expanding the bilateral asymmetry and affecting the incipient process of modernization in Argentina.

In its structure of bilateral relations, China has divided its Latin American partners into four categories: strategic partners (Brazil, Mexico), comprehensive strategic partnerships (Venezuela, Argentina), integral cooperation (Peru, Chile), and the rest, which lack a specific definition. This categorization shows that China’s relationship with the different Latin American countries is not homogeneous. Two Lines of Interpretation With regard to China’s interest in Latin America, there is a relative consensus that China views the region as a source of imports of commodities and as a market for Chinese manufacturing exports, as well as a destination for Chinese direct investments and lending with the aim of contributing to Chinese economic development. Interpretations of China’s economic impact on different national cases from the South American sub-region, however, include both positive and critical assessments, which, as Ernesto Vivares (2018), following Prebisch’s argument, argues has a particular place in the global economy as specializing heavily in primary goods from the sectors of agriculture, mining, and energy. Some of the contributions see China’s impact as positive and as a contribution to positive economic and social developments in Latin America. This interpretation largely follows the official Chinese discourse on their economic ties as harmonious relations that produce “win-win” outcomes, where both partners gain from the relationship. Even if the pattern of these economic relations is asymmetrical in terms of the characteristics of trade and financial interactions, the outcome is harmonious from this perspective. The literature that take this view often considers China–Latin America relations as an example of South-South relations, or cooperation that differs significantly from Latin America’s traditional relations with the developed world and the United States, which follow a North-South pattern, often with impositions made by the stronger party, contrary to Chinese behavior and policy of non-intervention and non-imposition in respect of ­sovereignty.

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Another set of contributions emphasizes that China–Latin America relations in structural terms mirror the traditional North-South pattern and asymmetries. These scholars argue that this pattern of economic relations tends to provoke a process of re-commodification and de-industrialization in Latin America, particularly in the South American sub-region, and cements Latin America’s traditional involvement in the global economy. From this perspective, the rise of China and the growing importance of China for Latin American development have led to a third phase of Latin American dependency. Some analysts, such as Oviedo (2012a), Bernal-Meza (2016), and Dussel Peters (2016), consider that we are witnessing a process of growing Chinese economic hegemony in the region. Contributions focusing on the political dimension of China–Latin America relations address geopolitical issues such as China’s impact on Latin American regional integration, asking whether China mainly contributes to strengthening integration in the region or whether its impact may rather provoke regional fragmentation, for example, due to China’s impact on de-industrialization and a deepening of commodification and models dominated by natural resources. A topic addressed in a number of the chapter contributions is that China’s rise has provided a context for a new geopolitical situation that provides greater “room for maneuver” and wider margins for autonomy for Latin American countries. A more critical view suggests that China’s negative economic impact in the region rather weakens the conditions for a more autonomous role. Another political topic addressed in some of the contributions focuses on the role of different social groups and production sectors as well as political parties on the Latin American side. They point out that domestic politics are of key importance if we want to understand Latin American responses to and policy toward China and, more generally, to understand the development and foreign policy strategies of Latin American countries. This topic is significant in relation to the debate on China’s impact on Latin American development, as well as more generally in relation to debates on what accounts for Latin American development processes. It is under-studied and deserves further consideration in the literature on China–Latin America relations. In this sense, the contributors to this book allow us to take a clearer look at the situation. China–Latin America relations have gone through different phases since the turn of the century. These phases respond to global contextual developments as well as to developments in individual Latin American countries. One topic of particular importance for China–Latin America

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relations, as well as for the impact of China on Latin American d ­ evelopment, is the issue of the commodity super-cycle (2003–2013), which China’s development contributed to creating, and the end of the ­commodity super-cycle after 2013 (some analysts date the end of the super-­cycle to 2011 or 2012). Changes in the period between 2000 and 2018  in the terms of trade of different Latin American countries play a significant role in Latin American economic and social development as well as on domestic politics, arguably. It therefore seems advisable for analysts of China– Latin America relations to include the issue of terms of trade and the Prebisch thesis on the tendency for deteriorating terms of trade for those countries specializing in natural resources in their analytical frameworks and theoretical toolboxes.

The Book’s Objective and Methodological Approach China’s economic transformation following its opening up to the world economy 40 years ago did not follow the precepts of “neoliberalism” and the so-called “Washington Consensus”: the Chinese development model is arguably still state-led. The Chinese economy has experienced a massive technical upgrade and a revolution in its manufacturing sector, making China the “factory of the world”, the biggest global exporter, and a remarkable financial powerhouse. China has also gradually taken on a rising global role on the global political scene in tandem with its economic rise. During this period, China has launched a wide set of initiatives such as BRICS, One Belt One Road (OBOR), the Asian Infrastructural Investment Bank (AIIB), the Shanghai Cooperation Organization (SCO), as well as having greater presence in regional Asian organizations and in its relations with Africa and Latin America. Following the international financial crisis of 2008 and the election of Donald Trump as US President in 2016, China is becoming perhaps the most significant advocate for an open, rules-based global liberal economy. The era of US hegemony and the Washington Consensus has thus ended, giving way to a new situation in the global political economy and in the global economy. This volume takes international political economy as its major methodological approach. It focuses on economic and political dimensions and their interplay, approaching them both from a Chinese and a Latin American perspective, with specific attention to the period from the start of the twenty-first century. The main contribution of the volume is within the area of economic relations, particularly with regard to the theme of

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how to understand and characterize China’s economic impact on Latin America. This theme is of key importance within the literature and debate on China–Latin America relations. There is no consensus on the matter, but widely differing interpretations.

The Chapter Contributions Relations between China and Latin America have become increasingly important in the twenty-first century, particularly due to China’s growing centrality in the global economy. The academic literature on China–Latin America relations has therefore expanded, and the relations are seen as increasingly important from the perspective of governments, both in Latin America and China. The Chinese government has, for instance, produced two “white papers” (2008 and 2016), where they set out the official policy view on relations with Latin America. The academic interest revolves around both economic and political themes. The chapter contributions are based on different theoretical IPE perspectives, such as liberal, Marxist, and nationalist perspectives. Most chapters focus on empirical analyses, while a few of them also include policy-oriented views and recommendations. China–Latin America relations are analyzed at three different levels, the national/bilateral level, the regional level, and the global/multilateral level. A general feature of the contributions on the theme of economic relations is that they all show that Latin America is a function of Chinese development in the sense that Latin America fulfills the function of being part of China’s economic periphery in the process of its economic transformation toward a great emerging economy. The book begins with a political economy focus on the role that China plays in Latin America, in relation to the construction of regional governance, regionalism, and autonomy. This is a look at the international insertion of the region, analyzing the influence of China in the hemisphere dominated by North American hegemony. The next two chapters analyze the relations between Brazil and China: by Becard, Lessa, and Silveira, and the second by Bizzozero and Raggio. The inclusion of two chapters dedicated to Brazil is explained by the fact that this country is the most important partner of China in the region. Brazil is also the most important country politically and economically in South America. Bernal-Meza and Zanabria’s chapter analyzes the relations between Argentina and China, which perhaps pose the greatest challenge of all the national cases. This is followed by a chapter written by B ­ riceño-­Ruiz

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and Molina Medina, dedicated to China–Venezuela r­ elations. César Ross’ chapter considers the relations between Chile and China, followed by a chapter by Eduardo Oviedo, analyzing, comparatively, the relations between Argentina, Paraguay, and Uruguay. In the next chapter, Carlos Juan Moneta makes a prospective analysis of Chinese economic development and its global impact in the decades. The book closes with an analysis by Li Xing in Chap. 9, comparing the insertion strategies in the international economy of China and the Latin American. By comparatively analyzing both development strategies, we can understand the profound inequalities between both segments of the world system and the conditions of the peripheral Latin American countries vis-à-vis China, as analyzed in Chaps. 3–8. Chapter Abstracts Chapter 2, by Thomas Legler, Mariano Turzi, and Eduardo Tzili-Apango, studies whether China’s growing role in Latin America has had an impact on the construction of autonomous regional governance. The authors find that China’s influence has been contradictory. China’s growing economic presence has seemingly created advantages for countries in the region by reducing their dependence on the United States. But China does not seem to have an ideological or political preference when it comes to its partners in Latin America. The authors remark that recent experiences of regionalism in Latin America have coincided with the growing presence of China in the region. However, this fact seems to be a coincidence rather than a consistent choice. Although Chinese influence has commonly been associated with a post-hegemonic trend/movement in Latin America, it has not been post-liberal or anti-liberal. Rather, Chinese economic influence has been decidedly liberal in nature, reinforcing the so-called “Commodity Consensus”. According to Legler, Turzi, and Tzili-­ Apango, there seems to be little evidence that China supports regional political autonomist efforts, concentrating rather on developing ties with regional multilateral institutions that are economic in nature. But autonomy has become both an end and a means to achieving certain purposes in Latin America. The advocates for the post-hegemonic regionalist experiments have claimed that the deepening of Latin American political and economic ties with China represents a historic or unprecedented opportunity to reduce dependence on the United States, and to increase Latin American independence and emancipation. According to the authors, the

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Chinese have also been accused of diffusing the “Dutch Disease” in many Latin American countries that have been downgrading their industry level in value chains. The authors argue that there is little evidence that China actively supports regional political autonomist efforts. In short, there is little evidence that regions such as South America, the Southern Cone, or the countries that comprise ALBA have fortified their decision-making autonomy vis-à-vis the United States thanks to their strengthened ties with China. Chapter 3, by Danielly Ramos Becard, Antônio Carlos Lessa, and Laura Urrejola Silveira, explores China’s relationship with its main Latin American partner. The authors state that the growth of China’s political influence in Brazil stems from an increase in Chinese capital in the Brazilian economy. They analyze the determinants of FDI, studying in particular the expansion of Chinese capital in the Brazilian electricity sector. The growth of the Chinese presence in Brazil in infrastructure projects in general, and in energy in particular, has direct political consequences relating to the powerful increase of its influence over the Brazilian economy and its prestige within and ascendancy over the Brazilian government. China’s interest in the generation, transmission, and distribution of energy in Brazil has grown consistently over recent years and has become an important tool of Chinese foreign policy toward Brazil. The growth of China’s influence over the Brazilian economy has been noticeable since the early 2000s, but, in 2009, China overtook the United States as Brazil’s main trading partner. The authors believe that China promotes the geopolitics of global connection through the implementation of infrastructure in order to increase the viability and fulfillment of its own domestic demands, such as food, energy sources, and strategic natural resources. The authors conclude by pointing out that Chinese investments in the Brazilian electric power market are a key component in the process of China’s growing influence over the economy and politics of its main partner in Latin America. Chapter 4, by Lincoln Bizzozero and Andrés Raggio, analyzes the evolution of cooperation relations between Brazil and China. Even though this chapter focuses on the relationship between both countries, the main focus is from the Brazilian perspective. The authors argue that cooperation in science and technology was the basis for the strategic partnership agreement and created a precedent for South-South cooperation. From scientific and technological cooperation, both countries switched to commercial relations and subsequently to cooperation in international politics.

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The authors argue that while at the commercial level the bilateral ­relationship occurs in a framework of complementarity but also of asymmetry, this type of relationship does not seem to be reflected in the same way at other levels. Bilateral trade increased during the period, as did the surplus, which was beneficial to Brazil, except in 2007 and 2008, when a trade deficit was produced. In the political-strategic field there is a convergence of interests on some issues involving the reform of international economic organizations. However, as regards the issue that particularly concerns Brazil, the reform of the Security Council through an increase of members, China has not taken a supportive position. The authors conclude that the scope of Brazil’s foreign policy regarding cooperation with China is conditioned by domestic interests, both economic and political. Chapter 5, by Raúl Bernal-Meza and Juan Manuel Zanabria, discusses the most complex example of relations between China and the countries represented in the book. China–Argentina relations integrate the three key elements of core-periphery and North-South economic relations: trade, investment, and loans. It is a relationship defined as harmonious by the complementarity of the exchange, but it has, however, resulted in a huge debt on the part of Argentina, a debt that has grown since 2008, when the deficit period that has continued the present time began. Argentina has been the only country in the region with which China has carried out a system of currency swaps, which is in fact a process of indebtedness, adding to the trade deficit, for the financing of infrastructure works carried out by Chinese companies and investments for the purchase of Argentine companies. The authors point out that the appearance of the People’s Republic of China in a trade scheme that reproduces the NorthSouth model has put the reindustrialization objectives that the governments of Néstor and Cristina Kirchner sought to promote under tension. China became the second largest source of imports from Argentina, displacing the United States from that position. Toward the end of the Kirchner governments, the “soy primarization” of exports was reached. The Argentine economy’s failure and the structure of economic relations that developed with China have given rise to “the paradox of food”, which represents one of the central problems in the structural conflict between the modernizations of Argentina and China. In short, China has generated a structure of international economic relations with Latin America, of which Argentina is one of the main examples, that makes the South American countries dependent on Beijing. In short, Argentina has made China indispensable.

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Chapter 6, by José Briceño-Ruiz and Norbert Molina Medina, looks into China–Venezuela relations. From 1974 to 1999, relations between China and Venezuela took a low profile. The situation would change with the arrival of Hugo Chávez. According to Briceño and Molina, Chávez’s aspiration to global and regional leadership and the increasing involvement of China in the Global South in general, and in Latin America in particular, are crucial factors for understanding the recent period of Chinese–Venezuelan relations. Venezuela’s trade relations with China have been transformed in the last two-and a-half decades. Significant levels of growth that show a major Chinese presence in the Venezuelan market and financial cooperation between the two countries are indicators of the bilateral relation. The authors’ analysis of the process of indebtedness of Venezuela to China deserves a special mention. The debt contracted with China was US$ 62.2 trillion, which represents a little more than 40% of the US$ 150 trillion disbursed by China in Latin America. The authors point out that the lack of payment of the Venezuelan debt led the Chinese government to decide to put Venezuela’s sovereign credit rating on the list of negative debtors due to uncertainty surrounding the Venezuelan government’s capacity to pay the debt as agreed. The political consequences for Venezuela of the growing ties with China have led to the fear of a new dependency. Huge commitments have been made to supply oil in exchange for investments. The volume of loans is enormous. But the current political and economic instability in Venezuela is a real source of concern for China. Chapter 7, by César Ross, deals with Chile’s foreign policy on the world stage in general, and with Asia/China in particular. Chile’s foreign policy has been primarily economic and is characterized by an approach that might be seen as somewhere between neoliberal and neorealist. The internationalization of Chile as regards East and Southeast Asia over the last 40 years began as a reaction to its international political isolation, derived from the world’s rejection of the Chilean military dictatorship from 1973–1989, but continued as a result of a genuine belief in the benefits of a specific model of international relations. China was the most important Asian country in Chile’s relations with Asia. As a hypothesis, Ross argues that the relations between Chile and China have taken a perspective that is historically pragmatic and, by extension, superficial. The author analyzes Chile’s relations with China as a case of upward asymmetry that corresponds to the successful experiences Chile has had. To this end, the author uses his own model, which he calls “double ­asymmetry”,

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according to which Chile is being positively tracked by ­developed countries, in this case, China. The commodities super-cycle (2001–2013) generated a more complex friendship, which the author tries to explain through the metaphor exposed in the subtitle of the chapter (“The Humming Bird and the Panda”). Chile, without being a major power, is part of the global chain of value and so its natural resources are present in many industrial products containing copper, steel, molybdenum, silver, gold, timber, and other elements of national production. According to Ross, the bilateral free trade agreement had a very positive impact on trade, despite the fact that this was affected by the crisis of 2007–2008. Ross concludes that China has become Chile’s main economic partner in Asia, and today is significantly more important than Japan and Korea, at least quantitatively. However, Chile does not have a political aspect in its bilateral relationship. Chapter 8, by Eduardo Daniel Oviedo, examines similarities and differences in the relationships between China and three South American countries: Argentina, Paraguay, and Uruguay. It focuses on political, diplomatic, trade, investment, and migratory matters, on the basis of differences in cultural traditions, political regimes, and economic structures. In this last field, China plays an important role in the economic modernization of the three countries. The chapter is divided in two main parts. The first part introduces the essential differences in terms of cultural, political regimes, and economic structures and their impacts on modernization processes. The second part analyzes similarities and differences in diplomatic, political, trade, investment, and migration policies between China and the three countries. These include China’s FDI, investments through tax havens, currency swaps, the number of Chinese immigrants in Argentina, the role of Taiwanese immigration in Paraguay, and the restrictive policy of Uruguay toward Chinese citizens. According to the author, in comparison with the economic relations of China with Brazil and Chile in the same period, the official statistical data relating to Argentina, Paraguay, Uruguay, and China confirm a trade relationship between the three countries and that China underwent “lost decade”, particularly in Argentina. The chapter concludes by providing a general and comparative vision of similarities and differences in the five fields of the relations between China and the three countries. The analysis contained in this chapter reaffirms the fact that China has grown its presence in the three countries and that power asymmetry has increased in all areas, increasingly as a result of Chinese modernization.

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Finally, Chap. 9, by Li Xing, provides a framework for explaining and understanding the current discussions on China–Latin American economic relations. The analysis is based on a historical review of the two different industrialization strategies adopted by China and Latin America: Exportoriented Industrialization (EOI) and Import-substitution Industrialization (ISI). The author argues that the synergy of internal factors (state-marketsociety relations) and external factors (geopolitical, geo-economics relations) came to shape their development strategies in different directions and link their development and economies with the global market (competition, production chain, value chain). The chapter maintains that some of the current problems in China–Latin America economic relations are directly or indirectly connected with the unintended consequences of the historically different industrialization strategies. The rise of China and its economic success are, ironically and dialectically, seen both as a promoter in accelerating China–Latin America economic relations and a factor in causing some of the economic difficulties faced by the region, such as economic de-industrialization and primarization. The chapter concludes that it is in the political and economic interest of Latin America to continue to seize the chance of China’s rise as external “promotion by invitation” and to increase its “room for maneuver” and “upward mobility” by finding strategic convergence with China’s global strategy. In the concluding chapter, Raúl Bernal-Meza affirms that China, from the early 1990s, initially represented a world of commercial and financial opportunities to Latin America, but it was not viewed as a political partner in world politics (Bernal-Meza, 2012a; Cervo, 2014; Li, 2012; Moneta & Cesarin, 2016; Pastrana & Gehring, 2017). Therefore, bilateral relations, from the Latin American perspective—and with the exception of Brazil (Bernal-Meza, 2017; Christensen, 2014; Oliveira, 2012; Oviedo, 2014; Pimentel, 2013)—have focused on the economic agenda, as the chapters of this book demonstrate. The authors of this book confirm what Li Xing (2010) pointed out in the context of the position of Latin American countries in the world system—a fact that the editors highlighted shortly afterwards, when analyzing for the first time a set of national examples of relations between China and Latin America–China has becoming an increasingly indispensable economic actor for Latin American countries.

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Notes 1. In the sense of the role that these relationships play within Chinese capitalist development. 2. “The US Secretary of State asked Latin America to keep ‘open eyes’ on the investments of the Asian giant”. Source: Emol.com—http://www.emol. com/noticias/Economia/2018/10/22/924726/Medios-chinos-criticana-Pompeo-por-sus-comentarios-ignorantes-y-maliciosos.html. 3. Primarization refers to countries that did not enter modernization or industrialization processes. Re-primarization refers to countries that had already entered the process of industrialization, such as Brazil, Argentina, and Mexico—called semi-peripheral—but which began to return to their previous phase of economic backwardness. 4. Primary economies or commodity exporters. 5. The new deepening protocol included the renegotiation of six chapters: access to markets, rules of origin, customs procedures, and trade facilitation, competition policy, economic and technical cooperation, and trade in services. Two new titles were added on electronic commerce, and environment and commerce. Likewise, trade facilitation provisions were incorporated under a new institutional framework. https://www.emol.com/noticias/ Economia/2018/10/25/925280/Congreso-aprueba-protocolo-queprofundiza-Tratado-de-Libre-Comercio-con-China.html.

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Bernal-Meza, R. (2012a). China-MERCORSUR and Chile relations. In X. Li & S. F. Christensen (Eds.), The rise of China. The impact on semi-periphery and periphery countries. Aalborg: Aalborg University Press. Bernal-Meza, R. (2012b). China y la configuración del nuevo orden internacional: las relaciones China-MERCOSUR y Chile. In R. Bernal-Meza & S. Quintanar (Eds.), Regionalismo y Orden Mundial: Suramérica, Europa, China. Buenos Aires: Nuevohacer and Universidad Nacional del Centro de la Provincia de Buenos Aires. Bernal-Meza, R. (2016). China and Latin America relations: The win-win rhetoric. Journal of China and International Relations, 2016(special issue), 27–43. Bernal-Meza, R. (2017). China en América Latina. Política exterior, discurso y fundamentos: diplomacia pública y percepciones en la región. In E. P. Buelvas & H. Gehring (Eds.), La proyección de China en América Latina y el Caribe. Bogotá: Editorial Pontificia Universidad Javeriana and Konrad Adenauer Stiftung. Cervo, A. L. (2014). Relações Internacionais da América Latina (3ra. edição.). São Paulo: Editora Saraiva. Cesarin, S. (2016). China, miradas desde el Sur. In C. Moneta & S. Cesarin (Eds.), La tentación pragmática. China-Argentina/América Latina: Lo actual, lo próximo y lo distante. Sáenz Peña: Universidad Nacional de Tres de Febrero. Christensen, S. (2014). La estrategia brasileña de política exterior a partir de 2003. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Montevideo: Ediciones Cruz del Sur and Universidad de la República. Christensen, S., & Bernal-Meza, R. (2014). Theorizing the rise of the second world and the changing international system. In X. Li (Ed.), The BRICS and beyond: The International political economy of the emergence of a new world order. Surrey, UK; Burlington, VT: Ashgate. Chunlai, C. (2009). China’s Integration with the Global Economy. Cheltenham: Edward Elgar Publishing Limited. Corkin, L. (2014). China’s rising Soft Power: The role of rhetoric in constructing China-Africa relations. Revista Brasileira de Política Internacional, 57(special edition), 49–72. Dussel Peters, E. (Coord.). (2016). La nueva relación comercial de América Latina y el Caribe con China. ¿Integración o desintegración regional? Mexico City: Red Académica de América Latina y el Caribe sobre China, Universidad Nacional Autónoma de México, Unión de Universidades de América Latina y Caribe y Centro de Estudios China-México. Ferrando, A. (2016). China y sus Tratados de Libre Comercio con América Latina y el Caribe. In C. Moneta & S. Cesarin (Eds.), La tentación pragmática. China-­ Argentina/América Latina: Lo actual, lo próximo y lo distante. Sáenz Peña: Universidad Nacional de Tres de Febrero.

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Moneta, C., & Cesarin, S. (Eds.). (2016). La tentación pragmática. China-­ Argentina/América Latina: Lo actual, lo próximo y lo distante. Sáenz Peña: Universidad Nacional de Tres de Febrero. Oliveira, H. (2012). Brasil e China. Cooperação Sul-Sul e parceria estratégica. Belo Horizonte: Fino Traço. Oviedo, E. (2012a). Puja de modernizaciones y relaciones económicas chino-­ latinoamericanas en un mundo en crisis. In R.  Bernal-Meza & S.  Quintanar (Eds.), Regionalismo y Orden Mundial: Suramérica, Europa, China. Buenos Aires: Nuevohacer and Universidad Nacional del Centro de la Provincia de Buenos Aires. Oviedo, E. (2012b). The struggle for modernization and Sino-Latin American economic relations. In X. Li & S. F. Christensen (Eds.), The rise of China. The impact on semi-periphery and periphery countries. Aalborg: Aalborg University Press. Oviedo, E. (2014). Principales variables para el estudio de las relaciones entre Brasil y China. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Montevideo: Ediciones Cruz del Sur and Universidad de la República. Oviedo, E. (2016). Défict comercial, desequilibrio financiero e inicio de la dependencia argentina del capital chino. In C. Moneta & S. Cesarín (Eds.), La tentación pragmática. China-Argentina/América Latina: Lo actual, lo próximo y lo distante. Sáenz Peña: Universidad Nacional de Tres de Febrero. Pastrana, E. B., & Gehring, H. (Eds.). (2017). La proyección de China en América Latina y el Caribe. Bogotá: Editorial Javeriana. Pieterse, J. (2011). Global rebalancing: Crisis and the East-South turn. Development and Change, 42(1), 22–48. Pieterse, J. (2018). Multipolar globalization: Emerging economies and development. New York: Routledge. Pimentel, J. (Org.). (2013). O Brasil, os BRICS e a agenda internacional. Brasília: Fundação Alexandre de Gusmão. Polanyi, K. (1944/1957). The great transformation: The political and economic origins of our time. Boston: Beacon Press. Prebisch, R. (1949). El desarrollo de América Latina y algunos de sus principales problemas. Santiago: Economic Commission for Latin America. Prebisch, R. (1951). Problemas teóricos y prácticos del crecimiento económico. Mexico City: Economic Commission for Latin America. Rosecrance, R. (1986). The rise of the trading state: Commerce and conquest in the modern world. New York: Basic Books, Inc. Vivares, E. (2018). The IPE puzzle of regional inequality, instability and the global insertion of South America. In E. Vivares (Ed.), Regionalism, development and the post-commodities boom in South America. Cham: Palgrave Macmillan. Wallerstein, I. (1975). Semiperipheral countries in the contemporary world crisis. In The Capitalist World-Economy. Cambridge; Paris: Cambridge University Press/Éditions de la Maison des Sciences de l’Homme.

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CHAPTER 2

Advancing Autonomy? Chinese Influence on Regional Governance in Latin America Thomas Legler, Mariano Turzi, and Eduardo Tzili-Apango

Introduction1 The quest for autonomy has been one of the principal characteristics of regionalisms that have emerged in Latin America in the new millennium, as promoted through regional and subregional organizations such as the Bolivarian Alliance of the Peoples of our America (ALBA), the Community The authors would like to thank Ornela Garelli-Ríos, Paola Lira and Claudia León Ang for their research assistance. T. Legler (*) Universidad Iberoamericana Ciudad de México, Mexico City, Mexico e-mail: [email protected] M. Turzi CEMA University, Buenos Aires, Argentina e-mail: [email protected] E. Tzili-Apango Universidad Autónoma Metropolitana-Xochimilco, Mexico City, Mexico © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_2

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of Latin American States (CELAC), the Southern Cone Common Market (MERCOSUR) and the Union of South American Nations (UNASUR). It is noteworthy that the rise of what has been called post-liberal, post-­ neoliberal and/or post-hegemonic regionalism (Riggirozzi & Tussie, 2012; Sanahuja, 2012) has coincided with a dramatic and unprecedented increase in the engagement between Latin America and China. A number of analysts have claimed that growing ties between Latin America and China are auspicious for the region’s autonomy, particularly in relation to the United States (Bonilla Soria & Milet García, 2015; Chávez, 2015; Dosch & Goodman, 2012; Escudé, 2014; Farnsworth, 2011; Hogenboom, 2009; Jenkins, 2010: 831; Lo Brutto & González Gutiérrez, 2015: 7; Nolte, 2013; Tokatlian, 2007). Nonetheless, it is striking how few systematic studies exist of China’s impact on the construction of autonomous regional governance in Latin America. In this chapter, we propose to help fill that gap by focusing on whether China’s actions are contributing toward the strengthening of autonomous governance in the region. We find that China’s influence on Latin American regional governance has been contradictory. On the one hand, the regional hegemonic decline of the United States has opened opportunities for China to expand its involvement in Latin America, thus in turn seemingly creating advantages for those pursuing autonomous forms of regional governance in the region, particularly in South America, to reduce their dependence on the United States. On the other hand, the politics of Chinese and Latin American opportunism may have contradictory and even negative impacts on autonomous regional governance. Although Chinese influence has commonly been associated with a post-hegemonic trend/movement in Latin America, it has not been post-liberal or anti-liberal. Rather, Chinese economic influence has been decidedly liberal in nature, reinforcing the so-called Commodity Consensus (Svampa, 2013) as well as open regionalism alongside post-­ liberal regionalism. Accordingly, China’s influence will potentially reinforce more post-hegemonic and liberal directions in regional and subregional governance than post-liberal ones. Importantly, trade and investment patterns associated with the Commodity Consensus, through their contribution to a re-primarization (reprimarización) trend, provide a weak material basis for autonomous regional governance in the long run. In this line, there seems to be little evidence that China supports regional political autonomist efforts, concentrating in developing ties with regional

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multilateral institutions that are economic in nature, as well as with the main economic actors in the region. Our study is divided in four parts. In the first part, we review the tradition of autonomy in Latin American regional governance. In the second section, we examine the relevant literature on the role of China in Latin America’s regional governance. Third, we develop our argument about the contradictory influence of China on Latin American regional governance. That is, various Latin American governments that have advanced an autonomist, post-hegemonic agenda in regional politics have been able to turn to China for important supports, but at the same time, the latter has clearly preferred to promote a liberal economic agenda vis-à-vis the region. Accordingly, China’s influence on regional governance has had both a liberal bias and a post-hegemonic nature (in relation with the tendencies of Latin America’s regionalisms). In the conclusion, we explore the implications of our argument for the prospects of autonomous regional governance in Latin America. In this regard, we stress that future research must focus not only on regional autonomy vis-à-vis the United States but also China.

The Quest for Autonomy in Latin American Regional Governance2 Before entering into the China-Latin American relationship in greater detail, it is first necessary to contextualize the contemporary quest by many Latin American governments for autonomous regional governance. It is important to understand what practitioners and scholars mean when they refer to autonomy. Various authors have observed that the quest for autonomy has long been one of the key narrative elements in the historical construction of regional projects in Latin America (Briceño-Ruiz & Simonoff, 2017; Mijares & Nolte, 2018; Rivarola Puntigliano & Briceño-Ruiz, 2013; Tickner, 2013, 2015). From the independence struggles against Spain and Portugal through efforts to counter British, French, and American imperialist impulses, Latin American governments have sought in a recurring fashion to chart their countries’ own destinies, both individually and collectively. Autonomy discourse is evident historically in regional diplomacy, where Latin American juridical experts contributed to the historical development of international sovereignty norms through the Calvo, Drago, and Estrada doctrines. Perhaps Latin America’s main contributions to

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International Relations thought have come from the focus of the CEPAL school,3 dependency theory, peripheral autonomy theory, and/or what has been recently called the Latin American School of Autonomy, on how to promote national and regional autonomy in Latin America in favor of the consolidation of national states and development (Briceño-Ruiz, 2014; Briceño-Ruiz & Simonoff, 2017; Tickner, 2015). Scholars who have studied autonomy in Latin America have generally been more implicit than explicit in terms of what they mean by the concept. Nonetheless, there are a set of recurring themes which when combined more or less add up to a definition. First, autonomy is perceived from the vantage point of relatively weak, peripheral states vis-à-vis the most powerful states and the global capitalist system. Tickner (2015) contrasts the defensive character of autonomy among those historically weak Latin American states that seek it with the pursuit and accumulation of power by more powerful states in the international system. Autonomy is linked to the desire to engage in state and nation-building across Latin America, unhindered by the influence of foreign powers or the forces of capitalist globalization. Autonomy is also historically connected with the struggle for development, again according to local needs and under local control, and not external dictates. As Briceño-Ruiz (2014) asserts as well, autonomy and regionalisms have gone hand in hand historically in the region. Accordingly, autonomy has become both an end and the means to certain ends in Latin America. As a symbolic end, autonomy draws on a painful regional history of foreign intervention and domination and is captured in the region’s historical penchant for international law, in particular the pursuit of sovereignty norms such as self-determination, non-­intervention, and territorial inviolability. Autonomy, as the right to self-determination without external interference, has become valued as an end in itself. Understood as means, autonomy has often been specifically associated historically with the promotion of ideological projects and policies related to state and development that have run counter to the political and economic interests of powerful extra-regional actors, such as the United States and multinational corporations. In the new millennium, autonomy discourse made a comeback in connection with the rise of new post-hegemonic and post-liberal regionalist projects in Latin America. In the context of declining U.S. influence, the multipolarization of the regional distribution of power, the rise of Brazil and Venezuela, and seemingly unprecedented foreign policy independence, Latin American and Caribbean governments sought to create autonomous

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regional institutional spaces which intentionally excluded or limited U.S. and Canadian participation and weakened hemispheric, pan-­American, or Inter-American regionalism. Latin American and South American regionalisms were anchored in the creation of the new regional institutions the Bolivarian Alliance for the Peoples of Our America (ALBA), the Community of Latin American and Caribbean States (CELAC), and the Union of South American Nations (UNASUR). In these regional projects, the quest for autonomy was closely associated with the launch of ALBA, CELAC, and UNASUR.  In turn, these organizations have been linked with particular governance priorities and preferences, such as the strengthening of state authority and prerogatives, the promotion of neo-developmentalism, the struggle against poverty and inequality, the inclination toward political over economic forms of integration, and a distinct bias against neoliberalism (Riggirozzi & Tussie, 2012; Sanahuja, 2012). These regionalisms attempted to construct dual spatial autonomy to shield these governance projects: that is, the construction of autonomous but interconnected regional and domestic political spaces, protected from U.S. or global capitalist interference (Legler, 2013).

Latin American Regional Governance: The China Factor Much of the burgeoning literature on China-Latin America relations does not analyze explicitly Latin American regional governance per se, or China’s contribution to Latin American regional autonomy. Rather, we have had to glean clues from multiple sources in order to craft a debate on the topic. Nonetheless, advocates for the post-hegemonic regionalist experiments have claimed that the deepening of Latin American political and economic ties with China represents a historic or unprecedented opportunity to reduce dependence on the United States, and to increase Latin American independence and emancipation (Bonilla Soria & Milet García, 2015; Chávez, 2015; Dosch & Goodman, 2012; Escudé, 2014; Farnsworth, 2011; Hogenboom, 2009; Jenkins, 2010: 831; Lo Brutto & González Gutiérrez, 2015: 7; Niu, 2017; Nolte, 2013; Tokatlian, 2007). Indeed, Carlos Escudé (2014) has claimed that China offers Latin America few risks as an economic partner, and that the United States is more of a security threat to Latin America than China.

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Beyond the lack of research on how deepening ties with China have affected Latin American autonomy, the China factor has received little attention in terms of how it influences Latin American regional governance. Accordingly, we have had to extrapolate from the voluminous literature on contemporary China-Latin American relations in order to identify four commonly held views concerning China’s impact on Latin American regional governance: (1) Chinese influence has foremost been economic (and not political) in nature; (2) China threatens U.S. hegemony in the hemisphere; and, therefore, the longstanding dominance of the Organization of American States and the Inter-American System; (3) China may have a negative economic and environmental impact in the region, exacerbating regional governance problems; and, (4) the China effect will not necessarily threaten U.S. influence or have detrimental governance effects. First, much of the literature suggests that China has little influence on regional governance because its interests in Latin America are primarily and selfishly economic (Castañeda, 2017; Chávez, 2015; Escudé, 2014; Hogenboom, 2009; Jenkins, 2010; León-Manríquez & Álvarez, 2014; López Villafañe, 2018; Myers, 2015; Myers & Wise, 2016; Nolte, 2013; Xiang, 2016). Indeed, Myers (2015: 214) has described China’s economic approach to the region as practically apolitical. According to this analytical line, Chinese interests in the region are driven principally by domestic demand for primary commodities to fuel its industry, to ensure a reliable supply of raw materials through trade and investment (Cornejo & Navarro García, 2010; Dosch & Goodman, 2012; León-Manríquez & Álvarez, 2014; Song, 2015). To a lesser degree, Chinese ties with Latin America have also been driven by its desire to diversify markets for its exports at a time when North American and European markets have been affected by the sluggish economic situation that has prevailed there since the global financial crisis of 2008 (Song, 2015). There also seems to be something almost natural about China’s growing economic ties with the region, given the apparent high degree of economic complementarity between China and Latin America (Escudé, 2014; Song, 2015), although this situation may create a new dependency based on raw materials exports and manufactured goods imports (Jenkins, 2012). This is not to say that China does not have the potential to make inroads in regional economic governance. It is undoubtedly having an effect on regional economic governance in the sense of jointly establishing the rules of the game for trade and investment with its Latin American partners. Song (2015: 55) has observed that regional and subregional institutions in Latin

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America have become part of an institutional framework for Chinese-Latin American economic cooperation. China has also been busy constructing bilateral institutional frameworks for free trade, such as bilateral free trade agreements with Chile, Costa Rica and Peru, as well as a potential agreement with Colombia under study (Song, 2015: 60). In late 2016, Uruguay announced it was pursuing an FTA with China. Although it had Argentina and Brazil’s conformity, it does highlight at the very least a sidestepping of MERCOSUR, the main subregional economic governance arrangement in the Southern Cone. China is motivated to promote the institutionalization of its economic relations in the interest of ensuring a long term, stable, and predictable framework for its activities through, for example, the ChinaCELAC Forum (Goulart Doria & Jaen Celada, 2016) and all the subforums that emanate from it,4 or through top-down institutional frameworks such as the policy papers issued in 2008 and 2016, a draft of measures to boost bilateral trade and investment in 2012, the “1+3+6” Framework for economic cooperation in 2014, the “Development Plan on China and Latin America” in 2015, and more recently the “Action and Cooperation Plan on Common Priorities Areas China-CELAC 2019–2022” (Ministry of Foreign Affairs, 2018; Yang, 2015: 291–293). There is controversy that China’s impact on economic governance may be negative. In contrast with the United States or other Western countries, there are increasing allegations that the Chinese are promoting economic governance schemes that lack safeguards to promote corporate social responsibility or to protect workers and the environment. In the Andean countries, for example, there have been voices against sizeable Chinese investments in extraction activities that allegedly undermine the environment, because Chinese financial support does not stick to globally recognized norms like the World Bank’s loans (Chimienti & Creutzfeldt, 2017), even though strong laws to protect the environment have not yet been issued by many South American governments. In this line, Chinese have also been accused of diffusing “Dutch Disease” in many Latin American countries that have been downgrading their industry level in value chains (Dussel Peters, 2011) in order to make export commodities to China more competitive, leading to various environmental and labor problems. Chile and Argentina are perhaps the most representative cases (Gachúz, 2012; Malena, 2011). There is also the case of the Nicaraguan Canal, where diverse voices have expressed strong concerns about the environmental and economic risks entailed (Chen, Zeng, & Deng, 2016; Romaniuk, 2015; Turzi, 2015).

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Second, implicit in the work of a number of scholars is the assumption that China’s impact on Latin American regional governance must be analyzed from the perspective of a triangular relationship: China, Latin America and the United States (Arnson & Davidow, 2011; Chávez, 2015; Dussel Peters, Hearn, & Shaiken, 2013; Ellis, 2012; Gallagher, 2016; León-Manríquez & Álvarez, 2014; Li, 2016; Rosales, 2017; Tokatlian, 2007). Analysts that study the triangular relationship can be divided into two groups: those that assert that China poses a threat to U.S. interests and domination and those that view its presence in the region as benign. Much of the negative perception about China’s presence in Latin America comes from the media. News headlines like “China to the conquest of Latin America” (RT, 2015a), “China reorganizes the Latin American economic map” (Zibechi, 2015), “China is flexing its muscle in Latin America” (Oppenheimer, 2014), “China intends to take space from the U.S. in Latin America” (RT, 2015b), or “Latin America welcomes ‘Beijing Consensus’” (Castillo, 2010), are common in the news. Basically, these media analyses advance a zero-sum reading, in which perceived gains by the Chinese in Latin America come at the expense of the United States. Among academics, Farnsworth (2011, 2012) worries that the U.S. government has been complacent with regard to the strategic implications of growing Chinese engagement in Latin America, “asleep on the watch” so to speak. Ellis (2012, 2014) and Farnsworth (2011, 2012) also draw our attention to the potential impact of China on the normative dimension of regional governance, namely the possible replacement of liberal norms with anti-liberal norms. For Ellis (2012: 6), “Chinese purchases, loans and investments in Latin America have undercut the United States’ leverage in demanding adherence to certain practices of democracy, human rights and free trade.” More recently, Ellis (2014, 2017) notes that since 2009 the growing presence of China in Latin America, especially Chinese firms, has obliged a number of Latin American state and non-state actors to deal with and adapt to their Chinese counterparts in a more “intimate fashion”. This in turn affects third parties like the United States and causes mistrust among the three sets of actors. Guilhon-Albuquerque (2014) highlights the challenges that China’s rise implies to U.S. global leadership in the commercial, military, and political realms. This makes it more difficult for the United States to address important challenges around the world, the Latin American region included, without taking into consideration China’s interests and political priorities (Basu Das, 2012, cited by Guilhon-Albuquerque, 2014). In a related fash-

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ion, China uses the idea of “latinoamericanismo” in the framework of the China-CELAC Forum, where all the countries of the region are invited except for the United States and Canada, so bypassing its main “world competitor”. This Forum may even potentially contribute to competition between China and the United States for Latin America (Oviedo, 2015). The literature underlining the incompatibility of norms—social, environmental, political—between China and the US in Latin America is usually American. As a result, it is inadvertently biased in its conflation between values and interests. On the Chinese side, the same is true, underplaying values in favor of a win-win—decidedly material—approach. Moreover, the U.S. literature tends to sideline the actual compliance of so-called liberal values on the part of the United States. The credibility of the actual application of those values in the region has been disputed by Latin American leftist governments in the first decade of the 2000s, from the lack of support to democracies in the 1960s and 1970s to the havoc wreaked by neoliberalism in the 1990s. It is conceivable that China could affect U.S. interests adversely in another way: the strengthening of regional governance institutions that intentionally exclude the United States. In so doing, Chinese influence could potentially undermine the authority of hemispheric governance institutions long associated with U.S. influence and dominance, such as the Organization of American States, the Inter-American Development Bank or the Summits of the Americas, in favor of autonomous institutions like ALBA, CELAC, MERCOSUR, and UNASUR. We will return to this subject in the next section. Nonetheless, other experts who analyze the China-Latin America-U.S. triangle suggest in their analysis that the potential impact of China on U.S. interests in Western Hemisphere governance remains benign. China recognizes Latin America as a U.S. zone of influence and accordingly intentionally avoids actions in the region that could upset U.S. authorities (Bonilla Soria & Milet García, 2015; Cornejo & Navarro García, 2010; Domínguez, 2006; Escudé, 2014; Farnsworth, 2012; Hearn and León-­ Manríquez, 2011a; Jenkins, 2010; López Villafañe, 2018; Nolte, 2013; Paz, 2012; Ray, Gallagher, Lopez, & Sanborn, 2015; Tokatlian, 2007). In geopolitical terms, China accepts Latin America as the United States’ backyard (Armony & Strauss, 2012; Jiang, 2006; Paz, 2012). Paz’s (2012: 23–24) interviews with key informants confirmed that the United States-­ China dialogue on Latin America established in 2006 during the Bush administration and continued under Obama has provided a crucial mecha-

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nism for the Chinese government to reassure its U.S. counterpart that its activities in the region do not put U.S. interests at risk. León-Manríquez and Álvarez (2014; see also Chávez, 2015; Cornejo & Navarro García, 2010) note that Latin America has occupied a marginal position in both U.S. and Chinese global priorities. Escudé (2014) asserts that militarily China does not present a threat to the United States in the region. Finally, over the past 30 years of relations with the region, China has reduced its “anti-status quo” posture in the region. From supporting liberation struggles in the past, it has sought to minimize the projection of ideology in its international affairs (Connelly & Cornejo Bustamante, 1992: 48–91; Hogenboom, 2009: 142).

China’s Actions in Latin America: Advancing Autonomous Regional Governance? From the previous section on the main characteristics of China’s impact on Latin American regional governance, we now turn our focus to the main purpose of our chapter: whether China’s deepening ties with Latin America have strengthened the efforts to construct autonomous regional governance via the region’s recent post-hegemonic regionalisms. In order for its influence to be positive, it would seem logical that among other things, China would need to provide favorable economic ties as a firm material basis for sustaining autonomous regional governance. It would also be recommendable that China offered at least symbolic or rhetorical support, if not outright strategic support for the ideological and policy preferences associated with post-hegemonic regionalisms. Nonetheless, as we detail below, contrary to the wishful thinking of many of the aforementioned advocates of Latin America’s post-hegemonic regional governance experiments, China’s actions have not necessarily bolstered regional autonomous governance. First, we consider China’s foreign policy in the region, and then we identify if there is some active or rhetorical support for Latin American autonomous regional governance. There is a growing literature on Chinese foreign policy toward the Latin American region. In this line, it is noteworthy to mention the contributions made in the special issue edited by Christensen and Silva Ramos Becard (2016), as well as by Bernal-Meza and Quintanar (2012), Ellis (2009), Hearn and León-Manríquez (2011b), Li and Christensen (2012), and Oviedo (2005, 2014). Common threads can be identified among Chinese official documents like the Research Report of China’s Policy towards Latin

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America (2015) and the two Chinese Policy Papers on Latin America and the Caribbean (2008, 2016) and across many academic studies: China’s reluctance to threaten the United States’ “natural” zone of influence, Latin America’s economic and resource potential, cooperation with existing regional forums and its relatively low importance vis-à-vis the United States (Cheng, 2006; Hearn, 2014; Lanteigne, 2009; Ríos, 2015; Villafañe López, 2011; Xue, 2015; Zhao, 2014). It is intriguing how Mao Zedong’s thought still permeates Chinese political culture today. Here we refer to Mao Zedong’s “On Contradiction” theory (1973), which among other things established a “Dialectical World Outlook”: Phenomena in the world possess both universal aspects and particular dimensions. It also suggested methods for resolving the contradictions arising from that dialectic. In this sense, according to Xue (2015), to face the contradictions that arise from international relations, China is currently in a diplomatic transition process known as the “New Type of International Relations”. This process is characterized by diplomatic policies, such as the “New Type of Relationship between Great Powers”, and political economic schemes like the “Silk Road Economic Belt” and “21st Century Maritime Silk Road” initiatives. In the “New Type of International Relations”, which comprehends the universal aspects of international dynamics, Latin America represents a particular aspect. According to Xue, Latin America was the last region through which China has achieved a global cooperation network between developing countries via the China-CELAC Forum. But this does not mean that Latin America will be treated as Africa or Asia. The author states that China is aware of the uniqueness of the region, such as its idiosyncrasies like slow development, indebtedness, cultural differences, U.S. political and economic influence and the struggle against drug trafficking. For these reasons, Xue argues that the China-Latin American relation has huge economic potential, but does not have the same promising future in terms of political or cultural cooperation. This may change in the mid-term according to the cooperation lines established in China’s second Policy Paper on Latin America and the Caribbean (2016). The Chinese government perceives that Latin America has an increasing role in political and economic world affairs because its countries have been exploring development paths suited to their national conditions, which have allowed them to maintain political stability and continued economic growth, even despite the global financial crisis of 2008 (China’s Policy Paper on Latin America and the Caribbean, 2008, 2016). Added to

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this, China’s government has pointed out that Latin America already constitutes an integral part of the world system due to its abundant natural resources, which offer the region great development potential (Research Report of China’s Policy toward Latin America, 2015). It is possible then to affirm that for China, Latin America is important due to a development path that enabled political stability and economic growth, due to its promising development potential, and for its vast natural resources. It is noteworthy that support for autonomy as an ideological project does not appear either in the diplomatic transition processes already mentioned or in the aforementioned government policy papers. However, recognition for Latin American autonomy does exist as a unique condition of the region given that China has also pursued an autonomous development path and foreign policy (Wang, 2008: 9).5 A recurring theme in the literature is the supposed desire of China to recruit Latin America as part of an anti-hegemonic or anti-United States force in international relations.6 Ríos (2015: 293) affirms that “it is a fact that traditional U.S. domination in the [Latin American] region has softened and is questioned by both China and the Latin American countries.” The Research Report of China’s Policy towards Latin America (2015) identifies that Latin American countries have a longstanding anti-hegemonic tradition and this has furthered Latin American diversification in its foreign relations as well as promoting multipolarity. This, according to Song (2015: 55–56), coincides with China’s advocacy for a multipolar world. Specifically speaking, both actors might converge in the quest of reforming the international system, a situation that this author calls a “common strategic interest”. However, even though it might appear to be semantics, it is not the same to have a “coincidence” as to “join forces” in order to reform the international system and counter-influence hegemony. The former may lead to the latter, but as the Chinese government is very cautious in international affairs, language usage is fundamental because “coincidence” frames a number of actions that preclude other, more extreme notions. This could also be applied to the promotion of “autonomy”. We will lean on Mao Zedong’s “On Contradictions” theory (1973) again. In this theory there is a “principal contradiction” that is basically the main object of actions of an actor, and there are “secondary contradictions”. For China, the relation with the United States is its priority in world affairs, and Latin America is a secondary priority. As Cheng (2006: 524) emphasizes, “both China and the Latin American countries value good relations with the United States, and they want to avoid any sharp deterioration in these relations”.

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With respect to multilateralism in the Western Hemisphere, China does not have a clear preference in its dealings for groupings that promote Latin American autonomy. Since 1993, China has developed links with both Inter-American and Latin American multilateralism (Oropeza García, 2008; Shambaugh, 2011), the former in which the United States is a member state, and the latter which excludes the United States. This allows Beijing to manage good relations with both Latin American countries, even the most anti-American ones, and with Washington. Beijing is also aware of the distance between the integrationist idea and reality in Latin America. China thus must deal with both the “cross-­ dispersion” and “open regionalism” characteristics of Latin American regionalism. The first concept, according to Zhao (2014), refers to the absence of operational principles and declared goals in Latin American regional organization. This means that for China, Latin American autonomist multilateral efforts may lack a sense of direction or purpose. “Dispersion” is represented in the fact that the five greatest Latin American economies (Brazil, Mexico, Argentina, Colombia, Venezuela) participate in five or more regional cooperation mechanisms; in fact, they lead and belong to very different subregional organizations, such as MERCOSUR, the Pacific Alliance or the Andean Community of Nations. The second concept is related to the significant trade openness of the region, which China sees as a positive factor. However, the trade openness varies from one regional organization to another, so the Chinese government has to deal with very specific and diverse realities. Accordingly, one could say that Chinese foreign policy toward Latin American countries and regional organizations is versatile. Latin America is part of the general global strategy of China, but it is not the most significant part. Latin America is important for Beijing because of its vast natural resources, because of the potential of its markets, and as previously mentioned to a limited degree because it shares a sense of “autonomy” from great powers. Nevertheless, with respect to Latin America and the United States, the latter country is clearly a greater priority for China’s global strategy. In its relations with Latin American countries, China has developed a multifaceted approach, because the Chinese government sees a diverse region with many particularities like its plethora of regional organizations and diverse economic models. In this sense, each one of these deserves unique attention. The emphasis of relations with Latin America is above all economic and commercial, with significant potential for expansion to other fields.

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Economic ties between China and Latin America have increased dramatically in recent years. According to Economic Commission for Latin America and the Caribbean (ECLAC) (2018: 39), trade between these two international actors increased 16% in 2017 to reach a total of 266 billion USD. However, between 2013 and 2016, the value of the region’s exports to China fell by 25%, which was more than twice the 11% drop in the region’s imports from China. In 2016, Latin America became the second main destination of Chinese investments just after Asia, accounting for 13.8% of total Chinese investments in the world, increasing 115.9% in comparison with 2015 (National Bureau of Statistics of China, 2016). Chinese investments in the region between 2005 and 2016 reached 90 billion USD and in 2017 are estimated to be more than 25 billion USD (ECLAC, 2018: 56). In financial matters, Chinese loans have focused on natural resources (oil and derivatives, mining), but since 2010 credits for infrastructure have been on the rise (Gallagher & Myers, 2014; Kaplan, 2016; Ray & Gallagher, 2013: 19–20). This also seems to be the case with China’s official development financing toward Latin American countries, mainly repayable loans whose cumulative value rose to 119 billion USD in 2014 (nearly 80% granted since 2010), compared to the 156 billion of the World Bank, Development Bank of Latin America, and the Inter-American Development Bank (IDB) combined (Esteban & Pérez, 2017: 208). China’s economic presence has been concentrated in South America and the Caribbean. Brazil, for example, accounts for 42.6% of Chinese exports to the region. The Virgin Islands and Cayman Islands concentrate nearly 92% of Chinese investments in the region, although the reliability of this investment data is difficult to track. In sum, 71.9% of total Chinese trade to the region has focused on Brazil and Peru (ECLAC, 2013: 7, 2015: 36, 62; Rosales, 2015),7 and Venezuela and Brazil account for more than half of Chinese financial loans to the region (Gallagher & Myers, 2014). Viewed from a regional perspective, Mexico is an important factor in China’s bilateral economic relations, given that it accounts for most of the trade deficit of the region, nearly 65,000 million USD in 2016 (ECLAC, 2018: 41). In matters of financing, since 2009 China has been using swap agreements with central banks to increase its economic presence in Latin America. The Chinese government has signed these agreements with Argentina, Brazil, Chile, and Suriname’s central banks for close to 49 billion USD (ECLAC, 2018: 24). According to Trinkunas (2016), the lack of alternative sources of foreign direct investment and the limited access to international capital markets has increased some Latin American countries’

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vulnerability to the influence of Chinese government economic policies. This was reinforced with the entrance of the yuan/renminbi into the International Monetary Fund (IMF)’s Special Drawing Rights basket since October of 2016 (Xinhua, 2016). Politically speaking, China gives priority to the main economic regional players, and this is reflected through its “strategic partnerships” and “comprehensive strategic partnerships”. This includes anti-hegemonic countries like Venezuela, and the more liberal ones like Chile and Peru. While the logics of defense and assertiveness are related to the figure of “strategic partnership” in Chinese foreign policy (Feng & Huang, 2014: 12–14), along the lines of “universality”, the “strategic partnerships” in Latin America respond to a more “particular” approach, and that is an economic one. In 1993, Brazil became the first Latin American country to receive this status, and this was followed by Venezuela (2001), Mexico (2003), Argentina (2004), Peru (2008), Chile (2012), Ecuador (2015), and Bolivia (2018). As Feng and Huang show (2014: 18), these strategic p ­ artnerships have increased their quality over time as the aforementioned countries have increased their economic importance for China (Table 2.1). The figure above shows the relation between the political status and economic importance of Latin American countries to China, an outlook related with the study of Zhao (2014) previously mentioned. The only difference between this analysis and Zhao’s is the situation of Peru and Colombia. The former holds one of the two main Chinese political statuses Table 2.1  Main partners of China in Latin America Country

“Strategic partnership” status

Argentina Brazil Bolivia Chile Colombia Ecuador Mexico Peru Venezuela

Strategic partnership Strategic partnership Strategic partnership Strategic partnership None Comprehensive strategic partnership Comprehensive strategic partnership Comprehensive strategic partnership Comprehensive strategic partnership

China’s place in trade importance 3 2 2 1 3 2 2 1 2a

Sources: Authors’ own compilation based on WTO (2016), Feng and Huang (2014: 18), Zhao (2014) In the WTO Statistics Database the main destinations of Venezuelan exports do not appear, only the origins of its main imports a

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in Latin America even though it does not figure as an important regional economy, and the latter, according to Zhao (2014), is an important regional economy for China but does not have a political status. This has to do with the fact that Peru opened since the 1990s to the Asia Pacific Region through the Asia-Pacific Economic Cooperation (APEC) Mechanism (along with Mexico), and also because it has signed a Free Trade Agreement with China, which has boosted bilateral trade but based on low-aggregate products such as minerals and fish flour (Berríos, 2015). Four of the six countries in the figure export mainly primary commodities while Mexico and Colombia export manufactures. The political status that Mexico holds is related with its closeness to the U.S. market, and is a sign of Chinese pragmatism. Accordingly, this figure suggests that China maintains strong economic ties and assigns strategic partnership status both to Latin American countries such as Argentina, Brazil, Ecuador, and Venezuela that have promoted autonomous regional governance through organizations such as ALBA, CELAC, and UNASUR, and others such as Chile, Mexico, and Peru that continue to maintain strong ties with the United States and have continued to advocate open regionalism through the Pacific Alliance. The figure above is reinforced by the table below, which underlines that China’s closest multilateral linkages in the Americas are with organizations whose member states have strong economic ties with it, and not necessarily those that have most championed autonomous regional governance. It is noteworthy that Beijing lacks ties with ALBA, the regional organization that has most promoted multipolarity and regional autonomy in Latin America, suggesting that it has no interest in altering its relationship with the United States. As shown in the next figure, China has maintained a presence in the OAS and the IDB, parts of the Inter-American System, as well as with regional forums such as ALADI, the Caribbean Development Bank and the Pacific Alliance. It is noteworthy that the China-CELAC Forum reproduces forum diplomacy that was designed and employed by Beijing vis-à-vis other regions of the globe, such as the Forum on China-­ Africa Cooperation (FOCAC) (Table 2.2). This table also highlights that China is tied to some of the most liberal leaning organizations in the Western Hemisphere. China’s association with the OAS and the IDB links it with the institutional architecture that has a history of promoting political and economic liberalism in the Americas, namely the Inter-American system. It is also tied as a permanent observer to the Pacific Alliance, champion of open regionalism. The Chinese government has signed free trade agreements (FTA) with two of

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Table 2.2  China’s presence and status in Latin American regional organizations Year of entrance

Latin American multilateral mechanism

Status

1990 1993

Rio Group Latin American Integration Association (ALADI) MERCOSUR Caribbean Development Bank Latin America Economic System

Dialogue partner Observer

1997 1998 1998

2000 2004 2004 2005 2008 2013 2015

Dialogue partner Member Cooperation partner with the China Council for the Promotion of International Trade Political and cooperation partner Permanent observer Permanent observer Member

Andean Community Organization of American States Latin American Parliament China-Caribbean Economic & Trade Cooperation Forum Inter-American Development Bank Member (IDB) Pacific Alliance Permanent observer China-CELAC Forum Member

Sources: Authors’ own compilation based on Oropeza García (2008), Shambaugh (2011)

its member states, Chile and Peru, and with Costa Rica, a country that is a candidate to join this regional group. China and Colombia as the other remaining member of the Pacific Alliance have been studying the possibility of a bilateral free trade agreement. With Mexico, China has declared its intentions to negotiate an FTA, but the Mexican government has refused to do so. Apart from Costa Rica, the other countries have been given a “strategic partnership” status. China has also proposed to create a study group to analyze the viability of an FTA with MERCOSUR, which if fulfilled, will encompass all of China’s main Latin American partners in the region. All the aforementioned trade arrangements underline China’s distinct liberal economic bias in its relationships with Latin America. China interacts with all Latin American governments regardless of political tendency or ideology. This also means that Beijing recognizes the way in which those governments have gained political power, which in most of the cases has been through electoral democracy. Moreover, China engages both Inter-American organizations and other more autonomous Latin American organizations, with little real indication of greater support for one or the other, or for regional organizations with a more anti-­U.S. bent.

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Conclusions The main purpose of this chapter is to assess whether China’s growing presence has strengthened efforts to construct autonomous regional governance in Latin America, in particular post-hegemonic regionalism. China has officially hailed Latin America’s increasing role in political and economic world affairs, not because it has been a provider of raw materials or has been a market for Chinese products and investments, but because Latin American countries have been exploring development paths suited to their national conditions. Our findings indicate that China’s deepening ties with Latin America have not necessarily bolstered autonomous regional governance. In addition to trade and investment patterns that reinforce the Commodity Consensus and re-primarization precisely among those countries that have sought to increase their autonomy vis-à-vis Washington, D.C., China does not generally discriminate along ideological or political lines in terms of the countries or organizations with which it chooses to do business, as also observed by Steen Christensen (2018) in the case of South America. China has respected and interacted with diverse multilateral schemes across the region, both Inter-American and Latin American, as well as more liberal and post-liberal oriented. In addition to plugging itself into existing multilateral networks and creating new ones, it has also advanced its bilateral options in a pluralistic fashion. In short, there is little evidence that regions such as South America, the Southern Cone or the countries that comprise ALBA have fortified their autonomy vis-à-vis the United States thanks to their strengthened ties with China. Our research findings open up an interesting research and policy agenda. In academic terms, analyzing China as a variable to be ­incorporated in the analysis of regional governance in Latin America showcases the growing complexity of international relations at the global, regional, and subregional level. It also hints at how great power competition manifests itself in a region that—although traditionally neglected in the mainstream study of International Relations and Global Politics—is the most immediate geopolitical area of influence of the global hegemon. Throughout this chapter, we have focused on evaluating how China’s relations with Latin America may or may not have strengthened regional autonomous governance vis-a-vis the United States. However, it may well be that as part of a new research agenda, we need to redirect our analysis of the prospects for Latin America regional autonomy not only in relation

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to the United States but also in relation to China. Although China has no apparent interest or intention of exporting its own political model to the region (Grabendorff, 2018), and its emphasis on economic diplomacy seems benign, it does promote its own preferred forms of governance for managing its growing relationship with Latin American countries (Wise, 2018), such as the bilateral and interregional institutional arrangements that we have identified in our analysis. Moreover, even if the Chinese government is not interested in a strategic contest with the United States for domination in Latin America and the Caribbean, its expanding economic weight increases its leverage over policy-making among the region’s governments. As Avendano, Melguizo, and Miner observe, “… there are strategic benefits for the investing country … the soft power effects of foreign direct investment for the investing country can be substantial and include improving its image abroad, persuading others to side with it in international organizations, and shaping friendly policies in other countries” (2017: 1–2). Emerging developments and trends, such as China’s official announcement of its intention to extend the Iniciativa del Cinturón y la Nueva Ruta de la Seda to Latin America (see Myers, 2018), the possibility of a trade war between China and the United States, and the emergence of a new bipolar world order centered on the two countries (Actis & Creus, 2018), may push the regional autonomy question in new directions. In policy terms, it is urgent and compelling for Latin American leaders and decision-makers to understand and incorporate the “China factor” into their interest calculations and value judgments with respect to the construction of regionalism. In any event, the limits of the Chinese variable mean that it is back to the drawing board for those who seek to craft a more autonomous future for Latin America.

Notes 1. This chapter was written prior to the election of Donald Trump as president of  the  United States. It remains to  be  seen if and  how the  new Trump administration interacts with  China, and  how this might affect China’s interactions with Latin America. In the meantime, we are confident that our assertions concerning the impact of China on Latin American autonomous regional governance will on the whole stand up to the test of the Trump presidency. 2. By regional governance, we mean the social construction of regional spheres of authority related to specific issue-areas in which sets of actors craft corresponding regional institutional architectures.

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3. Economic Commission for Latin America and the Caribbean. The organization is commonly referred to by this acronym in Spanish. 4. China-CELAC Agriculture Ministries Forum, China-CELAC Science & Technology Innovation Forum, China-CELAC Business Summit, China-­ CELAC Think Tanks Exchanges Forum, China-CELAC Young Politicians Forum, China-CELAC Cooperation in Infrastructure Forum, China-­ CELAC Political Parties Forum, China-CELAC Civil Societies Friendship Forum. 5. It is worth mentioning that zizhu (自主), “autonomy” in Chinese, also means “independence” and “to act for oneself”. Nevertheless, it lacks theoretical development in comparison with Latin American countries, and can be translated according to the three meanings mentioned above, according to the context. 6. The China-Taiwan “diplomatic battle” is another recurring topic in the literature on China-Latin American relations. The China-Taiwan diplomatic dispute in the region is due in part to the fact that 11 of the 20 countries in the world that still recognize Taiwan diplomatically are in Central America and the Caribbean. The “Taiwan factor” is not a priority for China to improve its relations with Latin America as demonstrated by its absence in both of China’s Policy Papers, the slow evolution of bilateral political consultation mechanisms, and China’s willingness to approach CELAC, whose membership includes all 33 countries in the region, among them the countries that still recognize Taipei. This may change with the appointment of Tsai Ing-wen as president of Taiwan, and the recent diplomatic recognition from Panama to the People’s Republic of China. 7. According to Chinese figures, in 2015 the main South American trade partners accounted for 65.83% of the total Chinese trade with the Latin American Region (National Bureau of Statistics of China, 2016). This assertion contrasts with some studies already mentioned, and reflects the difficulties of tracing trade data.

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Christensen, S. F., & Silva Ramos Becard, D. (Eds.) (2016). China-Latin America relations in an era of changing world order, Journal of China and International Relations (Special ed.). Aalborg: Aalborg University Press. Connelly, M., & Cornejo Bustamante, R. (1992). China-América Latina. Génesis y desarrollo de sus relaciones. Mexico City: Centro de Estudios de Asia y África-El Colegio de México. Cornejo, R., & Navarro García, A. (2010). China y América Latina: recursos, mercados y poder global. Nueva Sociedad, 228, 79–99. Domínguez, J.  I. (2006). China’s relations with Latin America: Shared gains, asymmetric hopes. Washington, DC: Inter-American Dialogue Working Paper, June. Dosch, J., & Goodman, D.  S. G. (2012). China and Latin America: Complementarity, competition, and globalisation. Journal of Current Chinese Affairs, 41(1), 3–19. Dussel Peters, E. (2011). China’s challenge to Latin American development. In A. H. Hearn & J. L. León-Manríquez (Eds.), China engages Latin America: Tracing the trajectory. Boulder: Lynne Rienner Publishers. Dussel Peters, E., Hearn, A. H., & Shaiken, H. (2013). China and the new triangular relationships in the Americas: China and the future of US-Mexico relations. Mexico City: University of Miami-Center for Latin American Studies Publications. ECLAC. (2013). Chinese foreign direct investment in Latin America and the Caribbean. Working Paper of the Summit reunion on the Global Agenda of the World Economic Forum. Santiago de Chile: China-Latin America Cross-­ Council Task Force, United Nations. ECLAC. (2015). América Latina y el Caribe y China: Hacia una nueva era de cooperación económica. Santiago de Chile: Naciones Unidas. ECLAC. (2018). Exploring new forms of cooperation between China and Latin America and the Caribbean. Santiago de Chile: United Nations. Ellis, R. E. (2009). China in Latin America: The whats and wherefores. Boulder, CO: Lynne Rienner Publishers. Ellis, R. E. (2012). The United States, Latin America and China: A “triangular relationship”? Washington, DC: Inter-American Dialogue Working Paper, May. Ellis, R.  E. (2014). China on the ground in Latin America: Challenges for the Chinese and impacts on the region. New York: Palgrave Macmillan. Ellis, R. E. (2017). Cooperation and mistrust between China and the US in Latin America. In M. Myers & C. Wise (Eds.), The political economy of China–Latin America relations in the new millennium. Brave new world. New York; Oxon: Routledge.

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CHAPTER 3

One Step Closer: The Politics and the Economics of China’s Strategy in Brazil and the Case of the Electric Power Sector

Danielly Ramos Becard, Antônio Carlos Lessa, and Laura Urrejola Silveira

Introduction Since 2010, the Chinese government has planned and executed several types of infrastructure projects in Brazil, including in the Brazilian Amazon Basin region. As with the Belt and Road Initiative (BRI), Chinese projects in Brazil seem to have regional and global integration as a metric, and, in this case, they form a multimodal (port/rail) project that seeks to connect the Atlantic Ocean to the Pacific. China’s projects in Brazil also have as a main objective the nurturing of investments made by Chinese State-­ Owned Enterprises (SOEs) in the electric power sector, as already initiated in other parts of the world. It is also apparent that the growth of China’s

D. R. Becard (*) • A. C. Lessa • L. U. Silveira Institute of International Relations, University of Brasília, Brasilia, Brazil © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_3

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presence in Brazil in infrastructure projects in general, and in energy in particular, has direct political consequences related to the powerful increase of its influence over the Brazilian economy and its prestige within and ascendancy over the Brazilian government. Starting from this context, we explore in this chapter how China’s interest in the generation, transmission, and distribution of energy in Brazil has grown consistently in recent years and has been transformed into an important tool of Chinese foreign policy toward Brazil. In addition, we seek to expose the effects of China’s presence in Brazil’s electric power sector in a broader sense, speculating on the consequences of this process for China’s economic development strategies implemented over the last few years, and their potential impacts on Brazilian foreign policy. Using a two-level analysis, we will explain China’s motivations for and the effects of its presence in Brazil’s electric power sector and its consequences for the Brazilian foreign policy. In doing so, we argue that, at the international level, China’s “Going Global” project helps to explain the reasons why China’s SOEs chose Brazil’s electric power sector as a platform for action. We contend that the acquired capacity and saturation of the Chinese domestic market of infrastructure companies1 would drive them to invest in international markets, especially those in greater need, such as developing countries like Brazil. In addition, the Amazon region is the final frontier in the expansion of China’s economic presence in Brazil, and here infrastructure is the missing element for the intensive exploitation of strategic natural resources, which are of interest to the Chinese market. In order to address the questions and test the arguments proposed above, we will begin by analyzing, from an International Political Economy (IPE) perspective, the emerging context and potentialities that have allowed China to expand its infrastructure projects (part 1). Next, we will explain the determinants of Chinese Foreign Direct Investments (FDI) in Brazil (part 2). We will then explain the determinants of China’s FDIs in Brazil’s electric power sector (part 3). In this final part of the paper, we will apply empirical observations of the results of auctions of concessions for electricity generation, transmission, and distribution projects promoted by the Brazilian National Electric Energy Agency (ANEEL), and of the purchase of assets from power generation enterprises by Chinese companies. We will conclude with a reflection on the relative success rate of Chinese investments in the Brazilian electric power market since 2010 and why this is a key element of the process of China’s growing influence on the economy and politics of its main partner in Latin America.

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The Logic Behind China’s Global Investments in Infrastructure: Context and Potentialities According to Parag Khanna (2016), the future has a new maxim: “Con­ nectivity is the destination”. The connections between global infrastructures of communications, energy, and transport (highways, railways, airports, pipelines, power grids, Internet cables, and more) are at the center of his argument. The author argues that connectivity creates a world beyond states, a global society larger than the sum of its parts. Connectivity is, therefore, intensely geopolitical and changing the role of borders. Khanna argues that when we map functional geography—transportation routes, power grids, advanced operating bases, financial networks, and Internet servers—we are also mapping the paths by which energy is projected and power exerted. Berta Becker (1995: 286) explains the configuration of world power, which she calls “logistics”. For this Brazilian geographer, world power transformation occurs through an improved territorial and calculated action spread by disciplinary power (with no direct exercise of force) over various fragments of territory. This facet of power directly affects the bodies of individuals, making them produce according to the interests of the social order built under the mold of a rationalized capitalism, where the predominant practice is spatial selectivity (Becker, 1995: 287). Becker (1995: 286) also states that at the base of geopolitics is a logistic rationality, associated with the changes engendered by the scientific-technological revolution, “moving from the mere control of space to the control of time, configuring the chronopolitics”. For Becker, this configuration of world power comes with an improved territorial action, where several fragments of territory diffuse the disciplinary power (Becker, 1995). We consider, in this sense, that China promotes the geopolitics of global connection through the implementation of infrastructure in order to increase the viability and fulfillment of its domestic demands (such as food, energy sources, and strategic natural resources). According to Jacques (2009: 155), since the late 1970s, infrastructure projects have become of great importance in Chinese reform planning. The project proposed by Deng Xiaoping in 1979, involving the creation of Exclusive Economic Zones (EEZs), was not only an economic revolution but also an evolution of China’s “openness” in foreign policy. It involved a complete overhauling of the state, which migrated from the ideological model to a development model similar to East Asian countries—the East Asia Tigers.

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China’s government expects that a portion of its rural population will continue to migrate to urban areas in the coming years in an attempt to improve their quality of life. To sustain this demand for better living standards, China’s government will need, for example, increased and stable access to (preferentially renewable) energy sources; access to strategic natural resources intra and extra-borders; and guaranteed access to food and consumer markets for goods made in China. To sustain its policy at the global level, the Chinese government has announced several projects (Sutter, 2016; Wang, 2014). On the one hand, it has developed a policy strategy for infrastructure at the domestic level that has made possible the integration of the country and thus the access of the rural population of western China to the coastal regions, with greater potential for insertion into the urban labor market (Arrighi, 2008: 362). On the other hand, these structuring works have made possible access to strategic natural resources, such as mineral and energy goods, which has strengthened the creation of the EEZs. At the regional level, China has acceded to neighboring countries, establishing, in particular, a program that has been in place since 2013 called One Belt and Road, which provides for the consolidation of the integration of consumer markets and resources, especially in South Asia (Small, 2018). On May 13–14, 2017, in Beijing, President Xi Jinping presented, from a more comprehensive and executive perspective, the “Belt and Road Initiative”. The main objectives of this initiative are “to raise global GDP by 80% and rise 3 billion people to the middle class by investing in key areas” (like ports, pipelines, roads, and railways), and expanding commercial, investment, and infrastructure linkages from Asia to Europe (Belt and Road, 2018). Globally, the project’s area of influence contains 68 countries, which account for more than 30% of the world’s Gross Domestic Product (GDP), and where approximately 4.4 billion people live. China includes Brazil, Argentina, and Chile in this area of influence (Belt and Road, 2018). China has been developing infrastructure projects in Latin America, with direct investments in the consolidation of transport (ports and railways) and energy (generation and transmission) enterprises (Casaburi, 2017: 31). Having accessed sources of energy production and raw materials in the region, China is now advancing with the implementation of infrastructure. A significant change in Chinese investment targets occurred in 2010, when Brazil became of increasing relevance to China’s infrastructure and energy projects (Casaburi, 2017: 19; Scissors, 2010: 3).

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The Economy and the Politics of Chinese FDI in Brazil Once China gained international economic recognition, the country assumed a more “proactive” role in world politics. As a result, to accompany its program of modernization, China reoriented its foreign policy in search of markets, technology, energy, and raw materials, all elements considered essential for Chinese development (Becard, 2017). From 2000 to 2014, Brazil was the most important destination for Chinese FDI in Latin America. Brazil accumulated 38.4% of Chinese FDI announced in this period, followed by Peru (31.9%), Argentina (13%), Ecuador (7.9%), Chile (4.1%), and Colombia (2.7%) (CEBC, 2017). Chinese investments in Brazil grew rapidly and at high intensity, combining all the FDI determinants proposed by the analytical framework provided by Stephen Hymer (Dunning & Pitelis, 2008): the search for firm-specific advantages (the exploitation of advantages related to market imperfections, giving important competitive advantages to Chinese companies operating in Brazil); the removal of conflicts (through the acquisition of direct control of production and, in some circumstances, acquiring the control of operations by purchasing local companies); and, finally, the internationalization of operations defined as a strategy adopted to mitigate risks. Applying the Dunning model (2008), the reasons for the growth of China’s direct investment in Brazil are clearly geared toward its search for resources, markets, productive efficiency, and strategic assets. The trajectory of growth of the Chinese presence allows us to observe the development of vertical investments, particularly in the sector of productive infrastructure, where big Chinese companies were moving upstream or downstream in different value chains and performing value-adding activities stage by stage in a vertical fashion in the Brazilian economy. Likewise, the business strategies of large Chinese conglomerates operating in Brazil combined strategies aimed at the dilution of barriers to trade or the avoidance of supply uncertainties (Nonnenberg & Mendonça, 2005). China’s objectives in Brazil were concentrated in the economic sector and they have multiplied steadily since 2010, with the increase in Chinese FDI (CEBC, 2017; CEBC and APEX, 2015). The import of raw materials, iron ore, and oil is still at the center of China’s strategy, but the promotion of investments has progressively increased, largely related to infrastructure sectors (the building of ports, railways, and highways, as well as the construction of power transmission and distribution lines), energy production (mainly hydroelectric and petroleum) and agro-food

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production (mainly soybean). Finally, the promotion of Chinese manufactured products (developed in China or Brazil, predominantly by Chinese public companies) is another of China’s objectives, the importance of which increases with Chinese economic capacity growth. Up until 2010, China gave priority to investments directly related to commodities, which make up the bulk of Brazilian exports to that country. In a second phase (2011–2013), Chinese companies looked for new opportunities in the industrial field, given the profile of the Brazilian market. A third phase (2014–2015) of Chinese investments in Brazil began when Chinese banks moved into the country or acquired stakes in Brazilian or international banks already operating in Brazil. In a fourth phase, Chinese companies have invested considerably in the production and transmission of electricity and in the agro-food sector. Finally, the participation of Chinese companies in the infrastructure sector became a feature of the new and present phase that began in 2015 (CEBC, 2017). China is interested not only in exporting its infrastructure services for the generation and transmission of energy, to support its SOEs from this sector, but also in the transportation of goods and raw materials to China, by means of railways, waterways, and ports, and that would not work without a guaranteed energy supply. Thus, the successful promotion of political-economic ties with Brazil would permit the consolidation of Chinese projects in Brazil and the constitution of its global functional geography.2 The growth of China’s influence on the Brazilian economy has been apparent since the early 2000s, but in 2009, China overtook the United States as Brazil’s main trading partner. Likewise, the importance of Brazil as a destination for China’s direct investments abroad has grown steadily over the same period, to the point where Brazil has become the second largest Chinese investment destination in the world (after the United States), with a special emphasis on infrastructure sectors. At the domestic level, increased profits, new business, and jobs would explain why public and private agents in Brazil perceive China’s SOEs both as competitors and as partners. The economic crisis that landed in Brazil in 2015, with stagnation produced by the end of the international cycle of commodities, created very favorable conditions for international companies with investment capacity and in search of good opportunities for expansion in the form of acquisition of assets offered at competitive prices. This resulted from both the accelerated depreciation of the Brazilian Real against the US dollar and the desperate search by the Brazilian ­government

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for new investors able to operate in strategic sectors that would require a lot of investment capacity, especially in infrastructure (generation and energy transmission, ports, highways, airports, and communications). Likewise, the rapid growth in the volume and importance of Chinese capital in various sectors of the Latin American economies has had an impact on the markets and generated competitive mismatches. In the case of the electricity sector, for example, it is clear that the action of Chinese SOEs led to a redesigning of the market for the generation and transmission of electricity, which is capital intensive. This process was particularly pronounced in Brazil, where the electricity sector underwent an intense reconfiguration process. There were also impacts on the regulatory capacity limits of the Brazilian state, notably the specialized agency of the electricity sector, the National Electric Energy Agency (ANEEL).3 At the level of business strategy, three processes are important in explaining the growth of Chinese investments in Brazil. The first and perhaps most important of these is the Chinese government’s strategic decision to improve relations with Brazil, which has led SOEs to benefit directly from the abundant supply of available credit at very low rates offered by Chinese state-owned banks. Access to the large amount of credit provided by Chinese state-owned banks was combined with Beijing’s strategic decision to seek the international expansion of its state-owned enterprises. This could be achieved by acquiring strategic assets or by creating entire operations, especially in those countries that did not offer severe constraints on Chinese capital in sectors such as infrastructure. Up until 2013, it was possible to observe a posture of hostility from the Brazilian government toward the growth of Chinese investments in some sectors, like energy. The nationalist reading applied by some sectors of the Brazilian Workers’ Party to the rapid growth of the foreign presence in strategic sectors prevailed. Therefore, despite the fact that many opportunities arose for the rapid entry of Chinese capital into the sector, they have been held back by government opposition. This was the case, for example, with State Grid’s attempt to acquire interests in companies such as Neoenergia in 2010 and part of Companhia Paulista de Força e Luz’s (CPFL) share in 2013 (Filgueiras, 2016). The second process was triggered by disruptions in the electricity sector, which produced economic imbalances and large business losses, and created the conditions for the transformation of Brazilian hostility to Chinese investors. This change was formalized by the publication of Provisional Measure no. 579, of September 11, 2012, which was later

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passed into Law 12.783, of January 11, 2013, signed by President Dilma Rousseff (2013; Brazil, 2012). This Law established the rules for the early renewal of an important set of concessions for the generation, transmission, and distribution of electricity. For some analysts, part of China’s growing presence in Brazil’s electric power sector resulted from this new Law, which forced energy companies to renew their concessions in advance, which would be subject to 20% lower rates in 2015. For those who capitulated as well as those who refused to do so, the measure changed the logic of the business because it affected both the revenue stream and the programmed cash flow. According to Thymos Energia Consulting’s projections, distributors’ rates would increase by between 18% and 27%, to counteract liabilities of at least R$ 71 billion in additional costs in the sector between 2013 and 2014. In addition, under the new Law, generators and marketers would need to be more competitive to meet the price reduction imposed by the Regulated Hiring Market (Polito & Pedroso, 2014). For Ricardo Savoia, in the medium and long term, the trend would be to increase energy tariffs and sales prices in energy auctions in the regulated market. These increases, in turn, would elevate the need to extend long-term financing mechanisms (Savoia, 2013). The third process that was crucial to creating the conditions for an expansion of China’s presence in Brazil’s electricity sector was the combination of the political crisis brought about by the corruption scandals and their consequent impacts on the business strategies of the Brazilian players in the industry. In fact, the succession of corruption scandals investigated in the Lava Jato Operation4 from 2014 onward involved some of the biggest players in the civil heavy construction industry, who were also owners of significant shareholdings in a large number of major developments in the electricity sector. These companies found themselves needing to quickly discontinue some of their investments in order to deal with the financial difficulties caused by the interruption of new public works contracts and cash flow problems. This factor, combined with disruptions to the electricity sector caused by Provisional Measure 579 and Law 12.783/2013, along with financial problems, led the entire industry to divest themselves of a large and fast supply of assets. This was just the opportunity for Chinese SOEs to rapidly acquire large and important positions in the generation and transmission of electricity in Brazil. In the business sector, profits from joint ventures with Chinese state-­ owned companies are easing the financial situation in which Brazilian companies find themselves, especially at a time of turmoil. These investments

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are able to give new life to Brazilian contractors who saw their businesses fade away during the country’s current crisis. The resumption of the generation of jobs throughout these infrastructure works is also very important. From the political point of view, the announcement of mega-­investments in these sectors constituted very good news to offset the rapid erosion of President Dilma Rousseff government’s popularity vis-à-vis public opinion and in the political sectors that were beginning to abandon the coalition that had supported the Workers’ Party since its assumption of power in 2003. This process was particularly visible from 2014, but it was in the context of Chinese Prime Minister Li Keqiang’s visit to Brazil in May 2015 that bilateral relations reached peak visibility in the context of the deteriorating political debate. In fact, the announcement of the signing of 35 cooperation agreements in eight areas, involving US$ 53 billion, made it clear that Brasilia viewed the possibility of presenting the Chinese partnership as a foreign policy asset with extreme interest.5 As an example of this newest, more dynamic phase, in June 2015, China’s government announced new investments and loans to Brazil. At a high-level Commission meeting, the Chinese and Brazilian governments announced their decision to create bilateral cooperation funds of US$ 20 billion (US$ 15 billion provided by China and US$ 5 billion by Brazil) to help expand their economies’ production capacity, to be invested mainly in Brazil (Presidência da República, 2015a). Priority projects would focus on Brazilian logistics infrastructure and manufacturing industries. On this occasion, both governments also announced the results of the first trilateral technical meeting on the Atlantic-Pacific/Bi-Oceanic Railway Project involving Brazil, China, and Peru. The meeting set out the preliminary report containing the baseline study and work plan, such as dates for on-site visits to Brazil and Peru (Presidência da República, 2015b). The initial design of this Bi-Oceanic Railway project aimed to connect the north coast of Rio de Janeiro, in Brazil, to the Peruvian railway network, through the towns of Campinorte (GO), Lucas do Rio Verde (MT), Vilhena (RO), Porto Velho (RO), Rio Branco (AC), Cruzeiro do Sul (AC), and Boqueirão da Esperança (AC), on the border between Brazil and Peru. The total length of the railway would be approximately 4400 km at a cost of US$ 30 billion. In February 2018, at a meeting in Ji-Paraná (in the State of Rondônia, Brazil), a protocol of intentions was signed by the leaders of three states of Brazil (Acre, Rondônia, and Mato Grosso) and Ambassador of China, Ji Jinzhang, setting standards and clearly

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strengthening the interests of the international economic partnership between Brazil and China (Maia, 2018). In the period between 2003 and April 2018, China established 262 projects in Brazil (106 announced and 102 confirmed), with a total value of US$ 126.7 billion (US$ 71.3 billion announced and US$ 55.4 billion confirmed) (Ministério do Planejamento, Desenvolvimento e Gestão, 2018a). Between 2000 and 2014, Chinese investments were particularly high in the mining sectors (34%) and in the energy sector (57%) where China has acquired significant experience (Moreira, 2015), as we will see in the next section. China in Brazil: Economic Presence Versus Political Influence The rapid and intense growth of the Chinese presence in the Brazilian economy was accompanied by an increase in Chinese importance in Brazilian foreign policy. This is a process that has only emerged in recent years and contrasts with the relative lack of historical density of bilateral relations. Brazil only recognized the People’s Republic of China in 1974, and during much of the period of normalization of the relationship, during Ernesto Geisel’s administration (1974–1979) until the late 1990s, the relationship was not very dynamic (Becard, 2008). This trajectory was characterized by certain themes in the bilateral agenda, such as cooperation in space in the development of geostationary satellites. The perception of business people and diplomats, however, was that the lack of good economic opportunities and the existence of few areas of political convergence on the international agenda contributed to a relationship of little dynamism, where Brazil had just a minor interest. On the other hand, China was one of the first emerging countries to seek to deepen its political relations with Brazil, recognizing its comparative weight in Latin America, as well as its political leadership capabilities, the relevance of its consumer markets, and its importance as a supplier of strategic resources for the Chinese economy (Altemani de Oliveira, 2010). China’s addition to the group of Brazil’s major international partners from the early 2000s foreshadowed a revolution in Brazil’s set of priority relations. In fact, from the early 1990s, Brazil had begun to recognize the urgency of constructing more consistent strategies for the approximation of regional powers, or so-called whale countries, such as China, Russia, and India—countries with wide territorial boundaries and mass populations—with the intention of increasing Brazil’s capacity for economic and political influence. This strategy was set in motion by the government of

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Fernando Henrique Cardoso (1994–2002), and was confirmed as a strong priority at the beginning of the cycle of the Workers’ Party governments, starting in 2003 (Lessa, 2017). Initially, the Workers’ Party formulated and implemented a foreign policy that pointed to continuity with the previous cycle, in terms of its broad themes and more general strategies. For example, the decision was taken to act to strengthen the multipolar international order as a general objective and to value global multilateral spaces. However, there was a notable change of style in politics and in the affirmation of international claims. This can be seen in Brazil’s persistent and determined pursuit of international prominence, expressed in ambitions such as the call for reform of the United Nations institutions and, in this context, obtaining a permanent seat on the Security Council. Similarly, Brazil called for a prominent role in the development of the Doha Round of the World Trade Organization and in many other issues, such as the stability of the economic system in the context of the global financial crisis of 2008 and the emerging agenda of climate change. In just a few words, the Lula da Silva government transformed its foreign policy strategy through an excess of self-confidence, which may have been produced by the relatively stable domestic economic situation, which in turn was facilitated by extremely favorable international economic conditions, in which China’s economic growth and global dynamism were of considerable importance (Cervo & Lessa, 2014). The growth of China’s presence in Brazil since the early 2000s has been spectacular, both politically and diplomatically, especially in relation to the economy. In this sense, Brazil has followed and aligned itself with an infallible global trend—China has become increasingly important to the world and its economic weight has become a crucial strategic variable for many countries. In Brazil, although Chinese investments have not yet replaced its traditional partners (notably the United States, Japan, and some European powers), their vertiginous growth, as we have pointed out above, has become a political issue representing one of the most notable changes in the international landscape at the beginning of the twenty-­first century. President Lula’s first major international mission was, unsurprisingly, to China in 2004 to mark the 30th anniversary of the establishment of bilateral relations. The President included in his retinue the largest delegation of businessmen ever taken abroad, with 300 business groups represented (Altemani de Oliveira, 2004). The agenda of the visit included clear demonstrations of Brazil’s support for important claims made by China or related to issues that bothered the Chinese government. For example,

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Lula da Silva stated that Brazil would support the market economy status claimed by China, which would change its status in the World Trade Organization. He also reiterated the position of support for China that Brazil adopted in the UN Commission on Human Rights, acting to block and defeat the draft resolutions that censured the human rights situation in the country (Haibin, 2010). The increasing demand for commodities also meant that China quickly became Brazil’s main trading partner and, in 2013, China assumed the position of the primary destination for Brazilian exports, surpassing the volume of trade flows with the United States. Due to the increasing importance of commodities, the Brazilian economy also experienced difficulties, as a consequence of the growing weight of primary products, with a concomitant deindustrialization. Moreover, critics have highlighted this reversal in the economy as one of the adverse effects of China’s increasing presence in Brazil and, consequently, in the foreign policy of the governments of the PT cycle (Cervo & Lessa, 2014; Lessa, 2017). The growth of China’s importance for Brazil, both for its economy and its foreign policy, also had consequences for Brazil’s relations with other regions. For example, during the Lula da Silva administration, an ambitious policy of expanding external ties was formulated to mark a new phase of its international action. One of the privileged spaces in this policy was Africa, a policy which was also encouraged during the governments led by the Workers’ Party. The idea of political and economic expansion in Africa has, however, encountered several obstacles, one of the most important being the clash with China’s new political and economic influence on that continent (Abdenur, 2015). Brazil under Lula also had the ambition of implementing a development cooperation policy that would function as a global leadership resource, leveraging the search for international prestige, notably in Africa and Latin America (Dauvergne & Farias, 2012). During this period, the Brazilian experience was limited by China’s ambitions, whose cooperation policy expanded in the same regions with more resources, more determination, and goals more clearly linked to trade and investment policies (Quadir, 2013). China also played a very important—and negative—role in the outcome of one of the most important chapters in the international strategy designed by the Workers’ Party governments, namely, the ambition to sponsor reform of the United Nations institutions and, more particularly, Brazil’s demand for a permanent seat on the Security Council. This has

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become the overarching goal of Brazil’s foreign policy, and it is possible to view many of the new initiatives and innovative approaches to traditional issues in the light of this great ambition. It was justified in the diplomatic discourse outlined during the Lula da Silva administration as a necessary action to remedy the legitimacy deficit that characterizes the multilateral forums, which weakened the perspective of multipolar international affirmation (Flemes & Saraiva, 2014). Brazil had initially articulated this ambition in the context of the creation of the so-called Group of Four—which also included Germany, Japan, and India—and was immediately opposed by China and other countries, which openly opposed any possibility of institutional reform. The Workers’ Party governments also operated a creative foreign policy agenda directly or indirectly involving China. The most notable event was the initial establishment of the BRIC group as a joint grouping parallel to the holding of UN General Assemblies and, as of 2009, as a formalized political grouping. Initially composed of Brazil, Russia, India, and China, and later by South Africa (BRICS), the grouping was primarily envisaged as a space for consultation and articulation, with a notable tendency toward the formation of anti-Western agendas (Kiely, 2015). Brazilian policy on BRICS has been ambiguous. On the one hand, there was resistance to the adoption of positions critical of the consolidated political arrangements, especially the UN, and there was a discreet rejection of the anti-hegemonic discourse on which many of the group’s manifestations were based. On the other hand, the institutional evolution of BRICS, especially the creation of the New Development Bank, announced at the Fifth BRICS Summit in Durban (South Africa) in 2009, was particularly important. Brazil’s interest is explained by the Bank’s potential to finance infrastructure projects and act as an alternative stabilization mechanism to the World Bank and the International Monetary Fund. Its interest is also explained by the fact that, in the context of the economic and political crisis characteristic of the final phase of the Workers’ Party cycle, expansion and the search for new sources of financing have become a new foreign policy concern. In the political dimension, the evolution of the BRICS group’s place in Brazilian foreign policy, especially during the two terms of Dilma Roussef (2011–2016), indicated a posture of retraction and intimidation in the face of the more assertive positions of some of the other partners. Accepting impassively the rise of Russian and Chinese leadership in the BRICS group, Brazil had to deal with interests and visions of international politics with

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which it disagreed and remained silent on issues such as the humanitarian crisis caused by the Syrian war and the crisis in the Crimea (Lessa, 2017). The context of political and economic crisis in which Dilma Roussef’s second term (2015–2016) unfolded marks the actual moment of expansion of Chinese political influence in Brazil. In the first half of 2015, the political crisis that would lead to Roussef’s impeachment was given impetus by the economic lethargy that had its origins in the global crisis that began in 2008 and the end of the commodity cycle. However, it is clear that the Brazilian crisis was deepened by a certain inability to manage macroeconomic policy and mitigate the effects of political uncertainty on economic activity. The government’s inability to maintain active investment policies in key sectors, such as infrastructure, was explained by the lack of financial resources and regulatory uncertainties. In this context, the visit of Chinese Prime Minister Li Keqiang in May 2015 was taken by the government as an important political event and represented a turning point in China’s policy toward Brazil. The announcement of a mega-investment package of approximately US$ 53 billion in various sectors, as we have already pointed out, was used by the Brazilian government in two ways: first, to reaffirm its ability to produce economic outputs in crisis situations; second, as an expression of the unequivocal confidence that China, as one of Brazil’s main international partners, had in Brazil’s potentiality and, quite possibly, in Roussef’s government. In any case, Li Keqiang’s visit and its impact on the internal and external policies of the Dilma Roussef government were viewed by political observers with perplexity, especially by diplomatic staff in Brasilia, and its effects are yet to be evaluated.

Chinese Participation in the Brazilian Electric Power Sector: Empirical Findings From 2003 to April 2018, the energy and extraction sectors became an extremely important part of China’s business in Brazil, involving more than 85% of the confirmed investments (Energy 46%, Oil and Gas 30%, Mineral Extraction 8%, Automobile 4%, Agro-business 4%, Financial Services 3%, Logistics and Transport 2%) (Ministério do Planejamento, Desenvolvimento e Gestão, 2018a). The generation and transmission of electric energy, mineral extraction, oil, and gas are the focus of Chinese FDI in the country, with US$ 53.9 billion of confirmed investment up to June 2018 (Ministério do Planejamento,

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Desenvolvimento e Gestão, 2018b). The most intense period of i­ nvestments in this sector was from 2010 to 2017, with seven projects dedicated to the oil and gas sector, involving more than US$ 16.4 billion, and 20 projects in the electric energy sector, with a contribution of approximately US$ 25 billion (Ministério do Planejamento, Desenvolvimento e Gestão, 2018a). We will analyze China’s presence in the Brazilian electricity sector more closely in this section. China views the energy issue as key to both economic and national security. According to Hu and Liang (2011), the proposal for the development of cleaner and more efficient energy is ongoing, and the 11th Five-­ Year Plan (2006–2010) presented Chinese “green development” as one of China’s medium-term objectives. In demanding higher levels of production and the expansion of the industrial sector, access to energy resources that sustain this uninterrupted growth in new production has become crucial for the balance and sustainability of Chinese growth and development rates. On January 1, 2013, China’s State Council released its 12th Five-Year Energy Development Plan (2011–2015). The plan addressed a growing number of concerns facing China both internationally and domestically and aimed to put China on a course to achieve a more secure and environment-­friendly energy supply situation. China’s 13th Five-Year Energy Development Plan identifies the main targets for energy development (2016–2020), aiming to optimize energy systems, promote energy products, and consumption reform, to build a clean, decarbonized, safe, and efficient modern energy system. In this Plan, cooperation in connectivity aims to speed up energy cooperation projects and promote energy infrastructure interconnection, especially with the nations along “One Belt One Road”. At the global level, the Plan encourages China’s participation in foreign major power projects, in accordance with local conditions. China clearly intends to participate in investment in and construction of new energy projects and the development of foreign energy networks (investment, construction, and operation).6 Chinese technological capabilities within the energy sector are also a central factor in explaining China’s investment in Brazil (Becard & Macedo, 2014: 156). Based on this premise, we anticipate a growing Chinese interest in new business opportunities within the Brazilian electric power sector given the positive, qualitative change in Chinese expertise in energy infrastructure.

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According to the International Energy Agency (IEA, 2013), China-­ Brazil relations in the energy sector have intensified over the past decade due to the increased innovation capacity and generation of investment flows between the two countries. For that Agency, elements such as the Brazilian abundance of energy resources, China’s great potential to finance projects, and the increased Brazilian and Chinese ability to expand their technological capabilities explain the emergence of new business opportunities (IEA, 2013). The insertion of Chinese state-owned enterprises into the Brazilian electricity sector started in June 2008. At that time, the Spanish consortium “Isolux Corsan” purchased lots A and B from Tucuruí transmission lines, known as Linhão de Tucuruí; lot A starting in Tucuruí and ending at Jurupari (527  km) and lot B, from Oriximiná via Jurupari to Macapá (713 km), through the Amazon Forest (ANEEL, 2018). To that end, the consortium hired China National Electric Engineering Co. (CNEEC), which brought in the following companies: Zhejiang Electric Power Transmission & Transformation Corporation of China, China Cable Corporation, and Zhejiang Shengda Steel Tower Company. But the biggest electric energy company in the world, State Grid Corporation of China, would only arrive in Brazil two years later, in 2010. Since its operations began in Brazil, State Grid Holding Brazil has acquired 23 concessions in the electricity sector. With an investment of about R$ 6.5 billion, it controls more than 14 thousand kilometers of transmission lines throughout the country and has more than 500 employees (Merker, 2018). According to Qu Yang, State Grid Vice President of commercial and administrative development in Brazil, the company will invest R$ 140 billion in Brazil over the next five years, including anticipated ­contributions to the generation, transmission, and other segments. The resources to be invested in the transmission of electric energy alone are estimated at R$ 90 billion (Spring, 2018). China Three Gorges (CTG), which operates the Three Gorges hydroelectric plant, the largest in the world, came to Brazil five years later, in 2013. There is strong evidence that State Grid and China Three Gorges will be among the main players in the Brazilian electricity sector in the coming years, as we will see below. State Grid Holding Brazil Since 2014, due to the persistence of internal political turbulence in Brazil, several local companies were unable to invest in the electric power sector and began selling assets at very low prices. Loans from the National Bank

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for Economic and Social Development (BNDES) also fell in number in the same period. With their available financial resources, excess international reserves, and favorable exchange rates, Chinese banks started to assume the role of financiers of the projects of Chinese companies in Brazil (Cigano & Benetti, 2018). According to Luiz Augusto Castro Neves, chairman of the Brazil-China Business Council, with the slowdown in China’s economy and more than US$ 3 trillion in reserves, Chinese companies needed to find ways to spend that money. China’s appetite for investment has found a Brazil in which there has never been so great a supply of assets and stakes in energy companies (Filgueiras, 2016). In February 2014, the IE Belo Monte Consortium won the right to build the transmission line that will transport energy produced by the Belo Monte dam in Pará to the Southeast Region of Brazil The success of IE Belo Monte Consortium led by State Grid Brazil Holding (51%), along with Brazilian companies Furnas Central Electric SA (24.5%) and the North Central Electric SA Brazil—Eletronorte (24.5%), signified a new investment cycle in the Brazilian electric sector, marked by the presence of leading Chinese companies, rather than companies from Western developed countries (Becard & Macedo, 2014). The line will extend for 2.1 thousand km, at an estimated cost of about US$ 1.3 billion. The line should be completed in January 2019. In July 2015, State Grid won the right to participate in the construction (100%) of a second transmission line to transport energy produced by the Belo Monte dam in Pará to the Southeast Region of Brazil. This second transmission line will extend for 2.5 thousand km, at a cost of US$ 2 billion. According to the then president of Eletrobrás, José da Costa Carvalho Neto, the aggressive bid made by the consortium was possible due to prior arrangements with contractors and suppliers, which have enabled the consortium to expect to work for a price of below US$ 5.1 billion, as suggested by the Brazilian Energy Agency (Agência Nacional de Energia Elétrica—ANEEL) (Alvarenga, 2014). State Grid is actually a global technology leader in transmission and distribution and a world leader in long-distance power transmission, opening up the possibility of technology and knowledge exchange with Brazilian companies. In the case of the Belo Monte project, State Grid will use very high voltage transmission lines, using pioneering technology (voltage above 800 kV) (CPFL, 2017). In January 2017, State Grid became the controlling shareholder of CPFL Energia (Companhia Paulista de Força e Luz), the largest private group in the Brazilian electricity sector. State Grid acquired a 54.64% stake

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from Camargo Corrêa Group and pension funds Previ, Fundação Cesp, Sabesprev, Sistel, and Petros. State Grid has extensive experience in smart grid projects, having installed more than 300 million digital meters throughout China, and having supported and invested in low carbon technologies, particularly in the areas of renewable energy and mobility energy. These actions are aligned with the strategic drivers of the CPFL Energia Group, which has been leading investments in smart grid in Brazil and developing projects focused on renewable energy sources and electric mobility. CPFL Energia (energy), which has been in the electricity sector for 104 years, operates in the distribution, generation, commercialization, services, and telecommunications segments.7 China Three Gorges China Three Gorges (CTG), which operates the Three Gorges hydroelectric plant, the largest in the world, entered Brazil in 2013. CTG has been very active in Brazil’s electric power system and is now the second largest generator of energy in Brazil outside the state system. CTG has invested, up to 2018, R$ 23 billion in Brazil, on acquisitions and asset improvements (Caetano & Nogueira, 2017). CTG’s business in Brazil includes the acquisition of the assets of EDP (Energia de Portugal) in 2013, the Santo Antônio do Jari hydroelectric plant in Pará in 2014, and the purchase of the hydroelectric plant Jupiá and Ilha Solteira Brazil Energy for US$ 3.6 billion in 2015. In November 2016, CTG bought all the shares of Duke Energy International Brasil Holdings. The deal was closed for US$ 1.2 billion (Valor Econômico, 2016). The assets included eight hydroelectric plants with a total installed capacity of 2242 MW, located on the Paranapanema River, and two small hydroelectric plants with a total installed capacity of 16 MW each, located on the SapucaíMirim River in the state of São Paulo (CTG Brasil, 2016). As a result of these acquisitions, CTG achieved an installed generation capacity of 8.27 GW; in comparison, Itaipu, the largest Brazilian hydroelectric power plant, has an installed capacity of 14 GW (Caetano & Nogueira, 2017). Recent Trends In addition to experiencing readjustments in the regulatory framework of the energy sector since 2012, major investors in the sector, such as Petrobras, Eletrobrás, Camargo Corrêa, Odebrecht, OAS, and Queiroz

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Galvão, were directly affected by the Lava Jato Operation, an ongoing criminal investigation being carried out by the Federal Police of Brazil. These companies also needed capital to reduce debt, invest in projects, and pay fines and indemnities in relation to leniency negotiations with the government, so they put their assets on sale. For interested Brazilian investors, the cost of financing was high. For foreigners such as Franco-Belgian Engie and Germany’s E.ON, the slowdown in the European economy and adjustments in operations in Latin America hampered its business. “The Chinese are practically the only ones with financial availability today to make viable the big auctions of the Brazilian government”, says Fernando Camargo, director of LCA Consulting (Filgueiras, 2016). The announcement on August 21, 2017 of the federal government’s adoption of a privatization policy, with the sale of the Eletrobrás group of companies and state distributors, should mark the beginning of a new phase in the electric power sector. This is because another round of privatizations could remove from Brazilian state-owned enterprises their leadership role in the operation of the Brazilian electricity matrix (Rosas, 2017). But the process of privatization of Eletrobrás is far from complete due to strong resistance within and outside the government. In fact, the president of the Chamber of Deputies, Rodrigo Maia, said, on July 10, 2018, that he agreed with other parties that the bill authorizing the privatization of Eletrobrás would not be put to the vote in 2018 (Cunto, 2018). This task would be left to the next government, which took office in January 2019. In the context of the changes already taking place and those yet to come, it is possible to highlight at least three characteristics of the current structure of the national electricity sector. First, the industry is still largely state-owned. Second, foreign companies have a strong presence, whether they are private or even state-owned. And third, the degree of market concentration is still considered to be low, since the largest companies hold a small percentage of the total market (Dieese, 2017: 6–7). Eletrobrás holds first place in generation capacity, followed by Tractebel (French company in the Engie/GDF Suez group), Cemig (controlled by the government of Minas Gerais), and CTG (Chinese SOE). However, when Duke Energy’s asset purchase process is completed, the Chinese state group will have the second largest generation capacity, second only to Eletrobrás. The American group AES is the sixth largest in the generation segment and the third in the distribution segment. CPFL, controlled by the Chinese, is the seventh largest in the generation segment and the fourth in the distribution segment. With the acquisition of CPFL, State

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Grid, which is currently one of the largest companies in the transmission segment in the country, will have a stake in the generation and distribution segments, establishing a vertical structure and becoming one of the largest groups in the Brazilian electricity sector. It is important to remember that Chinese investments in the energy sector have grown significantly not only in Brazil but throughout the world. In Brazil, in particular, investments reached R$ 70 billion between 2005 and 2015 (Colombini Neto, 2016; Dieese, 2017). If this privatization policy continues, it will change the national prominence of the planning and operation of the Brazilian electricity matrix. In any case, there is a strong indication that the Chinese state groups China Three Gorges and State Grid will become the main players in the sector. Once the Brazilian firm Odebrecht lost market share after the start of the Car Wash Operation, Chinese firms such as Sinohydro, the China Three Gorges Corporation, and the State Grid emerged as the contractors with the most experience and financial capacity in the electric sector (Ray, 2018). During the current economic crisis, the Brazilian government sees Chinese investments as short-term relief for its adjustment challenges in its public accounts. However, some analysts believe that overcoming the fragility of public accounts through extensive cooperation projects with the Chinese could restrict the bilateral strategic relationship. This is because, under an asymmetric situation, China would not be compelled to provide many counterparts to Brazil, including sectors as strategic as that of electricity (Valdez, 2017). Within this short-term dynamic, China SOEs would hold most of the negotiating power and no limit would be placed on the maximizing of investment opportunities in Brazil, opportunities that as a whole would lead to the establishment of genuine Chinese businesses in China’s own interests. Final Remarks Since the late 1970s, the Chinese government has promoted development policies that have put infrastructure strategies in a central position. At the domestic level, those strategies made it possible to unite the country and connect the rural population of the Chinese west to the coastal regions, offering greater potential for growth in the urban labor market. At the regional level, China’s government established strategies to create access to natural resources, such as mineral and energy goods, and to consolidate the integration of consumer markets. China’s main objectives in its own region, especially through the Belt and Road Initiative, were to raise global

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GDP and expand commercial, investment, and infrastructure linkages from Asia to Europe. China has clearly included Latin America in its global strategy. After accessing sources of energy and raw materials, China is now advancing its strategy in this subcontinent with the implementation of infrastructure, with a particular focus on Chinese State Enterprises (SOEs). A significant shift in China’s investment targets occurred in 2010, as Brazil became increasingly relevant for China’s infrastructure projects. From 2003 to April 2018, the energy and extraction sectors became key to China’s business in Brazil and accounted for more than 85% of its confirmed investments. Since 2008, Chinese companies have started to acquire the assets of Brazilian electric power companies or other multinational companies located in the country since the 1990s, such as the EDP Group (Energia de Portugal) and the Spanish Company for Activities and Services (ACS). China also started to participate in concession auctions for transmission projects. This enabled China to become the second largest generator of energy in Brazil, behind Eletrobrás, whose privatization the Brazilian government is now planning. We have explored in this chapter some of the major reasons why China is investing steadily in the area of electric power in Brazil. First, China’s 13th Five-Year Plan for Energy Development (2016–2020) clearly sets out China’s principle of cooperation through connectivity, aiming to optimize energy systems, promote energy production and consumption reform, and to build a clean, decarbonized, safe, and efficient modern energy system. Using a strategy of cooperation through connectivity, China seeks to accelerate energy cooperation projects, promote the interconnection of energy infrastructure, and participate in major international energy projects, according to local conditions. In short, China plans to participate in the investment and construction of new energy projects and develop international projects relating to energy networks (investment, construction, and operation). Second, China’s technical capabilities are a central factor in explaining China’s investment in Brazil. Based on this premise, we understand that the growing Chinese presence in Brazil’s energy sector is the result of a qualitative and positive change in Chinese expertise in energy infrastructure. Third, elements such as the Brazilian abundance of energy resources and China’s great ability to finance projects (at a time when Brazil is facing a deep economic crisis and suffers from a lack of infrastructure) also explain the emergence of new business opportunities.

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Finally, we should note the effects of China’s presence in Brazil’s energy sector in a broader sense. Chinese companies are competing in Brazil against many different companies from all over the world and are achieving positive results through their very aggressive and competitive pricing and projects. Chinese companies have started buying up Brazilian electric power companies and other multinational companies: China is already one of the main players in the generation and transmission of energy in Brazil. However, the accelerated rate of these acquisitions and the growing number of agreements announced and implemented in very recent years by Chinese companies indicate that it may be too early to understand the scale and implications of China’s impact on Brazil’s infrastructure, most especially in the electric power sector.

Notes 1. According to Meg Rithmire (apud Perry Arrasmith, 2018) “Right now, China’s markets are highly saturated with a highly trained workforce. For many, the BRI presents a welcome opportunity to put these workers into markets that are not oversaturated. With many developing nations lacking the experts needed to construct major infrastructure projects, Chinese workers have moved abroad to fill the gap” (Arrasmith, 2018). 2. We based this research on primary and secondary sources, and a technical, economic, and environmental data matrix, identifying Chinese projects in the Brazilian electric sector. We had access to a variety of public documents to write this paper, including Agreements and Treaties signed between China and Brazil, available at the Ministry of Foreign Affairs (MRE); Electricity Generation and Transmission Concession Agreements, available at the National Electric Energy Agency (ANEEL) and at the Ministry of Mines and Energy (MME); Environmental Licensing Processes of enterprises in which Chinese companies act as concessionaires or providers of engineering services from the Brazilian Institute of the Environment and Renewable Natural Resources (IBAMA). 3. ANEEL is a federal regulatory agency responsible for establishing rules for the entire energy supply network to the final consumer; overseeing the public and private services responsible for generation, transmission, distribution; promoting the auctions of public concessions of services and purchase and sale of energy. Available at: www.aneel.gov.br. 4. Brazil has been hit by a corruption scandal that began with a state-owned oil company, PETROBRAS, and since 2014, the country’s political and business elites have been investigated and prosecuted as never before, as a result of Lava Jato Operation (Car Wash Operation). This scandal is one of the most prominent corruption cases in the world.

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5. Prime Minister Li Keqiang visited Brazil from May 18 to 21, 2015. During the visit, 35 cooperation agreements were signed in the areas of strategic planning, infrastructure, transportation, agriculture, energy, mining, science and technology, and trade (Matoso, 2015). 6. See https://policy.asiapacificenergy.org/node/2918 to access China’s Five-Year Energy Development Plans. 7. CPFL is a leader in the distribution market, with a 14.3% share, totaling more than 9.1 million customers in 679 cities of the States of São Paulo, Rio Grande do Sul, Minas Gerais, and Paraná. In the generation sector, it is the third largest private agent in the country, with a portfolio based on clean and renewable sources. CPFL Geração (generation) has 2248 MW of installed capacity, considering its equivalent participation in each of the generation assets. In 2011, it created CPFL Renováveis (renewables), with assets such as wind farms, biomass thermoelectric plants, and the Tanquinho solar plant, a pioneer in the State of São Paulo and one of the largest in Brazil. Adding the equivalent stake in CPFL Renováveis, CPFL Group’s total installed capacity reached 3192 MW by the end of the third quarter of 2016 (CPFL, 2017).

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Colombini Neto, I. (2016). Dinâmica Capitalista dos Investimentos Chineses no Brasil. ActionAid. Retrieved from http://actionaid.org.br/wp-content/files_ mf/1493418194actionaind_investimentoschineses_web_2.pdf CPFL. (2017). Relatório Anual 2017. Retrieved from https://www.cpfl.com.br/ institucional/relatorio-anual/Documents/relatorio-anual-2017.pdf Cunto, R. (2018, July 10). Maia diz que não votará privatização da Eletrobras este ano. Valor Econômico. Retrieved from https://www.valor.com.br/politica/5650407/maia-diz-que-nao-votara-privatizacao-da-eletrobras-este-ano Dauvergne, P., & Farias, D. B. L. (2012). The rise of Brazil as a global development power. Third World Quarterly, 33(5), 903–917. https://doi.org/10.108 0/01436597.2012.674704 Dieese. (2017, March 2017). Privatização, desnacionalização e terceirização do setor elétrico brasileiro. Nota técnica no. 173. Retrieved from https://www. dieese.org.br/notatecnica/2017/notaTec173PrivatizacaoSetorEletrico.pdf Dunning, J.  H., & Pitelis, C.  N. (2008). Stephen Hymer’s contribution to international business scholarship: An assessment and extension. Journal of International Business Studies, 39(1), 167–176. https://doi.org/10.1057/ palgrave.jibs.8400328 Filgueiras, M.  L. (2016, August 11). O setor elétrico brasileiro caiu no colo dos  chineses. Revista Exame. Retrieved from https://exame.abril.com.br/ revista-exame/o-setor-eletrico-brasileiro-caiu-no-colo-dos-chineses/ Flemes, D., & Saraiva, M. G. (2014). Potências Emergentes Na Ordem de Redes: O Caso Do Brasil. Revista Brasileira de Política Internacional, 57(2), 214–232. https://doi.org/10.1590/0034-7329201400312 Haibin, N. (2010). Emerging global partnership: Brazil and China. Revista Brasileira de Política Internacional, 53(Special), 183–192. https://doi.org/ 10.1590/S0034-73292010000300011 Hu, A., & Liang, J. (2011, March 08). China’s green era begins. China Dialogue. Retrieved from https://www.chinadialogue.net/article/show/ single/en/4149-China-s-green-era-beginsInternational Energy Agency (IEA). (2013). Energy investments and technology transfer across emerging countries: The case of Brazil and China. OCDE/ IEA. Retrieved from http://www.iea.org/publications/freepublications/publication/PCS_ChinaBrazil_FINAL_WEB.pdf Jacques, M. (2009). When China rules the world: The end of the western world and the birth of a new global order. London: Penguin. Khanna, P. (2016). Connectography: Mapping the future of global civilization. London: Random House. Kiely, Ray. The BRICs, US Decline and Global Transformations. Palgrave Macmillan, 2015. https://doi.org/10.1057/9781137499974. Lessa, A.  C. (2017). A Política Externa Brasileira No Ciclo Do Partido Dos Trabalhadores - Continuidades, Inovações e Retrocessos (2003–2016). Revista Politika, 5, 6–23.

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CHAPTER 4

Cooperative Relations with China in Brazil’s International Politics: Scope and Interests of the Global Strategic Partnership Lincoln Bizzozero Revelez and Andrés Raggio

Introduction The restoration of diplomatic relations between the Federative Republic of Brazil and the People’s Republic of China took place in 1974, during the government of Ernesto Geisel in the context of the Responsible Pragmatism foreign policy (Becard & Ramos, 2008). Responsible Pragmatism was a function of Mao’s Three Worlds Theory and, in fact, it allowed for convergence between Brazil and China within the international system as regards North-South issues. This led to the opening of a new path for cooperation and South-South international insertion in Brazil’s foreign policy, complementing the North-South policy (Altemani de Oliveira, 2004, 2006). In 1979, President Joào Figueiredo made the first visit by a Brazilian Head of State to China. In 1982, Chancellor Ramiro Saraiva negotiated the bases of a cooperation agreement in Science and Technology with Deng Xiaoping (Brun & Louault, 2013).

L. Bizzozero Revelez (*) • A. Raggio Faculty of Social Sciences, University of the Republic, Montevideo, Uruguay © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_4

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The expansion of the cooperation agenda provided the necessary basis for the signing of a strategic partnership agreement within a few years. This agreement, presented by Prime Minister Zhu Rongji, sought to characterize the relations between both countries and to differentiate ­ them in the international system. This was China’s first strategic partnership agreement with a Latin American country, and it placed new issues on the agenda, which allowed for development of agreements, cooperation areas, and bilateral trade. After 1974, when diplomatic relations were restored and before the strategic partnership was signed, 25 bilateral agreements were established. In the early years of the signing of the strategic partnership, during Itamar Franco’s presidency, 16 agreements were signed, and 17 others were concluded during Fernando Henrique Cardoso’s presidency (1995–2003) (Hirst, 2009: 131). During Lula da Silva’s first presidency, 21 agreements were signed, following the upward trajectory, and between 2010 and 2015, 62 agreements were registered. In 2012, on the occasion of the Rio+20 Summit, Prime Minister Wen Jiabao proposed increasing the level of the partnership to a Global Strategic Partnership, confirming on China’s part Brazil’s position in the international system and the global role it could perform from a strategic perspective. In turn, a Global Strategic Dialogue between both countries was established, anticipating an annual meeting between ministers. This partnership forms part of a series of responses to the global financial crisis of 2008 and the subsequent loss of confidence in international financial institutions, such as the International Monetary Fund or the World Bank. From China’s point of view, the partnership with Brazil has come to be a component of the international system’s reformist design and has confirmed both countries’ systemic complementarity. Even though this chapter focuses on the relationship between both countries, it takes as its main focus the Brazilian perspective. However, it is worth noting the geostrategic role that Brazil plays for China and how it manifests itself on several levels. On the one hand, at the commercial level, the bilateral relationship occurs in a framework of complementarity but also of asymmetry, as detailed in Chap. 2. Nevertheless, this type of relationship does not seem to be reflected in the same way at other levels (Pereira & Neves, 2011). On the other hand, at the multilateral political and commercial level, there is a relationship under the South-South paradigm, which generates political pressure to change the system at the regional and international level. This directional movement seems clear,

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with the creation of organisms that aspire to compete with those already established, such as the New Development Bank of the BRICS or the Currency Reserve Fund of the same block. This impetus also occurs at the regional level, with the creation of forums between the Community of Latin American States and the Caribbean (CELAC), which are relevant because they are a hemispheric space that does not have the participation of the United States of America. For Brazil, the Global Strategic Dialogue has ratified its goals of participating in issues on the global agenda by forming a strategic alliance with China to improve its international standing and by maintaining its role as Latin America’s main interlocutor. The year 2015 marked a turning point in the relations between both countries, the fourth meeting of the China-Brazil High Level Commission of Agreement and Cooperation (COSBAN) took place, which is the main institutional mechanism between them; 35 bilateral agreements were concluded, among them the Joint Action Plan 2015–2021, which complements the Ten-Year Cooperation Plan 2012–2021; the Complementary Protocol for the joint development of the China-Brazil Earth Resources Satellite (CBERS) 4 satellite; the Cooperation Agreement in terms of animal health; financing agreements between banks; and operational agreements for Petrobras and Odebrecht, among others. If we include the regional projects in the context resulting from the summit between the CELAC, the bi-oceanic railway project’s first trilateral technical meeting held in Lima in June as well as the decision, in the context of the fifth COSBAN, to create a US$ 20 billion cooperation fund for production capacity expansion, a huge agenda is revealed, which has expanded the relevant sectors and the issues discussed during the early twenty-­ first century. Taking into account improvements resulting from the agreements and bilateral cooperation that have been concluded, both countries’ profits are likely to have seen improvements at a domestic level as well as to their respective positions within the international system. Two assumptions prevent us from considering the benefits in absolute terms, and this is mainly from Brazil’s perspective: first is China’s power increase, which is reflected in different structural components of the system’s functioning and second, at a domestic level, the political differences that arise between the government, the political parties, and the economic actors on the role of China. The latter assumption also reflects a marked difference between both states. In China the national interest manifests a strategic continuity

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according to the definitions provided by the Communist Party. In Brazil, foreign policy (apart from the permanent and structural state interest), is the expression of different options and ideas about the country’s role in the world, international insertion, and foreign priorities. The increase in China’s power has been expressed in the Latin America/ Caribbean region through President Xi Jinping’s proposal, at the BRICS (Brazil, Russia, India, China, and South Africa) group’s sixth Summit in Brasilia in 2014, to create a community of shared destiny with a global strategy guided by the New 1+3+6 Cooperation Framework. The New Cooperation Framework was defined at the first China-CELAC Forum held in Beijing, in January 2015. The proposal entails a Five-Year Cooperation Plan, whose three driving forces are trade, investment, and finance, with the aim of increasing trade to US $ 500 billion and the investment stock to $ 250 billion. It also covers six key areas (energy and natural resources; agriculture; infrastructure; manufactures; communication technology; and Science and Technology innovation) with the necessary funding to activate them. This leads us to other questions concerning the win-win logic of cooperative relations in terms of the evolution of domestic interests in Brazil’s relation with China and its political expression. The domestic interests of the relation with China are articulated and driven by the State. These interests also channel ideas in the political system and in the political parties about the presence and participation of China in the development of the country. Two occasions which display the internal political differences in Brazil in the priorities regarding relations with China were the change of government that saw Lula da Silva assume power, and the presidential elections in 2014. The change of government promoted a reformist realist foreign policy, that sought to distance Brazil from the “Washington Consensus” guidelines and that prioritized South-South relations, especially with China (Mercadante, 2013). This realism was expressed through the return of geopolitics and Brazil’s regional priorities to the international system (Bernal-Meza, 2010). On the other hand, in South-South relations the Lula da Silva governments had a policy of selective multilateralism with the creation and participation in multilateral forums. The turning point in Brazil’s relations with China following Lula da Silva’s accession to government led to improvements in the international field with the BRIC bloc, later BRICS as well as in bilateral relations, with the Strategic Partnership’s elevation to global status. The Partnership became global in 2012, as recorded in the joint communiqué signed

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between President Dilma Rousseff and Prime Minister Wen Jiabao in the context of the Rio+20 Summit. This differentiated the agreement, ­consisting of a Global Strategic Dialogue, from other agreements known as Integral Strategic Partnerships, such as the agreement signed with Argentina in 2014, as stated in a previous paper (Bizzozero & Raggio, 2016). Hence, this type or subtype of partnership would have global projection, differentiating it from Integral Partnerships, which are second in terms of importance out of four strategic association categories (Ramón-­Berjano, Malena, & Velloso, 2015: 9). Moreover, Brazil took part in, and sometimes led, initiatives at the World Trade Organization and in the reform of the United Nations, being an example of the Second World’s opportunities (Khanna, 2013). This status change, as well as the increasing number of agreements reached, was another component of the different points of view and political options in the debates generated during the presidential elections in 2014 and 2018. This marked important differences in ideas about the orientation and priorities of foreign policy in political party programs (Bizzozero, 2015). In the case of the Bolsonaro administration, Brazil shows closer relations to the United States than to China (Gabriel, Mandelbaum, Sanches, & Carvalho, 2019; Malamud, 2018). The expansion and deepening of the cooperation agenda caused the relations to both impact upon new actors and sectors and to produce greater effects on those already involved. This new China-globalized domestic scenario led, at the end of Lula da Silva’s period in government, to the need to strategically rethink relations with China (Amorim, 2015), in the framework of Chinese policy projection that is focused in win-win cooperation (Reyes, 2018). The extension of China’s influence in Brazil led to an expansion of the political debate on the effects on the domestic economy, the development model, and relations with the United States and the European Union. This chapter analyzes the scope and objectives of Brazil’s international policy in relation to its cooperation with the People’s Republic of China. The Brazil-China partnership presents a platform for the development of cooperation based on the structural-systemic complementarity between both countries/regions. The scope and potential of this complementarity will be analyzed with greater detail in this chapter when considering the evolution of economic and trade relations. We conduct an analysis of the evolution of Brazil’s cooperative relations with China and its impact on different domestic sectors and actors in Brazil, with its consequent manifestations in the political direction of the parties as well as at the governmental level.

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The evolution in the process of the domestic political, social, and economic interests involved in Brazil’s relations with China provides an explanation for the existing differences in their interpretation and also of the change of priority assigned to the Asian country. It is also clear that although there are systemic-structural constraints, priorities in the strategic field and the scope of the relationship will depend on governmental direction, as it is in that arena that the programmatic direction of the party in government is applied. The following sections will show the evolution of commercial relations and foreign investment in order to demonstrate their different impacts. We will also discuss the COSBAN meetings from the Brazilian perspective, to highlight the key priorities and concerns. The differences between the main political parties in the 2014 presidential elections will also be discussed, in relation to their international priorities and the linking of domestic interests and the development of the country. Finally, we will conclude with a discussion of the government’s articulation of domestic political and economic interests, in terms of the priority and scope of the cooperative relations with China, as well as in the international policy direction.

Strong Asymmetries in Trade Relations A bilateral trade analysis can be conducted using different approaches. One of these relates to the counterpart’s participation in a country’s trade structure, taking as an indicator the relative and absolute influence that the counterpart exerts in the exports and imports of the other part. In this case, it is assumed that, given that one country plays a greater part in the structure of the other, in exports, imports, or both, there is a greater degree of interaction, but at the same time a greater degree of dependency since both countries are tied to the other country’s situation. It is clear that there is an intervening variable in this case, and that is the size of the countries involved. Nonetheless, even though Brazil is a very large country, in terms of its population, products, or goods on offer, it is less than a sixth of the size of China. Trade can also be analyzed according to its composition, in the sense that the related economies can have a complementary link (in which one sells raw materials and the other manufactures), or a competitive one (in which products are varied). A trade composition analysis implies analyzing

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the products being traded, including an added-value continuum in them, as well as the degree of technology which gives them this value. Concerning China-Brazil’s trade in absolute terms, it is important to point out that in the period we studied (2000–2015) the exchange of goods experienced an exponential growth, favored by China’s development and, to a lesser extent, the development of Brazil. In 2000, the trade exchange between them amounted to US$ 2.3 billion, whereas in 2015 it had grown to US$ 66.3 billion, which represents a growth of almost 29 times according to COMTRADE, although it is important to highlight that in 2015 a significant decrease in trade between the two countries, as shown in Fig. 4.1. Unlike most other countries in the region, Brazil has a trade surplus with China which has grown since the end of the first decade of the twenty-first century. Similarly, the trade balance has favored Brazil since the beginning of the period (2000). Moreover, bilateral trade increased during the period as, at the same time, did the surplus, which was beneficial to Brazil, apart from in 2007 and 2008, the two years during which a trade deficit was produced, as is shown in Fig. 4.2. Nevertheless, the Chinese-Brazilian trade relationship has evidenced an increasing interdependence since the start of the century and the importance of both members to each other has grown. Brazil’s increasing role in 90 80 70 60 50 40 30 20 10 0 2000

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Fig. 4.1  Bilateral trade in goods between Brazil and China in billions US$, 2000–2015. (Authors’ own elaboration using data from World Integrated Trade Solution (WITS)—World Bank and COMTRADE)

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Fig. 4.2  Brazil’s trade balance with China in billions US$, 2000–2015. (Authors’ own elaboration using data from World Integrated Trade Solution (WITS)— World Bank and COMTRADE)

China’s exports and imports is particularly notable: in 2000, it was ranked as the 26th exporting and importing partner; 15  years later, Brazil is ranked as number 21  in Chinese exports and number 9  in imports. As regards the South American country, China’s growth as a trade partner was superlative: in 2000, China was the 11th exporting partner and the 12th in imports, whereas in 2015, it held the first position in both, representing a fifth of Brazil’s total trade. Another point to consider, which is vitally important in evaluating whether this is a virtuous relationship, is built on the analysis of the products the countries trade with each other. In this case, the change of relationship in the intervening period was dramatic, since China gradually increased its raw materials imports from Brazil, whereas Brazil increased its purchase of manufactured goods with high added value from China. It is important to point out that at the start of the twenty-first century, Brazilian exports to China centered on raw materials, mainly soybeans and iron ore, whereas imports included products such as coal or office components and accessories. Nonetheless, the complementarity became even more evident over the years, to the extent that Brazil’s main trading products were, in addition to those previously mentioned, oil as well as cellulose pulp. China, on the other hand, was slowly adding greater technology and, as a consequence, more value to its products, marking a very ­important diversification trend, including telephones as well as radio and television parts.

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Fig. 4.3  Brazil-China exports concentration, accumulated first four products (%), 2000–2015. (Own elaboration using data from WITS—World Bank and COMTRADE)

Knowledge of the different goods that both countries exchange allows us to understand the extent to which trade contributes to development, as well as the concentration level of the products being traded. In Fig. 4.3, we can see the high degree of concentration of the first four products exported, mainly from Brazil to China (Iron ore, crude oil, soy, and sugar). Two relevant observations can be made: the first is that Brazil’s exports have a very high concentration on only four products; on the other hand, China has tended to have a relative low concentration of products exported to the South American country. The second observation is that a slow divergence in the export landscape between both countries can be seen, where Brazil has been increasing its dependence degree, while China has tended toward a moderate performance that ranges at around 20%. Clearly, the complementarity between the Brazilian and Chinese economies has developed dramatically throughout the twenty-first century. However, the concentration on so few Brazilian products sold to China produces, apart from a significant dependence, a risk from the sustainable development perspective, contrary to the intended aim of the successive governments of the Workers’ Party (in Portuguese: Partido dos Trabalhadores, PT) as well as the demands of some civil society o ­ rganizations. However, it is clear that the trade relationship is not the only component of the cooperative relations, nor has it produced purely negative impacts.

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To this end, some analysts show the effects of the bilateral trade in Brazil’s economic sectors and they are examined in terms of the cooperation/competence dialectics’ scope and its consequences in the region (Barbosa & Camargo Mendes, 2009; Nedal, 2014; Raggio, 2016). Even though the economic aspects arising from the interests of the sectors involved in bilateral trade with China have been highlighted, political consequences have also been generated in Brazil’s regional relations. These consequences can be measured in terms of the political and economic effects which China’s presence produces in the region. The political dimension can be measured in terms of the unequal Brazilian presence, which undermines its natural regional status in relation to its territorial size and its economic weight. This effect causes dilemmas which are difficult to elucidate in Brazil’s foreign policy, for if Brazil intends to mark a presence actively, it can be questioned by the other South American countries (Christensen, 2014). A question in point is Brazil’s relations with Argentina, which are strategic for both countries. A recently conducted study proves the impact that China’s bilateral trade has had on these countries in the South American axis (Oviedo, 2014). Several findings arise from this study; one of them involves the chain reaction effect that China produces in the region. This has caused a response from Brazil that has affected the other countries in the region, including Argentina (Oviedo, 2014). This process led from abroad unbalances the regional axis. The second finding involves the Argentinean situation, where the increase in trade was produced at the expense of both countries’ relations (Bouzas, 2009). When assessing China’s increased trading presence and the position in the relationship between Argentina and Brazil, it can be concluded that the negative effects on added-value categories in the intraregional trade have restricted the possibilities of a virtuous integration (Bizzozero & Raggio, 2016). This conclusion can be identified in the MERCOSUR’s launch proposals issued by Brazil at the start of the century, first by Cardoso and then by Lula, who both placed emphasis on centering developmental priorities in the regional agenda again. The evolution of bilateral agreements between Brazil and China, with greater emphasis on those settled during the present century, have served both countries from a strategic point of view, since they have allowed Brazil to attain a greater international presence, and provided China with an “emergent power” as an ally. However, this growing association has not managed to generate a virtuous process regarding Brazil’s development and productive matrix, given that trade asymmetries between the two

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countries have grown. This conclusion derives from data presented in the documents produced by COSBAN, where it appears that Brazil has continuously channeled its efforts toward the sustained growth of its raw materials exports to China. Meanwhile, agreements aimed at stimulating the industrial sector, for example, have been unable to narrow the gap in complementarity. On another front, the economic impact of China’s presence in Brazil is also seen in the uneven investments made in sectors located in certain states. Varying impacts are also present in this area, as will be shown in the following section.

Chinese Investments: Regional and Sectorial Bets Chinese capital investments in Brazil have had a quite uneven performance, since over the years these have been diverse as regards the amount of investment as well as the number of investment projects. If we look at Fig. 4.4, we can see the declared Chinese capital investments per year in Brazil from 2004 to 2015, amounting to a total of more than US$ 37 billion, placed in 143 declared projects. Of those projects, 86 were entirely Chinese investments, whereas 57 were shared with Brazil (39) or with other countries, for instance, the United States (5) or Portugal (3). In the above-mentioned period, 2004 and 2007 stand out as the years in which the largest investments were announced. Even though this is worth noting, it is even more significant to compare it with the number of 8000 7000 6000 5000 4000 3000 2000 1000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Fig. 4.4  Announced investment of Chinese capital in Brazil per year in millions US$, 2004–2015. (Authors’ own elaboration using data from RENAI)

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projects announced per year. For example, there were fewer investment projects in 2004, only six, with an average of US$ 754 million each. Something similar occurred in 2007, when there were 10 projects, amounting to US$ 707 million on average. However, there were a greater number of projects in 2012 (28) and 2011 (23), although the year with the highest average was 2009 (5) with US$ 953 million. In this sense, it is important to point out that given that the number of projects increases independently of the amount invested, one can begin to talk about the consolidation of relations and, specifically, about the Chinese interest in Brazil’s supplies, firstly in buying and then in investing (Hearn, 2015). However, the investments did not go to the same sector or to the same place. Although the sector identified as “Processing Industry” by the Rede Nacional de Informações sobre o Investimento (RENAI) was clearly the one which received the largest number of projects announcements (125), the Chinese also promised investments in sectors such as “Electricity, Gas and Water Production and Distribution” (7) or “Extractive Industries” (5), projects which received large amounts of investment. Heterogeneity can be found in these sectoral divisions, since there are several that include more than 10 projects in the period studied, during which “Electronic Material, Appliances Equipment and Communication Equipment Production” (26 projects) is predominant, as can be seen in Fig. 4.5. An interesting point is that despite being from different fields,

Basic Metallurgy Manufacture of machinery, accessories and electrical materials Electricity, gas and hot water Manufacture of office machinery and computer equipment Manufacture of chemical products Manufacture of machinery and equipment manufacture and assembly of motor vehicles, trailers and bodies facture of electronic equipment and communication equipment 0

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Fig. 4.5  Top projects announced by Chinese capital in Brazil by division, 2004– 2015. (Authors’ own elaboration using data from RENAI)

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extractive action is involved in many of these projects, related not only to minerals but also to oil. Another relatively curious detail is that the three largest investments (US$ 5.5 bn, US$ 4 bn, and US$ 3 bn) were in metallurgy, with Brazil as co-investor, although Luxembourg features in one of them. The reasons for investment are varied, that is to say, not all of them have the purpose of starting a project from zero or an “implementation”, as it is termed here. They can also be used for “expansion”, “modernization”, or a combination of these. However, Chinese capital investments in Brazil were mostly targeted to implement a new project, at close to 60%. Investments allocated to expansion represented 25%, whereas 5.6% were allocated to modernization. In turn, the remaining investments emerge as a combination of expansion and modernization, and implementation and modernization (9.8%). On another front, related to the geographical point of view, investments in 16 Brazilian states were made between 2004 and 2015, Espíritu Santo being the state which received the highest amount (US$ 5.6 billion distributed across five projects) although this is not a large amount, given that an investment from Companhia Vale Do Rio Doce (CVRD) in conjunction with BAOSTEEL in 2007, with the aim of producing steel plates, represented an investment of US$ 5.5 billion. The second state which was given the largest amount in terms of investments was Bahia, with six projects, which together represented US$ 5.3 billion; although there was also a single investment, in this case on the part of the Cabral Mineração mining company (Cabral Resources/China Railway), which in 2012 represented an amount of US$ 2.2 billion, allocated to the exploitation of iron mines and the construction of a processing plant. Other states such as Rio de Janeiro (US$ 4.1 billion), Minas Gerais (US$ 3.2 billion) or Pará (US$ 3 billion) also received large investments in only two or three projects. In the period studied, two states were favored above others, despite not being first as regards the amount of investment: Amazonas (US$ 2.4 billion) and São Paulo (US$ 2.2 billion). The Amazonas State received a little more than 40% of the projects in the whole period, which were mostly related to communications, information technology, and transport. This special feature is explained by the benefits given to the Manaos Free Economic Zone. In the case of São Paulo, the investments were mainly allocated to the automobile sector and cellular telephony, represented by companies such as Build Your Dreams (BYD) or Chery in the case of the first sector, and Lenovo and Huawei in the case of the second.

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Finally, as far as companies are concerned, it should be noted that some of them stood out because of the size of their investments or the number of projects they invested in. In the former case, the companies which invested the most in a project were, as was already mentioned, Companhia Vale Do Rio Doce (CVRD) together with BAOSTEEL (US$ 5.5 billion); the Wisco company (Wuhan Iron and Steel) was in second place with a total amount of US$ 4 billion allocated to the iron and steel industry. As regards the companies which announced a greater number of investment projects, the ones which stand out are H-Buster da Amazonia (nine) investing US$ 253 million in total, mainly allocated to the production of LCDs and computers; the DIGIBRAS company (eight), related to Lenovo (computing), which announced projects for an amount close to US$ 500 million; and CR Zongshen (seven), a motorcycle producing company, which invested US$ 228 million. Even though there is a concentration of investment in specific sectors, it can be proved that during the period there was greater regional coverage and sectoral expansion. In this way, other sectors which are components of the cooperation should be included, such as the spatial, and in order to do this, the COSBAN’s functioning is counted on. Finally, it must be stated that there is a pattern for Chinese investments in Brazil. The biggest investments, as shown above, are aimed at controlling a certain sector, like mining or the oil industry. This strategy is not limited to Brazil, but can be seen in regional neighbors such as Peru and Ecuador. In the case of Brazil, Chinese investments have centered on iron, steel, and soy. This means that Brazil’s exports to China tend to concentrate on a very few products. During 2014, for example, over 70% of Brazil’s exports to China consisted of those three products and their by-­ products (The Atlas of Economic Complexity).

COSBAN Agenda: The Brazilian Perspective The China-Brazil High Level Commission of Agreement and Cooperation (COSBAN) is the main relationship body between Brazil and China. Under its auspices, the Ministry of Foreign Affairs brings together the bilateral agenda’s main concerns and synthesizes the different interests of the political and economic actors. It is a channel through which we can view the state of the relations, the main concerns, and the bilateral agenda’s priorities as well as the focus of each of the parties.

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COSBAN has functioned as a Strategic Partnership development tool between both countries, bringing forth concrete actions such as the 2010–2014 Action Plan and the 2015–2021 Action Plan, as well as the 10-Year Plan 2012–2021. So far, four meetings have been conducted by the body, in 2006, 2012, 2013, and 2015. COSBAN consists of several subcommittees which work on specific issues. These are: Economic and Financial; Education; Space Cooperation; Agriculture; Science, Technology and Innovation; Industry and Information Technologies; Political; Cultural; Economic and Trade; Inspection and Quarantine; and Energy and Mining. There is also the China-Brazil Business Council (CBBC), whose participation in COSBAN was approved during the third meeting. One of the Brazilian delegation’s recurrent issues in COSBAN concerns trade diversification between both countries and the inclusion of value-added products in their exports. This is due to the fact that, as we have seen, exports from Brazil to China have concentrated on a small number of products and nearly all of them are raw materials without added value. There have been some exceptions to this, such as the aircraft exports by EMBRAER (Goldstein, 2002). More recently, in May 2015, the Export-Import Bank of China signed agreements with Brazilian companies that allow for technological support and collaboration with Chinese companies to facilitate financial assistance for the acquisition of 40 E-190 airplanes, valued at US$ 6650 million. Another significant issue which is taking shape in the business sector is the fear of the invasion of Chinese products in the Brazilian market, which are rather cheaper and are detrimental to national production. During the presidencies of Lula and Dilma, the concerns expressed by some business sectors, comprising electronics, textiles, games, among others, made it necessary to present antidumping claims at the World Trade Organization (WTO) and to pursue specific trade agreements. In this sense, and in conjunction with the concerns of Argentinean businesspeople, the Brazilian National Confederation of Industries and the Argentinean Industrial Union signed an agreement on the advocacy of both countries’ business interests. The agreement was signed in September 2016 in Buenos Aires and although it presents a set of goals for the improvement of the position at a regional level (information exchange, government visibility, and regional leadership), it arises from the concern caused by the invasion of Chinese products. This new agreement, termed Brazil-Argentina Business Council (CEMBRAR), has a channel for dialogue with the Presidents of

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both countries, which emphasizes the role and the inclusion of some important business actors in the relations with China. COSBAN and its subcommittees have worked intensively and they have evolved in different cooperation fields. From the political perspective, significant developments in Brazil’s aspirations during the Worker’s Party (PT) era were made, which aimed for Brazil as a global player. One of these ambitions was cooperation with multilateral agencies such as the United Nations (UN), in the G-20, BASIC, or the BRICS itself. As regards trading matters, some issues that were solved, or are being solved, concern the exporting of beef, which was approved again, and the certification of Brazilian exporters of different types of meat (beef, chicken, pork). The signing, in May 2015, of the Protocol for the Quarantine and Veterinary Health Conditions of Beef exported from Brazil to the People’s Republic of China and the agreement reached on the International Health Certificate are concrete results which have reduced the tension that existed between both countries following the suspension of beef exports to China due to some cases of Bovine Spongiform Encephalopathy. On the Brazilian side, at the time, it was considered that this measure exerted pressure related to other significant issues for Brazil, such as the antidumping claims launched at the World Trade Organization (WTO), as well as some differences connected to the importance of the strategic relationship, due to the reduced attention paid by Dilma Rousseff to international issues. Other paramount issues for the Brazilian delegation in COSBAN concern investments to enable and increase trade to China. In this sense, the priority to channel investments was presented in order to expand the production capacity and for infrastructure, logistics, transport, industry, and agriculture. Even though these are recurrent issues, the decision in the IV COSBAN to create a Brazil-China Cooperation Fund for Expansion of Production Capacity, whose technical conditions were defined in terms of the corresponding legal systems of the countries, created positive expectations on the Brazilian side. Specifically, the budgetary agreement implies giving the Fund US$ 20 billion, of which 75% will be provided by China. One of the issues where there is a convergence of interests is the completion of the Bi-Oceanic Connection through Peru. The conducting of the first technical meeting in Peru is noted in the Minutes of the fifth Meeting, as an example of the convergent developments in cooperation. One recent action which will have repercussions is the creation within the Economic and Trade Subcommittee (ETS) of a working group to analyze the services trade potentials.

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As regards cooperation in the economic and financial fields, which has its own subcommittee (EFS), the third Meeting highlighted the important role of the Integral Strategic Partnership in coordinating between states, forums, and international organisms such as the International Monetary Fund (IMF), the World Bank, and the G-20 itself. In turn, new measures were presented to give Brazil greater independence in the international system, proposing the use of swaps. At the fourth Meeting, not only was Brazil’s participation in the Asian Infrastructure Investment Bank (AIIB) announced, but also the importance of swaps as a trading and cross-border investments tool was pointed out once more. Cooperation with a view to strengthening political dialogue placed emphasis on developing the potentials which both parties could jointly exploit in the international system. In this sense, the dialogue between China and the Lusophone countries included in the Macao Forum (2013) was emphasized, due to Brazil’s approach to Africa in recent years in the context of the Community of Portuguese Language Countries (CPLP). This dialogue was considered important for the implementation of the CELAC-China Forum (2015). Another core issue where interests converge involves the Science, Technology and Innovation Subcommittee, which is relevant in defining and advancing some positions in the international system’s structure. In this subcommittee, cooperation has been important and the prospects are significant (Biato Junior, 2010). The Brazil-China Center for Innovation and Nanotechnology Research was established, as well as a virtual laboratory for agricultural research (LABEX-EMBRAPA); a binational center for the study and development of meteorological satellites; a biotechnology center; and another for climate change and innovative technologies; a memorandum of understanding to cooperate in the field of science and technology parks was also signed. One of the subcommittees in which mutual cooperation can be developed the most is the Agriculture Subcommittee, because of the existing complementarity and China’s interest in the development of the sector. To this end, a Brazil-China Joint Working Group on Agricultural Biotechnology and Biodiversity was created. In addition, an exchange of information about the regulatory system for genetically modified organisms was established. Cultural cooperation has not developed beyond commitments, which are continuously expressed in the need to produce joint publications as well as to provide access to books, organize events, to arrange Brazil’s

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Month in China and vice versa, and also to resort to sports as a means of exchange. Nevertheless, the Education Subcommittee has strengthened the program of student exchanges, and incentives to teach one’s mother tongue to the counterpart were generated. In this field, there is insufficient interdependence to nurture dialogue in the intraregional social fabric. One of the areas in which we can observe concrete results is the spatial realm. The launch of the China-Brazil Earth Resources Satellite (CBERS-­3) in 2013 and the CBERS-4 Satellite in 2015 consolidated a joint effort which dates from the twentieth century. The evolution of the Spatial Program brings other opportunities and advantages for Brazil’s soft power toward other regional as well as African countries, due to the possibility of data transmission. This is also important for Brazil in terms of the possibility of increasing its capacity and resources, not only operational but also from the technological hard core, as these development opportunities are subject to domestic budget restrictions as well as external constraints on the part of the United States. These constraints were imposed due to the link between this technology and the armaments field (Silva, 2014). Finally, cooperation in the fields of power and mining is very significant, since China has important investment interests in this field (Klinger, 2015). As far as energy is concerned, the creation in Brazil of a subsidiary of the most important hydroelectric company in the world, the State Grid, named State Grid Brazil Holding, is particularly notable. In mining, Brazil has declared the need for clear regulations, in addition to promoting joint capital partnerships between both countries with the aim of investing abroad, mainly in underdeveloped countries. In this area, COSBAN’s concerns about environmental issues and the concerns of civil society organizations regarding populations affected by the extraction model have not been expressed. In short, COSBAN acts as a thermometer for measuring the progress of cooperative relations in different fields—trade, economy, investments, science and technology cooperation, and political-strategic. It can be inferred that in some of these fields different interests are displayed, which causes tension in the bilateral relations as an expression of domestic interests. These tensions are particularly visible in the fields of trade, economy, and investments. These fields represent sectors that are either negatively affected or they are not sufficiently considered in Brazil’s relations with China. On the other hand, sectors related to scientific/technological cooperation as well as some economic sectors are well-positioned. In the

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political-strategic field, there is a convergence of interests over some issues which involve the reform of international economic organizations. However, on the issue that particularly concerns Brazil–the reform of the Security Council through an increase of members—China has failed to adopt a supportive position. A political interpretation of Brazilian priorities and domestic interests was expressed in the outcome of the presidential elections of 2014. Differences in the direction and priorities of foreign policy, as well as in Brazil’s external relations, represented an important chapter in the debate, in opposition to the little significance they were given before.

The Presidential Elections of 2014: Differences in the Orientation and Priorities of Foreign Policy1 This section seeks to present the different political views that exist within Brazil vis-à-vis the People’s Republic of China. It attempts to briefly clarify the various aspects of the different proposals concerning foreign relations with China, such as priorities in international policy, objectives and scope of the cooperation policy, economic and trade relations, global policy, BRICS, and the country’s position regarding a number of issues on the global agenda. It concentrates, in short, on the intersection between globalization and the domestic field, which is a vital component of Brazil’s national politics. The elections in Brazil were resolved in two electoral stages, since none of the candidates attained the required majority. Thirty-two parties were presented and 28 of these entered Congress, which caused a greater division within Congress. The main candidates and parties in the electoral race were the Workers’ Party (PT) with the candidacy of Dilma Rousseff, the Brazilian Social Democracy Party, whose candidate was Aécio Neves, and the Brazilian Socialist Party, with Marina Silva. In the first stage, Rousseff and Neves were elected as candidates and in the second round, the PT candidate, Dilma Rousseff, won with a very low margin. The second round was characterized by intense confrontations during the four televised debates between the two leading candidates. Regional issues as well as the country’s foreign policy in the region were central ­topics in the third debate, which significantly differentiates this from previous elections where these issues were barely present in the parties’ programs.

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As regards the different perspectives, ideas, and options for Brazil’s relations with China originating from the parties’ programs as well as from the debates between the candidates, a number of differences arose, spelling out different pathways in terms of the formulation of foreign policy and in Brazil’s external relations. In terms of strategic direction on foreign policy, the differences between the parties involved the role assigned to BRICS and the global prominence given to regional blocs. Even though relations with China have a structural-systemic basis, which was not under question, their scope would be limited by a different political option to that maintained by the government of Dilma Rousseff. From a strategic perspective, the opposition parties both gave priority to relations with the United States in their political programs. The possibility of revitalizing a partnership with this country would curb the increasing Chinese prominence in the region. Importance was also given to considerations of a possible MERCOSUR trade and economic agreement with the European Union. According to these options, aspects related to the cultural matrix and identity play an important part in terms of the proposals about the role of the country in the world. In this sense, the political perspectives of the opposition propose to diminish the influence of the Chinese ideology and, in some way, also of China. This distancing from China would partly stop the reforming impulse of BRICS, at least its South American component. It would also bring consequences as regards the regional role of Brazil and the priority given to South-South cooperation. The regional commitment to associate its industrial development with the region, besides being a guarantor of political and democratic balance, would also be reformed in some of the party’s assumptions. It is in these different views on the region where diverse interests were expressed by the parties, which could result in significant impact on regionalism and its components. Of course, matters related to regionalism also involve the role of Brazil in the region and its image in the wider world. This convergence of issues connects aspects which represent the hard core of international politics and relate to central debates. In sum, the elections marked the entry of foreign policy and external relations as a specific component in the electoral debate, through which different domestic interests, either political or economic, could be expressed.

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Conclusion This chapter aimed to analyze the objectives behind Brazil’s foreign policy regarding cooperation with the People’s Republic of China. To do this, it started by analyzing the systemic-structural complementarity between both countries. This complementarity is expressed predominantly through trade and economic relations and in particular through cooperation. Starting from this point, we considered the repercussions that these relationships have had in the economic and political field, both at government and domestic levels. One of the key factors is that the scope of Brazil’s foreign policy regarding cooperation with China is conditioned by domestic interests both economic and political. The conditioning generated by the State’s government-political and bureaucratic reality were expressed during the COSBAN meetings, while the conditioning brought about by the political system, permeated by economic interests, was expressed through the proposals made by the different political parties. Our analysis made it possible to verify that this systemic-structural complementarity had had important repercussions for Brazil’s trade and productive structure. From Brazil’s perspective, it is important to highlight that the Global Strategic Partnership has had the effect of positioning the country as a commodities exporter vis-à-vis the People’s Republic of China, in an asymmetric interdependent partnership. Another critical issue discussed involves the impact on domestic interests and the question of the loss of competitiveness by Brazilian goods with added value, both in regional and international markets. A significant number of Brazilian businesspeople expressed their concerns at being left out of the global value chains and that Brazil was failing to prioritize relations with the United States and the European Union, and these concerns were heard addressed by the opposition political parties during the 2014 elections. The systemic-structural complementarity between both countries has allowed the People’s Republic of China to upgrade the alliance to a Global Strategic Alliance in the year 2012. This way, China endorses Brazil’s place within the international system and its global role. From the Brazilian Government’s perspective, the Global Strategic Dialogue has ratified the goal of creating a strategic alliance with China to lift Brazil’s international status. Furthermore, this recognition positioned Brazil as the main interlocutor from the Latin American/Caribbean region in relation to the People’s Republic of China.

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Although participating from the Global Strategic Dialogue was considered relevant for Brazil’s strategic interests, it was the South-South logic that was emphasized by the country’s left-wing government as a model to develop its international relations. Throughout this study the differences between the strategic-structural interests on the one side, and domestic political and economic interests on the other, can be seen. At the same time, it emphasizes the importance that the government has in prioritizing the People’s Republic of China in its international policy. This way the emphasis made by the presidencies of Lula and Dilma on prioritizing relations with China can be comprehended. This priority started outlining a new scene for the domestic interests that showed both gains and losses. Thus, a moving picture of the political and economic actors can be visualized. Different views relating to the scope and priorities of relations with China were reflected in documents, through proposals and ideas of the economic actors and as previously mentioned, during the elections, through the parties’ political platforms. Some sectors were developed and benefitted from the economic relations and bilateral cooperation with China, such as the space, aeronautical, and telecommunications industries. These sectors benefitted from the effects of the South-South cooperation policy pursued during the presidencies of Lula and Dilma, policies that deepened and advanced relations with the People’s Republic of China. Although the development of this partnership is a matter of State policy, dating back at least to the 1980s, Lula’s foreign policy had a distinct strategic nature, aimed at the global stage, as some political analysis have pointed out (Mercadante, 2013). This foreign policy, including a component of regional orientation that has been followed since Lula’s presidency, has promoted continental regionalism and a new State model centered in logistics, and has produced benefits for Brazilian companies (Bernal-Meza, 2014; Bizzozero, 2014; Cervo, 2009). This said, cooperative relations with China had a specific strategic scope starting with the priorities defined by the presidencies of Lula and Dilma, but these won’t be necessarily continued by future administrations. One of the sources used to analyze the recent evolution of cooperative relations was the China-Brazil High Level Commission of Agreement and Cooperation meetings (COSBAN). COSBAN has met four times and interesting conclusions emerged from these meetings in respect of the indicators that relate the two countries’ approaches to bilateral trade, economic relations, and Chinese investments in Brazil. By cross verifying the

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data from bilateral trade and investments with what is noted in the ­minutes of COSBAN’s meetings, we were able to understand the diverse interests that will necessarily be reflected in the different weighting given to relations with China. Some economic sectors have been damaged, such as textiles, manufacturing, and toys, but other economic actors have seen benefits. What this investigation shows is precisely that economic factor is not essential in determining the scope that the cooperative relations might reach. This chapter has emphasized the difference between foreign policy and international policy toward China. Foreign policy is still formulated and executed from Ministry of Foreign Affairs following the President’s lead. This is key to understanding two findings that arise from this chapter. On the one side, there is the importance that the President has as Chief of State and Government in the direction given to foreign policy. Hence, we should bear in mind the party’s program when considering government policies and the priorities set by the President. However, there is a difference between the scope of strategic-diplomatic policy and other areas, where diverse political and economic interests are expressed. In these other areas, sectorial interests are expressed, engendered by the consequences derived from cooperative relations with China. In short, the scope of Brazil’s cooperative relations with China derives from a systemic-structural platform that has been developing since the last century. Its greater scope and depth, acquired during the presidencies of Lula and Dilma, were based on a strategic plan and a specific vision regarding the international system. The move from a Strategic Partnership to a Global Strategic Partnership during the second decade of the twenty-first century validates this orientation in foreign policy. However, it is limited by both the government’s political orientation and the influence that the business sector might exert. This study shows the progress made both in trade and in investments during a certain period of time, and allows us to understand the evolution of the ideas of different sectors and local actors. This way, the link between the interests, ideas, and their manifestation on Brazil’s politics can be understood. The priority and reach of cooperation with China in Brazil’s foreign policy had a significant political-governmental component. Brazil’s political significance in Latin America constituted a driving force for the SouthSouth cooperation model. The period of left-wing governments in Latin America had Brazil as a beacon for the international cooperation model.

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Throughout the studied period, Brazil reaffirmed its regional and international role through its participation in BRICS. Brazil tried to guarantee regional political and democratic balance by promoting the creation of institutions. This way, it generated a certain margin for autonomy in its relations with the United States. United States constitutes a relevant variable for Brazil. This fact was made clear by the parties’ political definitions expressed during the 2014 elections. The intersection of domestic interests with the political definitions of the United States and China will mark the evolution of relations in the years to come. And in this intersection of external conditioning factors with domestic interests, the political-­ governmental definition will end up deciding the priority and scope of cooperation with the People’s Republic of China within Brazil’s foreign policy.

Note 1. This part is based on an article by Bizzozero (2015, 80–82).

References Altemani de Oliveira, H. (2004). Brasil-China: Trinta anos de parceria estratégica. Revista Brasileira de Política Internacional, 47(1), 7–30. Altemani de Oliveira, H. (2006). China-Brasil. Perspectivas de cooperación Sur-­ Sur. Nueva Sociedad, 203, 138–147. Retrieved from http://nuso.org/articulo/china-brasil-perspectivas-de-cooperacion-sur-sur/ Amorim, C. (2015). Teerã, Ramalá e Doha – Memórias da política externa altiva e ativa. San Pablo: Benvirá. Barbosa, A., & Camargo Mendes, R. (2009). Las relaciones económicas y geopolíticas entre Brasil y China: ¿cooperación o concurrencia? In A.  Oropeza García (Coord.), China-Latinoamérica. Una visión sobre el nuevo papel de China en la región. Mexico: Universidad Nacional Autónoma de México. Retrieved from http://bibliohistorico.juridicas.unam.mx/libros/libro.htm?l=2702 Becard, D., & Ramos, S. (2008). O Brasil e a República Popular da China: política externa comparada e relações bilaterais (1974–2006). Brasília: FUNAG. Bernal-Meza, R. (2010). El pensamiento internacionalista en la era Lula. Estudios Internacionales, 167, 143–172. Instituto de Estudios Internacionales. Universidad de Chile. Retrieved from www.revistaei.uchile.cl/index.php/ REI/article/download/12703/12992

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Bernal-Meza, R. (2014). Brasil: Política exterior, BRICS y su impacto en la región. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Montevideo: Ed. Cruz del Sur. Biato Junior, O. (2010). A parceria estratégica sino-brasileira: origens, evolução e perspectivas (1993–2006). Brasília: FUNAG. Bizzozero, L. (2014). La política exterior de Brasil hacia América Latina: del regionalismo abierto al continental. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Ed. Cruz del Sur: Montevideo. Bizzozero, L. (2015). Las elecciones en Chile, Bolivia, Brasil y Uruguay: debates sobre inserción internacional y convergencia regional. Densidades, 17, 69–85. Retrieved from https://issuu.com/densidades/docs/densidades_n__17 Bizzozero, L., & Raggio, A. (2016). El impacto de la República Popular China en el eje Argentina-Brasil entre el 2004 y el 2014. ¿Evolución sistémica-estructural o definiciones político-estratégicas? Araucaria. Revista Iberoamericana de Filosofía, Política y Humanidades, 35, 341–364. Retrieved from https://ojs. publius.us.es/ojs/index.php/araucaria/article/view/2679/2252 Bouzas, R. (2009). China y Argentina: relaciones económicas bilaterales e interacciones globales. In A.  García Oropeza (Coord.), China-Latinoamérica. Una nueva visión sobre el papel de China en la región. Mexico: Universidad Nacional Autónoma de México. Retrieved from http://bibliohistorico.juridicas.unam. mx/libros/libro.htm?l=2702 Brun, E., & Louault, F. (2013). Brésil  – Chine: una rélation qui s’enracine. In Couffignal, G. (dir.), Amérique latine: 2012, l’année charnière. Paris: La Documentation française. Cervo, A. (2009). La construcción del modelo industrialista brasileño. Revista DEP. Diplomacia Estrategia y Política, 10, 74–86. Christensen, S. (2014). La estrategia brasileña de política exterior a partir de 2003. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Cruz del Sur: Montevideo. Gabriel, J. P. N., Mandelbaum, H. G., Sanches, A., & Carvalho, C. E. (2019). Bolsonaro, China and the Indo-Pacific: Challenges in sight. Mural Internacional, 10. Rio de Janeiro. ISSN: 2177-7314. Goldstein, A. (2002). Embraer: de campeón nacional a jugador global. Revista de la CEPAL, 77, 101–121. Retrieved from www.cepal.org/publicaciones/ xml/8/19288/lcg2180e_Goldstein.pdf Hearn, A. (2015). ¿Confucio versus Zeus? China, Brasil y la producción alimentaria. Revista Nueva Sociedad, 259, 55–68. Retrieved from http://nuso.org/ articulo/confucio-versus-zeus/

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Hirst, M. (2009). La perspectiva Sur-Sur: la importancia del vínculo con Brasil. In G.  Paz & R.  Roett (Eds.), La presencia de China en el hemisferio occidental. Consecuencias para América Latina y Estados Unidos. Libros del Zorzal: Buenos Aires. Khanna, P. (2013). El segundo mundo. Imperios e influencia en el nuevo orden mundial. Barcelona: Paidós. Klinger, J. (2015). Minerales estratégicos: cambio de escala de las relaciones entre China y Brasil. Revista Nueva Sociedad, 259, 106–116. Retrieved from http:// nuso.org/media/articles/downloads/7.TC_Klinger_259.pdf Malamud, C. (2018). ¿Qué política exterior tendrá Brasil? Real Instituto Elcano ARI 119/2018. Retrieved from http://www.realinstitutoelcano. org/wps/wcm/connect/4ca37764-8904-4061-8ee5-37b2993adfdb/ ARI119-2018-Malamud-que-politica-exterior-tendra-Brasil. pdf?MOD=AJPERES&CACHEID=4ca37764-8904-4061-8ee5-37b2993adfdb Mercadante, A. (2013). Brasil: de Lula a Dilma (2003–2013). Clave Intelectual: Madrid. Nedal, D. (2014). La presencia de China en América Latina y sus implicancias para Brasil. In B. Sorj & S. Fausto (Org.), Brasil y América Latina: ¿Qué liderazgo es posible? Plataforma Democrática. IFHC-Centro Edelstein. Retrieved from http://www.plataformademocratica.org/Arquivos/Brasil_y_America_Latina_ Que_Liderazgo_es_Posible.pdf Oviedo, E. (2014). Principales variables para el estudio de las relaciones entre Brasil y China. In R. Bernal-Meza & L. Bizzozero (Eds.), La política internacional de Brasil: de la región al mundo. Cruz del Sur: Montevideo. Pereira, C., & Neves, J. (2011). Brazil and China: South-South Partnership or North-South Competition? Foreign Policy at Brookings, Policy Paper Number 26, 4. Retrieved from http://www.brookings.edu/~/media/research/files/ papers/2011/4/03-brazil-china-pereira/03_brazil_china_pereira.pdf Raggio, A. (2016). Economías de enclave sudamericanas, extractivismo y el rol chino en la region. Serendipia, 2(2), 73–77. Retrieved from https://p3.usal. edu.ar/index.php/serendipia/article/view/4105/5078 Ramón-Berjano, C., Malena, J., & Velloso, M. (2015). El relacionamiento de China con América Latina y Argentina. Significado de la Alianza Estratégica Integral y los recientes acuerdos bilaterales (Documento de Trabajo no. 96). Buenos Aires: Consejo Argentino para las Relaciones Internacionales. Retrieved from http://www.cari.org.ar/pdf/dt96.pdf Reyes, M. (2018). A Projeção Política da República Popular da China: O caso da América do Sul, 2002–2015. Rio de Janeiro: Universidade Federal do Rio de Janeiro.

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Silva, P. (2014). Brasil-China e a parecería estratégica em ciencia e tecnología: o programa CBERS e as novas oportunidades de cooperaçào. Tesis. Programa de Pós-graduação em Relações Internacionais - PPGRI) - Universidade Estadual da Paraíba, João Pessoa. Retrieved from http://tede.bc.uepb.edu.br/jspui/ handle/tede/2359

Other Source The Atlas of Economic Complexity. Website. Retrieved from http://atlas.cid.harvard.edu UN Comtrade Database. Website. Retrieved from http://comtrade.un.org Asociación Latinoamericana de Integración. Foreign Trade Information System. Website. Retrieved from http://consultawebv2.aladi.org/sicoexV2/jsf/ home.seam Rede Nacional de Informações sobre o Investimento. Website. Retrieved from http://investimentos.mdic.gov.br

CHAPTER 5

A Goat’s Cycle: The Relations Between Argentina and the People’s Republic of China During the Kirchner and Macri Administrations (2003–2018) Raúl Bernal-Meza and Juan Manuel Zanabria

Introduction The economic relations between Argentina and China are part of China’s policy toward Latin America, which are based on the needs of China’s urban and industrial development strategy. According to the People’s Republic of China (PRC), the bilateral relationship is based on the ideas of cooperation for mutual benefit, non-intervention in internal affairs, trade Translated from the Spanish by Ana Paula Caruso. [email protected] R. Bernal-Meza (*) Department of International Relations, National University Center, Buenos Aires, Argentina INTE, Arturo Prat University, Iquique, Chile J. M. Zanabria Mercosur’s Cultural Information System, Buenos Aires, Argentina © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_5

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growth, and the deployment of foreign direct investment (FDI) flows that combines Chinese financial and technological needs with the priorities of Latin American countries (Creutzfeldt, 2017). The PRC argues that its relations with Latin America, and therefore also with Argentina, are based on the spirit of South-South cooperation, based on complementarity. However, as the Argentine case shows, there is a “win-­ win rhetoric” (Bernal-Meza, 2016a) at the roots of China’s public policy discourse. The bilateral relations began before the foundation of the PRC, but the political and economic bonds developed following the recognition of the new Chinese State in the United Nations (Oviedo, 2010). The General Assembly of the United Nations approved the project to recognize the government of the People’s Republic of China as the legitimate government of China. Argentina endorsed the resolution, recognizing the PRC and Taiwan as a province of China. China expressed its support for Argentina during the conflict. But its support was most evident in the United Nations, after the conflict. Thus, it has been pointed out that there is a relationship between both recognitions (Vadell, 2011). It was a mutual act of recognition: from Argentina to China for the issue of Taiwan and from China to Argentina for the Malvinas claim. However, this mutual recognition, with mutual diplomatic statements, occurred in the 1990s, under Carlos Menem’s presidency. With the deepening of this relationship, the Argentina-Taiwan relationship deteriorated. Argentina was increasingly willing to respect the one-China principle (Oviedo, 2015). Following the return to democracy in Argentina, in December 1983, all Argentine presidents have paid official visits to China.1 The contemporary relationship began, however, in 1972 when China became the PRC and the Argentine government recognized Beijing’s government as the sole representative of the Chinese state. Since then, both countries entered a period of diplomatic and economic rapprochement, which has deepened since 2003, when the government of Néstor Kirchner (2003–2007) sought to make China into the commercial and financial partner to replace Western powers. From this point forward, China began to play an increasingly relevant role, becoming an important investor and financial lender through the swap system,2 a practice that was continued under the two Peronist governments of Cristina Kirchner and one that Mauricio Macri3 has tried to deepen.4

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The political starting point of this stage in the relations was the decision made by Argentina to make China its most important economic partner after Brazil, an idea based on coincidences about the order in international politics, especially regarding the international economic relations. The recognition of mutual interests included Chinese support for the Argentinean claims for the restitution of the Malvinas Islands; Argentinean recognition of Taiwan as part of China; a lack of questioning regarding human rights violations in China or the Tibet situation; agreement on the topics on the international agenda of concern to developing countries: multilateral trade, reduction of protectionism, contribution to economic development. Argentina tacitly recognized China as a developing country, a political advantage for China, which has always sought to be considered “a developing country and part of the third world” (Bernal-Meza, 2016a, 2016b, 2017). In addition, Argentinean decisions, such as its recognition of China as a market economy, were important for Chinese interests in the WTO. The relationship became the second example in Latin American— after Brazil—of relations based on an international political economy approach, in which political and economic, international and bilateral interests converged.

Elements That Support the Bilateral Relationship In terms of political economy, the relationship between China and Argentina is based on three key elements: harmonious commercial interests (China purchases from Argentina primary products: primarily soybean and soybean oil, and China supplies industrial goods and capital); agreement with respect to the reform of the Bretton Woods system, in favor of greater benefits for the developing countries’ economies; and the common observance of principles of international order such as cooperation, peace, and the rejection of trade protectionism. The bilateral relations were deepened with the signing of the “Integral Strategic Partnership” in July 2014 under the presidency of Cristina Fernández de Kirchner. This is a position that China has only granted to Brazil and Venezuela in South America. However, despite the significant growth of economic relations, the trade agenda has not been free of conflict. China expressed its annoyance at the cancellation of the presidential visit and took economic reprisals affecting Argentine exports.

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China retaliated against Argentine exports highly dependent on Chinese demand, such as soybeans and soybean oil, as a consequence of decisions taken by Cristina Kirchner that did not take into account the impact of Chinese political power.5 Some authors, however, consider that ­anti-­dumping policies applied by the government of Cristina Kirchner were the main cause of Chinese retaliation, as well as decisions taken by the Argentinean justice system, regarding the violation of human rights in China by the Chinese government. Among such authors is Eduardo Oviedo. This author also points to the denunciation and capture of former President Jiang Zemin for violation of Human Rights by the Argentine justice. Argentina, like the rest of the region, became a safe place for China to access minerals, agricultural products, food and energy, which guaranteed a steady income until the 2008 crisis. At the same time, the opportunity to access industrial goods at a lower cost and Chinese direct investments led to a convergence of interests, and so the Latin American economies easily integrated into the Chinese productive structure. The industrial production and consumption of food and energy, oil and gas, of China require Latin American exports. That is why the Latin American economies are integrated into the Chinese productive structure. Problems only arose when the trade balance became increasingly deficient. Thereafter, Chinese financing of public works and infrastructure completed a framework of commercial and financial dependence.

A Goat, a Tiger6 The foundational milestone of the intensification of diplomatic relations between Argentina and the PRC was Argentina’s promise of recognition of PRC’s market economy status in the WTO. At this time, there began a cycle of bilateral relations, with the signature of trade and cooperation treaties, international financial support, and direct purchases from Argentina by the PRC.  The political relationship was the basis for commercial exchange. However, the arrival of the PRC as a strategic partner of Argentina, in a trade scheme that reproduced the North-South model, stressed, affected the objective of reindustrialization of the Argentine government of Néstor and Cristina Kirchner sought to promote. Rather, it was linked to the reconstruction of a neo-developmental state, because China began to provide Argentina’s domestic market with industrial goods at more competitive prices, displacing the local industry and that of its Mercosur industrial partner, Brazil. According to the Virtual Treaty Library, Argentina signed 1962 bilateral treaties between 2003 and 2015, 76 of which were with the PRC, to

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which would be added those that Presidents Macri and Xi Jinping were expected to sign at the G-20 summit in Buenos Aires in December 2018. The most dynamic and productive period in the formalization of diplomatic relations between both states7 was the second government of Cristina Fernández and the first two years of the Macri government. The continuity of Argentinean policy positions favored the strengthening of bilateral relations, which experienced two well-defined periods. The first period, involving the strengthening of trade relations that were more favorable to Argentina, took place from 2003 to 2009. The second stage, of complexity in the economic relationship, corresponds to the two governments of Cristina Fernández de Kirchner. In order to analyze the content of the treaties, the authors applied the following categories: economic, that is, those agreements that impacted on foreign trade and FDI8; political: treaties that aimed to generate coinciding positions in matters of international politics and military affairs9; consular: documents that favored and regulated the movements of Argentine and Chinese citizens in territories belonging to both countries10; and treaties on “[c]ultural, technical and scientific cooperation”.11 This classification helped us to identify where the deepening of the relationship between both states was focused (Fig. 5.1).

Fig. 5.1  Bilateral treaties between Argentina and China by type of treaty (2004–2015). (Authors’ own elaboration using data from the International Trade of the Argentine Republic)

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Evolution of the Signing of Agreements The founding stage, in the 1970s and 1980s, began with the signing of the first, essential agreements on trade, maritime transport, economic cooperation, and science and technology. During the phase of strengthening relations, which we call the “second foundation”, starting in 2004, the strategy of the PRC was one of mutual attraction. Investment projects were agreed on rail transport and energy, an area perceived by the Kirchner administrations as requiring significant investment. In return, the PRC secured mechanisms for the supply of soybeans and derivatives (soybean oil) and access to the Argentine market for consumer goods. Thus 2004 was the year in which Argentina and the PRC established the foundations for strategic cooperation (Bernal-Meza, 2012a: 84). In a context where Argentina was emerging from its greatest social, political, and economic crisis, at the end of 2001, there were positive expectations regarding the outcome of the agreements. For its part, the PRC was just beginning to deploy its strategy in Latin America. To this end, the agreements represented a win-win situation. In subsequent years, the relationship ­developed12 under the logic of a power relationship. Argentina seeks a favorable relationship with China. But China has its own interests and when it does not agree with what it proposes, Argentina uses its power. That is why I say that “relations continued to develop”, as an expression of ambiguity (Fig. 5.2). The commodities crisis caused by the fall of international prices and Chinese demand hit Argentina very hard in 2008. The crisis negatively affected the Chinese-Argentine trade exchange to the detriment of Argentina. But in the case of the Sino-Brazilian exchange the crisis did not affect Brazil. At the height of an internal conflict in Argentine politics, the Argentine President suspended an official visit to China scheduled for a short time later. There are, nevertheless, several indications that would suggest that it was the Chinese government that canceled the visit.13 The truth is that the cancellation of the visit caused particular irritation to the Chinese authorities. In addition, there were some complications on both sides to attend consular services. Chinese consulate in Buenos Aires did not facilitate the attention of the Argentine public and Argentina made it difficult to grant visas to Chinese citizens (Bernal-Meza, 2012a: 88) and another episode in the same year (2010) would further complicate the relationship, when Argentina applied anti-dumping measures to the importing of some Chinese products. The PRC responded by imposing Non-Tariff Measures

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Fig. 5.2  Structure of the bilateral treaties between Argentina and China by type of treaty (2004–2015). (Authors’ own elaboration using data from the International Trade of the Argentine Republic)

on the entry of soybean oil, which temporarily suspended the shipments of processed soybeans (Bernal-Meza, 2012a: 86). These internal and external conditions generated tensions in the bilateral relationship, affecting the fulfillment of the agreements that had been signed. These agreements provide an example of the fact that the commercial relationship was complemented by cooperation actions and agreements in other areas. The qualitative leap taken during this period was the granting of the status of “Integral Strategic Association”14 by the Chinese government to its relations with Argentina, and the subsequent establishment of the Permanent Binational Commission. This ensured an institutionalized negotiation space between both states. In terms of international politics, the relationship appeared to be mutually beneficial. However, a more complex issue came up involving an alleged violation of human rights by the state apparatus of the PRC, toward which

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the Kirchner governments adopted a passive attitude. Although the position of the Kirchner administrations has been to value and promote the struggles of the human rights movements, especially within Argentina, in the period 2003–2015, and throughout Macri’s government, Argentina showed little interest in the claims of the Uighur community, or those of Tibet. In the latter case, the Argentine government, like most of the members of the international community, chose to subordinate human rights issues to the commercial relationship (Bernal-Meza, 2012a: 57; Oviedo, 2015).15 Diplomatic efforts have focused around commercial and financial relations. The value of exports in the period 2003–2015 was US$ 62,240.1 million, rising from US$ 2580.8 million in 2003 and peaking at US$ 6562.3 million in 2008. At the end of the second government of Fernández de Kirchner (december 2015) exports to China had amounted to US$ 5387.516 million. During the whole period, the PRC rose from the fifth to the second position as the destination of Argentine exports. PRC’s exports were even more dynamic than Argentina’s. In 2003, Argentina imported US$ 342.1 million from China, and by the end of the period the value had reached US$  10,737.2  million annually. Therefore, between 2003 and 2015, Argentina paid about US$ 75,350.3 million for products of Chinese origin, creating a deficit in the trade balance of approximately US$ 13,110.2 million. In addition, China became the second provider of goods in Argentina and displaced the United States. As shown in Fig. 5.3, Argentine exports grew between 2003 and 2007, and stagnated from 2007 until the end of the period analyzed (2015). Oviedo (2015) points out that despite the high price of soybeans, Argentina failed to increase its exports of soybeans and derivatives, creating surpluses in bilateral trade. China is the fourth largest producer, the second largest processor, and the biggest consumer and importer of soy in the world. Soybean oil is the vegetable oil most consumed by the Chinese population, and is used, along with pellets, in animal feed. By 2010, Argentina was the top supplier of soybean crude oil to China, contributing 80% of Chinese imports of that product (Sevares, 2012: 338–9). These statistics indicate a deepening commercial relationship. Nonetheless, China has reduced its imports of soybean oil to minimal quantities at present. The Chinese government has invested in grain processing plants, only requiring soybeans to produce oil in Chinese territory. This fact reaffirms the trend for primary specialization in Argentina exacerbated by China by transferring value-added activities to its own territory, such as the process of industrializing soybeans.

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Fig. 5.3  Exports, imports, and total trade balance between 2003 and 2015. (Authors’ own elaboration using data from ALADI)

With the growth in Chinese demand, the area planted with soybeans in Argentina increased from 12,566,885  hectares during the 2002/2003 crop to 20,479,094 hectares in the 2015/2016 crop, that is, an increase of 63% in the surface planted. Production grew even higher in the 2002/2003 crop, from 34,706,662 tons of soybeans to 58,799,258 tons in 2015/2016, showing a growth of 69.5%. The increase in production in relation to the sown area is explained by the average increase in productivity per hectare. In the 2002/2003 crop, yields reached 2803 kilograms per hectare,17 while at the end of the period the yields recorded were of 3015 kilograms per hectare.18 These figures, shown in Table 5.1, reveal the process of specialization that was taking place in Argentina’s agricultural sector, prompted by commercial trade with China. However, as the bilateral relationship progressed and following the aforementioned 2010 political episode, China favored the import of soybeans to the processed product, that is, soybean oil (Bernal-Meza, 2012a: 59). Thus, the PRC began to develop a strategy of import substitution that led to a deterioration in the added value of Argentine exports. Oviedo (2015) argues that toward the end of the Kirchner governments, a “soy primarization” of exports took place. This situation contrasted with a “diversified agricultural primarization” path that had occurred toward the end of 2008 in order to reverse the trade balance deficits that began in 2008.

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Table 5.1  Sown area, production, and yield of soybeans in Argentina Sowing campaign 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016

Sown area (hectares)

Production (tons)

Yield

12,566,885 14,526,606 14,400,002 15,393,474 16,141,338 16,608,935 18,042,895 18,343,940 18,883,429 18,670,937 20,035,572 19,799,462 19,809,300 20,479,094

34,706,662 31,576,752 38,300,006 40,537,368 47,482,787 46,238,890 30,989,474 52,676,218 48,878,774 40,100,197 49,306,202 53,397,720 61,446,556 58,799,258

2803 2207 2728 2679 2971 2821 1848 2905 2607 2281 2539 2774 3175 3015

Source: Open data of the Ministry of Agribusiness

To evaluate Oviedo’s thesis, we used the Simpson index,19 which allows us to observe the diversification, or concentration, of exports. The results, for the period 2003–2015, show that a diversification of primary exports did not take place at the end of the period of the Kirchner governments. While Argentina maintained trade surpluses with the PRC (until 2007), primary exports remained at a low diversification level. As the trade deficit began to grow, Argentine exports to the PRC began a process of primarization, even within the primary sector, explained by specialization in the production of soybeans directed to the Chinese market. Although Argentina and the PRC have made progress in consolidating a regulatory framework that allows for transition toward the diversification of primary exports, this process did not take place in the third Kirchner government and it is not evident under the current government. Argentina does have commercial complementarity with China, but complementarity is greater with other countries of destination of Argentine agricultural exports. With respect to imports, the pattern is the same as in the rest of Latin America. In addition to diversifying its portfolio of business partners, the PRC has also diversified the products it exports to the region, with a preference for high value-added manufacturing. The equation is simple: as the relationship progressed, the PRC began to dominate high valueadded markets, ranging from durable goods such as railway machinery

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and automobiles to consumer goods, such as televisions, computers, and cell phones. Hence, the commercial links are organized following the logic of economic complementarity based on comparative advantages, and not intra-industrial complementarity (Bolinaga & Slipak, 2015).20 At this point, one of the most complex internal conflicts in the Kirchner administrations, which had been trying to promote industrialization. During this period, regional agreements were focused on protecting Argentina’s productive matrix through Mercosur (Bernal-Meza, 2012a: 83). Contradictions emerged when Argentina began to promote its commercial relationship with the PRC and, at the same time, the reconstruction of its industry (Bolinaga & Slipak, 2015). This is when the contradictions in the discourses of the Chinese and Argentine governments and the logic of South-South cooperation became apparent. As the PRC consolidated its position as a great power, its demand for primary products and their derivatives increased. Consequently, the commercial relationship between Argentina and the PRC has tended toward being an inter-sectorial scheme, without generating complementarities in its value chains (BernalMeza, 2012a: 67; Bolinaga & Slipak, 2015; Sevares, 2012: 334). With respect to FDI flows between both countries, Oviedo (2015) points out there was a change in the flow of Chinese investments in Argentina. In 2007, total Chinese direct investment in Argentina exceeded the total investments of Argentina in China for the first time. This flow structure was consolidated in 2010, when several Chinese companies— CNOOC, PetroChina, and ICBC—invested in assets in Argentina.21 At this point, Chinese investments in Argentina appeared as a new aspect of their bilateral relations. Within the period, three modalities of the Chinese investments in Argentina were registered: tax havens, direct foreign investments, and investments in extra-regional countries with an impact on the region. In addition to these modalities, two forms of loans were initiated: currency swaps and loans granted for purchases, direct or by tender, of Chinese products; and loans to the State or subnational entities (provinces or municipalities), with the approval of the Argentine State, to carry out improvements to infrastructure and services (Oviedo, 2017a: 6). As part of the agreements with the PRC relating to direct foreign investment, the Argentine government awarded, in 2013, the construction of two dams to a business group, one of whose members is the Chinese company Gezhouba. Oviedo (2015) points out that, as of 2011, the flow of FDI was paralyzed, and Chinese companies remain in adopted a “wait and see” attitude. But the UNCTAD data do not corroborate this statement. While

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in 2011, flows from China and Hong Kong totaled US$ 132 million, with a stockholding in the country of US$ 380 million, in 2012, the inflow of capital reached US$  195  million, and the stockholding reported in Argentina reached US$  649  million (UNCTAD, 2017). However, as Oviedo (2017) points out, different sources of data can lead to dissimilar conclusions: data reported by Argentina, which is used by UNCTAD and ECLAC, differs greatly from data reported by China. Since some Chinese investments in Argentina are not FDI, but investments made through tax havens, it is appropriate to refer to Chinese capital, which includes direct investments, indirect investments, loans for infrastructure, and swaps. Swaps have been an important economic factor in the bilateral financial relationship. In 2014, the Central Bank of the Argentine Republic (BCRA) finalized a swap agreement of local currencies with the Bank of the PRC, for approximately US$  11,000  million, with a maximum term of three years. The agreement established that the BCRA could request from its Chinese counterpart a disbursement of up to 70,000 million Yuan, and, in return, deposit the equivalent in Argentine pesos, with a repayment term of up to 12 months. The precedent was a commitment signed in 2009 for a currency swap for the equivalent of US$ 10.2 billion. The goal of both agreements was to generate foreign exchange insurance and to guarantee access to international currency in the event of future illiquidity. The 2009 swap was not used, but it created a precedent. The situation was different in 2014, when the international reserves of the BCRA were weaker. The agreement was activated in October 2014, when the BCRA requested a first tranche (US$ 814 million). At that point, the BCRA’s reserves had fallen to US$ 27,346 million. The swap helped to strengthen market confidence, stopped the escalation of the dollar against the peso, and stabilized the balances of bilateral trade. By January 2015, five more tranches were activated, amounting to US$ 3114 million. In October of the same year, after the payment of the Argentine debt bonds (BODEN, 2015), the swap with China represented 40% of the reserves of the BCRA, which explains the search for funds in various ways by the Central Bank’s ­authorities. At the end of 2015, officials from both governments agreed to “continue making progress in the policy and providing continuity” to the swap arrangements and other agreements that the two entities were developing as part of the comprehensive strategic partnership (Gentile & Jara Musuruana, 2015). China began to play an increasingly important role as a source of financing.

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Analysis of the Kirchner Government Period (2003–2015) From the beginning of the twenty-first century, China became Argentina’s second most important trading partner. Up until the agreements of the government of Mauricio Macri with the IMF, in August 2018, the PRC was the largest lender, with the exception of Argentine bonds purchased by the Venezuelan government of Hugo Chávez. Argentina supported China’s entry into the WTO and has been more permissive regarding the entry of Chinese citizens into the country.22 Although China is Argentina’s second largest trading partner after Brazil, during the presidential administration of Cristina Fernández de Kirchner, not one single year of trade surplus with China was generated. Argentina experienced growing trade deficits, matched by an increase in the number of anti-dumping measures (Oviedo, 2016: 286). To understand the process by which China became such an important commercial and financial partner, certain key elements must be taken into account. Argentina provides the clearest example in the region of a commercial relationship process with China that has experienced a broad cycle of economic relations (trade, investments, loans), being initially successful, beneficial, and producing a surplus in Argentina’s trade, but which ended up being deeply deficient and negatively affected its modernization. Moreover, the economic and financial relationship between China and Argentina explains much of the structural deficits of Argentina’s current finances. There are two main explanations for the increased development of the economic relationship between Argentina and China, starting in 2003. First, these relations are part of China’s strategy of incorporating Latin America into its structure of world political and economic relations (Bernal-Meza & Quintanar, 2012; Dussel Peters, 2016; Ellis, 2009; Prieto, Figueredo, & Rodríguez, 2017). Second is Argentina’s growing need to obtain external financing for its public and private sectors (Oviedo, 2016; Sevares, 2015, 2016). The causes of Argentina’s lack of financial resources are its trade deficit23 and its difficulties in obtaining internal financing, in addition to political decisions taken by the government that affected its relations with partners, countries, and organizations that were part of the portfolio of suppliers of traditional capital, such as the United States, some countries of the European Union, the IMF, and the Paris Club. During the governments of Néstor Kirchner and Cristina Fernández

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de Kirchner, Argentina faced international isolation, led by the United States, the European Union, and Japan, which saw the deterioration of commercial and financial ties with these countries. This isolation weakened and, in some cases, stopped commercial and financial relations with countries with which Argentina had a long history, during a period in which the country began to emerge from the default of 2001, and the debt renegotiations were extremely complex. Argentina’s debt, in that year, reached US$ 144,000 million.24 According to Sevares (2016), between 2005 and 2014, Argentina received ten loans from Chinese entities, for an amount of US$ 19,000 million, which were mostly used to finance infrastructure works and purchase railway equipment. China was the exclusive supplier of goods and production inputs in general. China’s loans and investment initiatives were framed in a dense network of bilateral agreements. In 2014, in the context of President Xi Jinping’s visit to Argentina, a framework agreement was signed that included 17 individual agreements, 5 of which were economic and involved extensive Chinese financing for the construction of dams and acquisition of ships and dredges; financing for railway works; irrigation systems; and the construction of the Atucha III nuclear power plant. The total value of the agreements reached US$  8542  million. The Integral Strategic Partnership was established in July 2014, during President Xi’s visit to Argentina. According to Sevares (2016: 263–6), in February 2015, during President Cristina Fernández’ visit to China, 15 agreements were signed, which were questioned in Argentina because they allegedly hurt Argentine companies’ interests. But they were also objected to because they were signed close to the presidential elections of October 2015 and affected the margin for maneuver of the new government. Some of the agreements were challenged as unconstitutional and questioned for other reasons, such as environmental issues or lack of transparency. The agreements affected the “Buy National” system, which protects Argentine companies from competition from foreign companies. They also affected Brazilian companies (Argentina’s main commercial and political partner in Mercosur) that were protected by the Asunción Treaty and its protocols. The construction contract awarded to China for the dams had previously been awarded by tender to a consortium led by Brazilian companies, in which leading Argentine companies had also participated as partners. This awarding of this contract was canceled in favor of Chinese companies and

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investment. The new contract allowed for the hiring of employees of Chinese origin and the use of British courts in the event of differences between both countries. In other words, should a conflict originate between the countries, Argentina would be subject to the rulings of a country with which they had no close or friendly political or commercial ties. These negotiations were questioned in Argentina, since the government had not used the institutional channels that regulate public purchasing. Nonetheless, the agreement should be analyzed in the context of the general situation that included a lack of access to international credit markets, and where the financing conditions offered by the PRC were unbeatable for Argentina. Argentina is the third most industrialized economy in Latin America, after Brazil and Mexico. However, Argentine-Chinese trade is more highly primarized than any other Argentine trade segment, that is, it is based on the export of primary products. This fact demonstrates that Argentine-­ Chinese bilateral trade is part of a core-periphery scheme. Additionally, exports to China have been stagnating since 2008, and the country has an increasingly negative trade balance, due to the importation of industrial products of Chinese origin. Oviedo (2012) argued that China represented in Latin America an example of a “clash of modernizations”, between China’s successful authoritarian modernization model and Latin America’s unfinished effort to modernize its democracy. The Argentine inability to modernize, and the structure of the economic relations that have developed with China, has given rise to what this author calls the “food paradox”, one of the central issues in the conflict between the modernizations of Argentina and China which allows the characterization of the relationship as core-­ periphery. According to Oviedo (2016: 273), although Argentina is an exporter of agricultural products and China is a major importer of food commodities, Argentina transferred huge amounts of foreign currency to China via the trade deficit, causing the decrease in international reserves and the instability of the Argentine peso. At the same time, China emerged as the key to solve the problem through the agreement on exchange of currencies and the granting of loans that stabilized the financial situation in the short term. In this way, in addition to the already consolidated core-periphery model in the commercial area, Argentina developed a dependence on Chinese capital, expanding the bilateral asymmetry and affecting the incipient process of modernization in Argentina.25

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Between 2008 and 2014, amid the worldwide increase in the price of agricultural commodities, Argentina, which allegedly benefited from this boom, transferred more than US$  24,000  million to China, through a trade deficit (Oviedo, 2016: 275). How did we get to this situation? From an international political economy perspective, the bilateral relationship, which began as a cooperation under the umbrella of “South-­South” (cooperation among developing countries), became North-South. Argentina became and remained a primary exporting country, specializing in the export of soybeans and soybean oil, and a growing importer of manufactures, machines, tools, and capital goods. China, keen to generate capital flows to Argentina, decided to establish a currency swap arrangement and grant loans for infrastructure projects, making direct purchases or through public purchasing bidding processes (to national or provincial governments) in exchange for political benefits. One example of this is the construction, establishment, and operation of a Chinese space station in the province of Neuquén. The agreement to create this station was signed before the formation of the so-called Integral Strategic Partnership in 2014, established when President Fernández de Kirchner traveled to China (Oviedo, 2017b). The government of Cristina Fernández tried to resolve the deficit of bilateral trade through Chinese loans through the exchange of coins (swaps). So Argentina got into debt with China, a country that historically was not a creditor, because traditionally its creditors were members of the Paris Club. One of the reasons for Argentina’s interest in obtaining Chinese financing through swaps was the fall in foreign reserves and the growing trade deficit, particularly with China itself. Loans through swaps are not the only instruments to incur debt. Yuans are used to pay for exports (Argentine and Chinese) but there are also loans for medium and long-term investments. These projects are recorded as investments, but, in reality, are loans granted by Chinese banks (Oviedo, 2016), tied to the exclusive provision of Chinese supplies and the presence of Chinese workers (Bernal-Meza, 2012a, 2012b). The official policy toward China, from 2003, was to accommodate an economic relationship shaped by Chinese interests. Later, Argentina started searching for loans and investments to compensate for the lack of financing and investments from other sources. This policy has condemned Argentina to a mainly passive model of economic insertion, based on the export of agricultural products and the purchase of industrial goods (Sevares, 2015).

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The government of Cristina Kirchner put Argentina granted favorable conditions to China that were not granted to other partners Chinese investments enjoy more advantageous bidding processes and Argentina’s government would be able to grant directly, that is, without a public procurement process; projects are awarded to Chinese companies when China offers financing, allowing entry to Chinese workers as well (Sevares, 2015). Macri, on his first trip to China as President, tried to change some of these conditions, with little success. However, according to Oviedo (2017b), the Chinese government was very concerned about the future of the bilateral relations as a consequence of the change of government in Argentina. Specifically, they were worried about the possibility of Macri directing his foreign policy toward Western partners to the detriment of China.

The Legacy of the Kirchner Governments At the time of the change of government in 2015—Cristina Fernández to Macri—the financial balance sheet showed Argentina transferred US$  30,815  million via its trade deficit to China between 2008 and 2015, with US$ 8000 million (plus interest) owed for the swap agreement and the payment of the loans for investments in railways and infrastructure. Argentina initiated a structural process of dependence on the PRC, consolidating a core-periphery scheme in their commercial exchange, which transferred currencies from the periphery to the center and led to an expansion of their bilateral asymmetry. Given Argentina’s default situation, the currency swap with China was a mechanism designed to stabilize the exchange rate in the short term. According to Oviedo, the government of Cristina Fernández de Kirchner strengthened the links with China, expanding the political asymmetry, the core-periphery relationship, the trade deficit, and initiating Argentine dependence on Chinese capital through loans. A history of bilateral Argentine-Chinese relations will view the second government of Fernández de Kirchner as the initiator of external debt with China, a country that did not even appear on the “radar” for loans and investments until after the global economic crisis started in 2008 (Oviedo, 2016, 2017b).

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Changes in Mauricio Macri’s Government (2015–2017)26 Argentina’s relationship with China represents one of the few lines of continuity between the foreign policy of the preceding Argentinean governments and the current one. During the governments of Néstor Kirchner and Cristina Fernández de Kirchner, China played the role of commercial, financial, and political substitute for Argentina’s relations with the United States and the European Union, lessening the importance of these traditional partners. Under the current government, China is an important partner, albeit not an exclusive one, in terms of Argentina’s international economic relations. It can be said the new government has modified Argentinean foreign policy toward China, putting an emphasis on the impact of Chinese capital in Argentina. The elimination of foreign currency exchange control, the payment to holdouts, and the return to the international capital market has diluted the growing dependence on Chinese capital. Nevertheless, the influence of Chinese capital and its markets in the external economic relations of Argentina persists (Oviedo, 2017b: 12). The political profile adopted by Macri chooses to maintain diplomatic relations where Argentina is dependent on Chinese economic and business decisions, bound by debts and investments previously committed. Macri has renewed the swaps agreement and closed an agreement to extend it by more than US$10 billion. The agreement is an extension of the existing swap for a total of 70 billion Yuan, that is, some US$ 8.750 million. The additional loan is equivalent to about 60 billion Yuan, that is, about US$  10,210  million, which brings the loans to a total of US$ 18,960 million.27 In the second figures is the effect of the devaluation of the peso. The improvement in Argentina’s political relations with the United States, which included the first visit of the Pentagon chief to Buenos Aires since Carlos Menem’s presidency in the 1990s,28 placed on the bilateral (and regional) agenda American concerns about the influence that China is having on the Latin American economies, and fear of a loss of sovereignty by the countries in the region. Argentina’s economic and financial situation forced President Macri to reach an agreement with the IMF in September 2018 for US$ 57,000 million, for which he had the broad support of President Donald Trump.29

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The first action of Macri’s administration to impact on ties with the PRC was the suspension of the infrastructure works in which Chinese state companies participated. This was a consequence of the terms that China had previously established. Throughout the Kirchner governments, arrangements had been guided by a “cross default” clause. That is, according to the terms of a contract that includes several projects, the review of one of them will put a halt on of all of them. By suspending the execution of most of the public works in Argentina during 2016, the Macri government created the conditions for the Chinese government to activate the “cross default” clause. In particular, two dam construction projects in the south of Argentina were interrupted, based on technical arguments. Official documents indicated problems in environmental impact studies. The press also pointed out that the technology that the PRC offered for these projects would not have been as cutting edge as in most of the projects of this type that the PRC finances around the world. The conflict with the PRC begun when the new Argentine government decided to continue with the projects agreed during the Kirchner governments in the north of the country while reviewing those in the south of the country. Thus, an emergency clause that had been established to generate stability and predictability in the deployment of Chinese FDI in Argentina came to the fore. Beijing’s response to the suspensions grew stronger, to the point of sending official notifications reminding the Argentine government that they were opening the door to the review of more than US$ 7000 million in projects, along with the extension of construction deadlines and financing conditions. These topics were discussed by the presidents at the bilateral meeting in Washington during the Nuclear Security Summit (2016), and in Hangzhou, during the G20 summit (2016). They were also recently discussed during the official visit of the Argentine president to the PRC, in May 2017. Another topic that generated tensions in the relationship has to do with the “swap”, a financial tool proposed by the Beijing authorities as a contingency insurance for investments in Argentina. Instead of keeping reserves in Yuans, the new Argentine government converted more than 30% of the swap to US currency shortly after taking control of the monetary authority. The tool, which contributed the equivalent of US$ 11,000 million of international reserves in Chinese currency, was used to convert them to US dollars, with the objective of facing debt maturities. Two-thirds of this sum was converted during the administration of Cristina Fernández and the remaining part under Macri’s government.

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During the first year and a half of management of the Macri’s government, the international price of soybean entered a downward phase reaching the floor of US$ 336 per ton in the Chicago market in June 2017. Even though purchases of Argentine soya beans (in grain) remain on the rise (while soybean oil purchases are down), the oversupply, together with the Brazilian devaluation—Brazil is a direct competitor in this market— saturated this global market (Gasalla, 2017). The tensions generated by the issue surrounding the dams had an impact on the Chinese purchase of Argentine soybean oil, although, as already explained, China imports soybean oil in very small quantities. China has made large investments domestically to build grain-crushing plants, which explains why China imports largely soybeans. During 2016, China practically did not buy any soybean oil; only soybeans. The strategy adopted in 2010  in response to the dumping complaint was repeated. When Argentina did not resolve the negotiation on an issue that affects Beijing’s interests, Beijing retaliated by canceling the purchase of soybean oil (LPO, 2016; Super Campo, 2016). By the middle of 2017, the Argentine government had managed to diversify its sources of financing, which strengthened its financial position. The new Argentine diplomatic strategy, bringing it closer to Washington, allowed the government to negotiate more comfortably, since it did not depend on financing from Beijing. The main winner of Macri’s presidential summit in Beijing was the PRC. A participant in the meeting anonymously confirmed that for the official visit of the Argentine President the Chinese government offered only one date during which Macri could renegotiate the agreements signed during the presidency of Cristina Fernández. The fact is that the state’s official hearing took place the day after the Belt and Road Forum. During this forum, President Xi sought to obtain broad support from foreign participants. That support would serve him internally for his goal of being reelected. The memorandum of understanding signed in 2004 had included China being recognized as a market economy. Following the entry of the PRC into the WTO system, 2016 was set as the deadline for WTO member states to recognize China as a market economy. This meant that any country in the rest of the world could apply anti-dumping complaints, provided that they demonstrated that the PRC had sold at lower prices in third markets. Argentina actually accepted the Chinese terms regarding dumping practices. Argentina lowered the barriers to the entry of Chinese products into its market and favored China’s international position by supporting

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its position vis-à-vis the WTO. This measure was met with great frustration by Argentine businesses who perceived Chinese industrial production as a threat (Rebossio, 2017). With regard to the investment projects, deadlines, technical issues, and the cost of the hydroelectric project were renegotiated. The reforms reduced the cost of the dams from US$ 7.6 billion to US$ 5 billion, and the estimated production capacity from 1740 megawatts to 1290 megawatts due to a reduction in the number of turbines. The Argentine ambassador in the PRC pointed out that after the meetings of May 2017, financing packages were agreed: US$ 5000 million for the two hydroelectric plants in the province of Santa Cruz; US$  12,000  million for two nuclear power plants: “Atucha IV and Atucha V”; US$ 2700 million to recover the “Belgrano Cargas railroad”; US$  1800  million for two gas pipelines in Córdoba; US$ 360 million for an aqueduct and road infrastructure in Entre Ríos; US$  350  million for a photovoltaic generation program in Jujuy; and US$ 800 million for a solar energy project in San Juan and La Rioja (Agencia Telam, 2017). One important project, due to its strategic and international impact, is the construction of a Deep Space Station, designed for the use of and to be operated by the Chinese State, which was agreed upon under the presidency of Cristina Kirchner. Argentina granted China a 50-year concession to build and manage a space facility in the south-west of the country, China’s first installation in the southern hemisphere of this type. A dedicated space of 208 hectares was provided to build and operate a space facility in a remote area near the Chilean border for a period of 50 years. Although it was announced that the installation will be used for China’s lunar program and, therefore, is purely for scientific purposes, this project is very controversial due to its military and geopolitical implications. The station’s main asset is an antenna of 35  meters in diameter that allows communication with devices such as satellites, although critics warn that the military uses of such an installation cannot be ruled out due to the dual-use technology of the antenna. The installation, which will be administered by a Chinese company, is expected to be fully operational by 2018 (Cardenal, 2018: 49). This agreement was subject to strong criticism in Argentina, given the exceptional facility granted to the Chinese State. During Macri’s visit to Hangzhou in 2016, a modifying addendum to the agreement for the development of the station was established. The addendum is in the Virtual Library of Treaties of the Foreign Ministry: the only addendum related to the peaceful purpose of the station.

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The reversal of the trade deficit with China is a major challenge for the government of President Macri. According to INDEC data, between 2007 and 2015 the cumulative deficit amounted to US$ 30,739 million. In 2015, the bilateral trade deficit amounted to US$ 6575 million, while in 2016 transfers to China accounted for US$ 5823 million. This was the largest deficit recorded during Macri’s time in government with all the countries with which Argentina trades. If we add the trade deficit accrued in 2016, the accumulated deficit between 2007 and 2016 reached US$ 36,562 million (Oviedo, 2017b: 30). In sum, at the presidential bilateral meeting of May 2017, the People’s Republic of China managed to reaffirm its recognition as market economy by Argentina. The issue of “cross default” raised by the review of contracts in the dams of Patagonia was also resolved. More questions have arisen as the financial bond has intensified, since in less than four years, the Chinese State will have become the leading foreign investor in Argentina. The other field of concern is that of diplomacy. However, although Argentina and China have signed 137 international treaties, all in a relatively short period of time, that number of agreements is comparatively small if we compare it with the 703 treaties that Argentina signed with Brazil (first commercial partner) or the 688 treaties signed with Chile.30

Conclusion The relationship between Argentina and the PRC is the result of the rise of the PRC in the world, which had a great impact on the Argentine economy and its structure. The PRC approached Latin America, and particularly Argentina, looking for resources to sustain an internal process of urbanization and industrialization over time. The Kirchner administrations sought out the PRC market for primary exports, seeing China as an extra-regional partner in the face of the Washington Consensus crisis, and an ally that could provide external financing given the difficulties in obtaining financial resources in the international capital markets. Argentina wanted to diversify its exports to China and requested that from the Chinese government. However, what happened was that China added to its exports of industrial products the financing of new projects, the sale of engineering services, energy infrastructure, and railways. In the political and diplomatic field, the relationship is relatively well balanced. Argentina strengthened its historical ties with the PRC in the United Nations and relied on this country and other developing powers at

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a time of estrangement from the United States and other Washington Consensus institutions. In the diplomatic arena, Argentina and China signed bilateral agreements in record time to strengthen mainly economic but also technical, cultural, scientific, political, and consular ties. However, China, as a great power, has conducted adverse realpolitik practices against Argentina (Bernal-Meza, 2012b). As far as political economy is concerned, the relations between Argentina and China fit within the general analysis provided by Li Mingqi (2005) and Li Xing (2010) to explain the impact of China on what it has constituted as part of its semi-periphery (i.e. countries that were in the process of industrialization and modernization, such as Argentina, Mexico, and Brazil) and its periphery (in general, the rest of Latin America, the Caribbean, and Africa). China has generated a structure of international economic relations with Latin America, of which Argentina is one of the main actors, that makes the South American countries dependent on it. This has an impact on South American integration strategies, because China substitutes South American partners who are no longer each other’s priorities (Dussel Peters, 2016). This places China in a dominant position within international economic relations, which impacts on the international political economy through the negative modifications in regionalism (loss of relevance of Mercosur, in Argentina’s case) and with the creation of an international network of commerce, investments, and finances with Beijing at the center. As a result of the annual transfers of dollars to China, the international reserves of the Central Bank of Argentina decreased by US$  19  billion between 2008 and 2014 (Oviedo, 2016: 276). However, in terms of economic development goals, in which modernization (infrastructure, technology, industry, and exports) is an essential requirement, China has become a strategic obstacle. Up until the end of the governments of Cristina Fernández de Kirchner, Argentina used anti-­ dumping measures and complaints as instruments of protection of Argentine industry against Chinese imports. In contrast, Mauricio Macri has used the exchange rate, based on devaluations of the Argentine peso, which led to a more than 100% depreciation of the Argentine currency in one year.31 The territorial, productive, market, image, and regional influences of Argentina, albeit smaller than those of Brazil, make Argentina an important partner for China and has provided strategic benefits.32 The installation of a deep space observation station in Patagonia would allow China

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to develop military satellite tracking.33 This issue was solved during Macri’s visit with the aforementioned addendum. The agreement was signed in 2014, within the frame of a broader agreement for the construction of a fourth nuclear power plant, with a Chinese investment of US$  3.8  billion.34 The agreement gives China tax exemptions and freedom to bring in Chinese technicians and workers, whose work will be governed by Chinese law, not by Argentine labor laws (Sevares, 2015: 127). However, the terms of the agreement were modified in 2018. During Macri’s visit to China, both countries had agreed on the construction of two thermo-nuclear power plants. The main modification made in 2018 was that the construction of Atucha IV was canceled and the Atucha V power plant was pushed forward. This is an important modification given that, during Macri’s visit, it was agreed that both would be built. In addition, the issue of corruption in Argentina has prompted the Argentine government to request that the Chinese company Gezhouba take over the work that should have been done by the company Electroingeniería. Three companies were in charge of those jobs. One of them is Electroingeniería and it is this company that has been questioned in relation to the payment of bribes. Hence, of the three companies originally employed for the construction of the dams in the south, only two remain. These issues, which might have been agenda items for agreement during President Xi’s visit to Argentina in December 2018, were reported on in the Argentine press. However, it was the Argentine government who requested the cancellation of Atucha IV project. Through the analysis carried out in this chapter, it has been demonstrated how Argentina’s commercial and financial relationship with China has impacted on the Argentine economy, modifying even its agricultural productive specialization. Historically, Argentina was known worldwide for its large-scale wheat production, thanks to which it was known as “the world’s barn”. Today, Argentina is known for its production and export of soybeans, a food that has never been part of the diet of Argentine people. It is paradoxical that Argentina has placed so much reliance on China, when everything it provides—in terms of exports, imports, investments, and financing—could be obtained from its relations with the major capitalist economies (from the United States to Europe and from Japan to South Korea). This has been justified by the increasing deterioration in its relations with the United States, Spain, France, or even minor partners as in the case of Japan and South Korea, which has led to its regarding China as compensatory actor. This position may be reversed as Macri reconstructs

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Argentina’s international relations with the West. Additionally, the image of China as an economic partner has been under question for several years, because of the dependent nature that it fosters in its partners, within the core-periphery structure in which its commercial relations are developed.35 A similar situation occurs in the economic and financial fields of international exchanges, “where China has been the axis of Argentina’s foreign trade policy towards the subregion; while the rest of the East Asian countries remain far from the Argentine commercial radar. Both policies—commercial and financial—are in contradiction with an integral approach towards all the countries of the subregion” (Oviedo, 2017a: 7). Although it should be understood that the deterioration of the Argentine currency is not exclusively the responsibility of Argentina’s commercial dealings with China, since Argentina has historically suffered from low productivity and a high internal cost of its industrial production and services, it is true that China is responsible for a significant part of the Argentine economic crisis. As a consequence of the permanent and growing trade deficit and Argentina’s indebtedness via swaps, China will not need to hold Argentine pesos, especially when, by August 2018, they had devalued by 100% against the dollar. The currency swaps with China reinforced its economic-financial presence, since the Yuan cannot be freely converted without the permission of the Chinese authorities, and, in the even that they are not returned, they can only be used to buy Chinese products (Sevares, 2016: 268–9). The reciprocity of commercial interests between the two countries, between Argentinean primary exports (mainly soybean and soybean oil) and industrial imports from China, created a commercial relationship of inter-industry and inter-sector exchanges, which was the origin of the complex economic and financial situation that currently exists between them. The deepening ties and the growing role of China in the political economy of Argentina has resulted from two processes: the core-periphery trade relationship and the political decision of the Argentine governments of Néstor Kirchner and Cristina Fernández de Kirchner to remove Argentina from the sphere of relations and influences of the United States, the European Union, and the organizations led by them: the IMF and the Paris Club. This generated a process of increasing dependence on China’s economic and financial policy. Of all the Argentine foreign trade, the one that concentrates the greater proportion of export of primary products is the commerce with China (Sevares, 2015: 129). If we consider that Argentina is the country with the

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second largest industrial structure in South America, we can grasp the enormous cost in levels of economic development that the bilateral relationship with Beijing has incurred. Argentina is currently going through a severe economic and financial crisis, with the peso having undergone a devaluation of 75.30% against the dollar since the current government of Mauricio Macri took office in December 2015 until October 2018,36 reaching 100% if we take into account the devaluation carryover from the last months of the previous presidency. As a consequence, its exports are not very competitive. However, China played a significant part in the Argentine economic crisis of 2018 as a result of the permanent and growing trade deficit and the indebtedness via swaps. Macri has tried to change the international orientation of Argentine interests: from China to the West and changed the external orientation taken by the government of Cristina Fernández de Kirchner, primarily by returning to the international capital markets and by normalizing its political ties with the main economies of the Western world. In terms of investments, there were also important changes that impacted relations with all international actors, including China (Oviedo, 2017b: 13). What does the future look like? Clearly, China’s demand for soy, investments, and financing has strengthened the Chinese presence in the Argentine economy. Chinese government confirmation that the country will begin to reduce its global imports of soybeans by about 12%, from October 1, 2018, will affect Argentina,37 even though soybean exports to China account for no more than 20% of its production. Even so, this situation will deepen the Argentine trade deficit and consequently its indebtedness to China. Thus, unless Argentina makes efforts to diversify the basket of its primary export products and starts the process of changing its position in the international market, moving to an industrial pattern and regaining its economic and financial links with the capitalist powers, it will maintain a peripheral condition with respect to China. The negative impact of this will affect Argentina’s economic and industrial development, causing dependency and underdevelopment. On the one hand, there was trade creation between the two countries. On the other hand, this trade fell within the PRC’s goals in the region: the provision of primary resources. In this sense, Argentina has repeated a trade scheme similar to that of the agro-export period (1880–1940), based on classic comparative advantages. Some authors suggest the transition to a diversified primary trade

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structure with the PRC, but we have not found empirical evidence of this trend, rather the opposite. It is a challenge for the authorities of the Argentine Republic to find the means to diversify exports to China. With regards to financial flows, both financial flows and Chinese FDI stocks in Argentina have no particular relevance, although a change in the trend of flows is evidenced since 2007. After the Kirchner governments cycle, a second stage in FDI flows began, with the PRC positioning itself as one of the main partners in terms of financing public works in Argentina. The illiquidity and swaps insurance policies of 2009, 2014, and 2018 agreed between Argentina and the PRC contributed to the management of the exchange policy. The Argentina of the Kirchner administrations was stuck with the dilemma of making efforts to maintain an industrialization process, while China pressed for the country to develop a primary structure, subsidiary to China’s urban and industrial development. Macri tried to modify some of the negative aspects of a relationship that is becoming increasingly complex. The development and deepening of the core-periphery relationship with China has two causes. The first is the enormous advantages in scientific-­technological development that China has accumulated in relation to the countries that today constitute its periphery. Second, there was a huge gap in terms of productivity: very high in China and low in Argentina. In a sense, China has exacerbated—not only in Argentina’s case, but also for the rest of the countries of the Latin American region— the failure of the modernization of economic structures and the process of international insertion by industrialization (import substitution industrialization). It has also gone hand in hand with the failure of socio-economic modernization in democracy. Argentina’s standards of social development have deteriorated, its poverty levels have grown, and inequality in wealth distribution has deepened, while its democracy is seen as fragile, with high levels of corruption. In late 2018, after the conclusion of the G20 summit in Buenos Aires, Presidents Macri and Xi Jinping announced the signing of 30 new commercial, investment, and financial agreements, the expansion of the exchange of currencies (swap) by 60,000 million Yuans (US$ 8700 million), as well as Chinese investments and agricultural exports for the next five years for US$ 5000 million. Argentina has recognized the importance of the infrastructure plans of the “One Belt One Road” but does not participate in it. The agreements include a Joint Action Plan 2019–2023, Extension of the

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Validity of the Memorandum of Understanding for the Establishment of a Strategic Dialogue Mechanism for Economic Cooperation and Coordination, Convention for the Elimination on Double Taxation, Memorandum of Understanding for the Strengthening of Fiscal and Financial Cooperation, Expansion of the SWAP of currencies for up to $9000  million, Cultural, Scientific, Technological Cooperation and recognition of higher education, among others. China becomes the main source of financing for Argentina and one of the main investors, whose first place continues to be occupied by the United States.38 Under the conditions in which China has negotiated its agreements with Argentina, the advantages are enormous for the Asian country,39 because they are connected to Chinese productive chains but not to the Argentine productive structure. Argentina, as part of the semi-periphery and in the process of peripheralization, within the framework of the world system economy, according to the World System Theory40 and on the basis of core-periphery morphology,41 has made China an essential country.

Notes 1. Raúl Alfonsín, Carlos Saúl Menem, Fernando De la Rúa, Néstor Kirchner, Cristina Fernández, and the current President Mauricio Macri. 2. A swap is a mechanism by which two agents (governments, banks, companies) commit to exchange currency or money on certain dates. The operation is not carried out immediately but in “installments”, that is, amounts and dates throughout an agreed period. In October 2014, Argentina negotiated a credit in Chinese Yuan equivalent to US  $11  billion. This does not mean that said amount has entered instantaneously into the local economy, but rather that the Central Bank of the Argentine Republic incorporated these currencies progressively according to domestic needs. http://chequeado.com/el-explicador/que-es-el-swap-chino/ 3. The direction of Macri’s government is not yet clear. For some authors, he discontinued the policies of the Kirchner administrations (2003–2015). For others, he persists with clientelist practices. Some see it as a liberal government, although not all his actions fit with this ideology. For example, the imposition of taxes on financial income, the persistence of taxes on soybeans and industrial exports. Some see it as a conservative administration, although recognizing changes with respect to the predecessor’s policies. But they all see it as developmentalist. The social policies adopted show his government to be right-wing populist.

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4. Government confirmed that it has opened negotiations with the People’s Republic of China to expand the current currency swap and strengthen the Central Bank’s international reserves. Cfr. https://www.infobae.com/ economia/finanzas-y-negocios/2018/06/06/el-gobierno-buscaampliar-el-swap-de-divisas-con-china-para-reforzar-the-reserves-of-bcra/ 5. The issue here was the postponement of Cristina de Kirchner’s official visit to China; decision taken for reasons of internal policy and with only a few days’ notice. Cfr. Bernal-Meza (2012a, 2012b). However, there is another issue that could explain Chinese retaliation: the extradition requests of former President Jiang Zemin and other leaders of the Chinese Communist Party for Human Rights’ violation. Little has been said about this issue in Argentina, the main problem remained the fact that the date of Cristina Fernández’s visit to China was postponed. 6. The year 2003, the year of the goat according to the Chinese Horoscope, coincides with the beginning of Néstor Kirchner’s presidency. While in 2010, the year of the tiger, the bilateral relationship underwent episodes of attrition and reactivation under Cristina Fernández de Kirchner’s presidency. 7. In 1947, Argentina and the PRC signed the Friendship Treaty. Diplomatic relations would be restored in February 1972. Between 1947 and 2015, 132 bilateral agreements were signed, 76 of which took place in the Kirchner administrations. 8. Examples: Memorandum of understanding on investments between the Ministry of Economy and Production of the Argentine Republic and the Ministry of Commerce of the Republic of Commerce of the PRC (2004). Memorandum of Understanding between the Ministry of Agriculture, Livestock and Fisheries of the Argentine Republic and the State Administration of Grains of the PRC (2012). Agreement between the Government of the Argentine Republic and the Government of the PRC on cooperation in the construction project of a pressurized water reactor in Argentina (2015), among others. 9. Examples: Memorandum of understanding on the strengthening of exchange and cooperation in defense between the Ministry of Defense of the Argentine Republic and the Ministry of National Defense of the PRC (2007). Joint declaration between the Government of the PRC and the Government of the Argentine Republic (2012). Memorandum of understanding for the establishment of the Permanent Binational Commission between the Government of the Argentine Republic and the Government of the PRC (2013). 10. Examples: Agreement between the Governments of the Argentine Republic and the PRC for the facilitation of visas for business travelers (2012). Extradition treaty between the Argentine Republic and the PRC (2013). Agreement between the Argentine Republic and the PRC on the facilitation of the issuance of tourist visas (2015).

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11. Examples: Agreement between the Government of the Argentine Republic and the Government of the PRC on civil air transport (2004). Agreement on cooperation in nuclear energy between the Ministry of Federal Planning, Public Investment and Services of the Argentine Republic and National Energy Administration of China (2012). Executive program of cultural cooperation between the Government of the Argentine Republic and the Government of the PRC for the years 2015–2018 (2015). 12. For a broader analysis of the key policies on which the first Kirchner government was built, see Varesi (2010). 13. See endnote 6. 14. Argentina has been rated by China as a “strategic” partner, a special rank it shares with Brazil, Mexico, and Venezuela (Bernal-Meza, 2012a: 59). 15. There is an important fact that is omitted in the analysis: the alliances in forums and international institutions. “In the Argentine geopolitical strategy, the country was part of the alliances that opposed the USA, the EU and Japan, coordinating positions with Brazil, China and India” (BernalMeza, 2012a: 82). 16. Source: ALADI. 17. In 1970, the yield per hectare of soybeans was approx. 1600 kg/ha. The increase in productivity was dramatic in the mid-1990s, jumping to a minimum of 2500  kg/ha, with the introduction of technology. From that point, and particularly in the period studied, the productivity increments are marginal. That is, innovations do not generate productivity differentials as large as in the 1980s and 1990s. 18. Data from the Ministry of Agribusiness—Argentina (2017). 19. The Simpson index for selected exports in a year was defined as follows: D=

∑

S

n ( ni − 1)

i =1 i

N ( N − 1)

where D is the diversity, S the total of tariff positions, N the total value of exports of the selected tariff positions in that year, n the total of exports for each position in that year. 20. Bolinaga and Slipak (2015) present the Grubel-Lloyd Index to explore whether there is inter-industry complementarity in trade between Argentina and the PRC. The empirical evidence shows that far from building a mutual development partnership, the link with its second commercial partner developed without any intra-industrial complementarity (Bolinaga & Slipak, 2015). 21. Also to be considered, is the purchase of Nidera by COFCO in 2016. 22. The issue of Chinese workers requires further analysis. The increase in the number of Chinese nationals in Argentina does not comes as a consequence of specific agreements. However, in recent years, due to the establishment

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of Chinese companies and project development in Argentina, migration has grown. In this regard, the need for qualified technical personnel for project development is clear. For example, investments and works in the railway sector require a large number of Chinese technicians, that is, engineers, experts in systems, signaling, and others. These tasks can only be carried out by Chinese personnel. To support these people, companies bring their own chefs from China or hire Chinese chefs from local Chinese restaurants. As a consequence, there has been an observable decrease in Chinese restaurants in Buenos Aires, since chefs work instead for companies or corporations that pay a higher salary, sometimes in dollars. For more complete information, see the Eduardo Oviedo chapter in this same book. 23. Argentina has maintained a permanent trade deficit with its main partner, Brazil, for decades. 24. Smink, Verónica (2011): “A diez años del ‘default’. ¿Cuánto sigue debiendo la Argentina?” BBC Mundo, December 23, 2011. 25. Original in Spanish. Translated by the translator. 26. At the beginning of December 2018, at G20 meetings in Buenos Aires, President Xi made a second state visit to Argentina. This chapter concludes its analysis in October 2018. 27. http://www.ambito.com/934601-bcra-renueva-swap-con-china-pormas-de-us-10000-millones 28. United States Secretary of Defense, James Mattis, visited Argentina on August 15, 2018. 29. https://www.infobae.com/economia/2018/09/04/mauricio-macrihablo-con-donald-trump-antes-de-la-reunion-del-equipo-economicocon-el-fmi/ 30. Source: compiled by the authors based on Virtual Treaty Library. Argentina’s Ministry of Foreign Affairs and Worship (2017). 31. https://www.infobae.com/economia/2018/08/30/en-el-transcursode-2018-el-peso-argentino-perdio-mas-de-la-mitad-de-su-valor/ 32. Argentina granted China a 50-year concession to build and manage a space facility in the south-west of the country, China’s first facility in the southern hemisphere. A dedicated area of 208 hectares was provided to build and run a space facility in a remote area near the Chilean border for a period of 50 years. Although it has been announced that the installation will be used for China’s lunar program and, therefore, is purely for scientific purposes, this project is very controversial due to its military and geopolitical implications. The main asset of the station is an antenna of 35  meters in diameter that allows communication with devices such as satellites, although critics warn that the military uses of such an installation cannot be ruled out due to the dual-use technology of the antenna. The installation, which will be administered by a state company, is expected to be fully operational by 2018 (Cardenal, 2018: 49).

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33. https://www.nytimes.com/es/2018/07/28/china-america-latinaargentina/ 34. As a result of this, the Argentine Senate gave their approval for the installation of the space station. 35. Cfr. Bernal-Meza and Quintanar (2012), Guelar (2013), Sevares (2015), Oviedo (2016), Bernal-Meza (2016a), Moneta and Cesarín (2016), Pastrana and Gehring (2017), Cardenal (2018). 36. https://www.infobae.com/economia/2018/08/30/en-el-transcursode-2018-el-peso-argentino-perdio-mas-de-la-mitad-de-su-valor/ 37. Cfr. “China confirmó que comprará menos soja”, La Nación, September 13, 2018, Section ‘Economía’: 22. 38. Available on Clarin.com, “Con 30 nuevos acuerdos, China es uno de los mayores inversores de Argentina”, 12-03-2018. https://www.clarin.com/politica/30-nuevos-acuerdos-china-mayoresinversores-argentina_0_vOMWyJ4KU.html 39. “Macri’s intention to review the conditions for the construction of the hydroelectric dams Kirchner and Cepernic in the south of the country, which involved a loan amounting to 4.7 billion dollars, ended in nothing when Beijing made it clear that the cancellation of this project would lead to the revocation of a 2100 million loan previously granted to renovate the Belgrano Project, the main railway infrastructure in the country. A letter from the China Development Bank to the Argentine government in March 2017 said that ‘the Kirchner-Cepernic dams and the Belgrano project are large projects promoted by the [Chinese Communist] Party’ and each of the agreements contain cross default clauses”. At a later stage, both countries agreed to reduce the capacity of the two dams that are allegedly the largest built by a Chinese company abroad. Rubén Rabanal, “La Argentina acordó con China ante amenaza de cross default”. Ámbito Financiero, March 24, 2017, www.ambito.com/833726-laargentina-acordo-conchina-ante-amenaza-de-cross-default. Cardenal (2018: 51). 40. Wallerstein (1974a, 1974b). See also Arrighi (1985, 1998). 41. Prebisch (1949, 1951).

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CHAPTER 6

China–Venezuela Relations in a Context of Change José Briceño-Ruiz and Norbert Molina Medina

Introduction Venezuela’s diplomatic links with China began in 1936 when a General Consulate was established in Shanghai, and, afterwards, an Extraordinary Envoy and Minister Plenipotentiary of China was appointed in Caracas in August 1941. Li Dijun, a diplomatic official appointed by China, presented his Letters of Credence to President Isaías Medina Angarita on April 1943 and the Legation of China was installed in the Venezuelan capital. In the following decades, Venezuelan relations with China were influenced by the rise to power of the communist movement led by Mao TseTung. Like most Latin American countries, Venezuela recognized the Chinese government in Taiwan, a situation that was modified in 1974,

J. Briceño-Ruiz (*) The Latin American and Caribbean Research Center (CIALC), Universidad Autónoma de México, Mexico City, Mexico N. Molina Medina Center of African and Asian Studies of the University of the Andes, Mérida, Venezuela © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_6

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when the government in Beijing was finally recognized (see Molina Medina, 2015). Between 1974 and 1999, the relations between China and Venezuela took a low profile. A new period began with victory of Hugo Chávez in the 1998 elections. Bilateral relations were modest in 1999: China and Venezuela had signed just 19 agreements up to that year, but from 1999 onward, more than 400 agreements have been signed, of which about 200 are fully operational. Hence, the “Chávez era” has been a new period in which unprecedented levels of political and economic cooperation have been achieved. Chávez’ aspirations for global and regional leadership and the increasing involvement of China in the Global South in general, and in Latin America in particular, are crucial factors in understanding the recent period of Chinese–Venezuelan relations. This chapter evaluates the period of Chinese–Venezuelan relations that began with the rise to power of Chávez in 1999, and is divided into three sections. The first section describes and evaluates the diverse agreements and political and economic actions that China and Venezuela have furthered in the last few years. The second section examines the results of the diverse bilateral initiatives between China and Venezuela. Finally, the logic behind the Chinese–Venezuelan rapprochement is explained in the last section of the chapter.

Chinese–Venezuelan Relations in Action The beginning of the China–Venezuela rapprochement began with the presidential tour of Asia undertaken by Chávez in October 1999 that included Beijing, Shanghai, and Hong Kong (MRE, 2000: 144, 193–4; see also Molina Medina, 2009). Chávez reached agreement with President Jiang Zemin (1993–2003) to promote mechanisms for the construction of a multipolar world, based on the respect of sovereignty and self-­ determination. Chávez also signed a Memorandum of Understanding on the creation of the Joint Commission on Energy and a letter of intent on the supply of Orimulsion (emulsified oil). Agreements in areas such as academic cooperation, infrastructure, energy, and mines and a credit agreement amounting to US$ 30 million for agricultural machinery, were also signed (MRE, 2000: 194–6; 570–9). In September 2000, a meeting of a Joint Commission on Trade was held and, following bilateral negotiations, Venezuela backed China’s accession into the World Trade Organization (WTO) and an agreement on economic and technical cooperation was

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signed. Mention should also be made of the official communiqué of the Venezuelan government that recognizes China’s government as the unique and legitimate representative of the Chinese people and ­reaffirmed support for the principle of “one China and two systems” as a means of reunification (MRE, 2001: 217–18, 616–18, 713). As part of a Latin American tour in 2001, Jiang Zemin visited Venezuela and signed a Strategic Partnership. Energy was the driving force of the strategic alliance but it also included China’s support for agricultural projects in Venezuela and joint ventures. Various agreements were signed, notably the creation of the Joint High-Level Commission and the granting of a preferential credit (US$ 20 million). Chávez made his second visit to China in 2001 with the aim of consolidating the ten-year Strategic Partnership signed that year (MRE, 2002: 212–13). Both 2002 and 2003 were marked by political crisis and social instability that had an impact on the Venezuelan government’s international strategy and affected attempts at rapprochement and cooperation with countries like China. However, a number of Chinese officials visited Venezuela in 2002 to promote bilateral cooperation. Similarly, a meeting on High-Level Political Consultation was held in Caracas in May and the second meeting of the Joint High-Level Commission took place in October (MRE, 2003: 251–2, 391–2, 689, 691–8, 700–2). The political instability ended, at least partially, in August 2004, when Chávez won the recall referendum. Along with this, the economic boom caused by a rise in oil prices allowed a relaunching of a new, much more aggressive foreign policy. The objectives of the latter were redefined by President Chávez in a High-Level Workshop held in Caracas in November 2004. As regards relations with China, the Workshop established a Committee for Economic, Technical and other Commercial Relations with China, responsible, on a temporary basis, for the study, evaluation, advising on, and monitoring of the negotiations both nations intended to advance. President Chávez’s third official visit to China took place in December 2004 and various legal instruments in areas such as energy and mining, non-reimbursable technical assistance (10  million Yuan), infrastructure, agricultural machinery (40  million Yuan), investment and railway construction, technical cooperation in the military sector, and housing were signed (MRE, 2005: 246–7, 331, 359–60). At the beginning of 2005, as part of the restructuring of the Venezuelan Foreign Ministry, a Vice Ministry for Asia, the Middle East and Oceania was created to manage, coordinate, and supervise the policies of the Ministry of Foreign Affairs

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for those regions. In terms of policy toward China, this restructuration was quite important, especially following the reelection of President Chávez in 2006, and contributed to the deepening of the bilateral relation. Chávez visited China in August 2006. During his visit, the fifth meeting of the Joint High-Level Commission was held in Beijing, signing 31 new cooperation agreements. A Consulate of Venezuela in Shanghai was also established in that year (MRE, 2007: 234, 305, 308–10, 314). Following the sixth meeting of the Joint High-Level Commission held in 2007, 45 agreements were signed on issues such as energy, financial cooperation, communication, technology, infrastructure, mining, agriculture, education, and tourism. Dialogue at the highest political level continued to grow, resulting in an expansion of the various areas of cooperation. President Chávez visited China in September again in 2008, when the eighth Meeting of the Joint High-Level Commission was held. New agreements, included the renewal of the Venezuela–China Joint Fund, were created in 2007, with a commitment of US$ 6 billion. In the sphere of military cooperation, a meeting between Chinese and Venezuelan representatives took place on November 2008 (MPPRE, 2009: 196, 198, 389, 392–3, 475; MPPEUCT, 2008). A presidential meeting took place during the sixth and final visit of President Chávez to China in April 2009, as well as 20 high-level meetings. One of the results of these meetings was an increase of the provision of oil to China, up to one million barrels per day by 2013. A few months earlier, in February, the Chinese Vice-President Xi Jinping had made an official visit to Caracas to strengthen the links and the strategic alliance with Venezuela. A Framework Agreement for the Creation of the China–Venezuela Joint Fund was signed during that visit. The eighth meeting of the Joint HighLevel Commission was held in Caracas in December. Twenty-nine agreements in areas such as energy, science, technology, and aerospace, economic, trade, and social issues were signed (MPPRE, 2010: 25, 141–5). During the period from 2010 to 2012, before Chávez became ill and eventually died, in March 2013, the Venezuelan Ministry of Foreign Affairs proposed closer relations with Asian states like Vietnam, Malaysia, and China, with the aim of (a) upgrading their economic, social, cultural, scientific, and technological integration; (b) creating a new framework for global trade that allows a rupture with the hegemonic centers of trade; (c) promoting investments from private firms and states and (d) establishing bi-national development funds for the financing of projects (MPPRE, 2011: 73; 2012: 68; 2013: 73). Forty-eight agreements were signed in

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2010, a year when the first disbursement of US$ 4 billion of the long-term and large-scale financing line between the Development Bank of China and Venezuela was made. The total amount of the financing was US$ 20 billion, made up of US$10 billion and 70 billion Yuan. The ninth meeting of the Joint High-Level Commission was held in in November 2010. Thirty-nine agreements were signed in areas such as mining, science and technology, industry, commerce, cultural exchange, agrarian development, communes, and housing (MPPRE, 2011: 84, 218–20). The tenth meeting of the Joint High-Level Commission was held in Caracas on November 2011, with the objective of reviewing the progress of the joint projects. A Venezuelan Parliamentary Friendship Group was installed in Caracas, headed by the President of the National Assembly, Fernando Soto Rojas, and the Chinese Ambassador, Zhao Rongxian (MPPRE, 2012: 72, 198–211). An evaluation of Venezuela–China relations from 1999 until 2011 shows that around 430 agreements were signed, of which 171 were projects involving cooperation in areas such as energy and mining, agriculture, science and technology, infrastructure, industry, aerospace, culture, social and economic and trade issues. Similarly, during diverse visits by Chinese officials to Venezuela, projects in areas such as iron and aluminum, food production, housing, importing of buses and vehicles, health and medical supplies, and electric power, among others, were negotiated and implemented. Cooperation continued during 2012, in particular, the financial assistance China gave to the so-called Great Housing Mission, a program launched by Chávez in April 2011 to provide housing to certain sectors of the population. Similarly, several Chinese delegations visited Venezuela that year to negotiate agreements in a number of areas. The 11th meeting of the Joint High-Level Commission was convened in Beijing in November 2012, with the aim of discussing new projects in sectors such as mining (certification, exploration, and geological prospecting of reserves of minerals), oil (supply, oil platforms), finances (Joint Fund with Petróleos de Venezuela S.A—PDVSA), electricity, and academic cooperation (MPPRE, 2013: 141–7). President Hugo Chávez died in 2013 and Nicolás Maduro won the extraordinary elections convened in April. However, the previously favorable political situation for Chavism had changed: Maduro’s victory was contested, oil prices fell, there were high levels of personal and legal insecurity, and corruption, political, and social instability led to protests in the first half of 2014. Together with violations of human rights, food and

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medical shortages, inflation and the exacerbated institutional disarray, Venezuela entered one of the worst crises in its republican history. Despite these facts, Maduro’s government adopted the so-called Second Socialist Plan (2013–2019) that included courses of action to be developed during his government. As far as China was concerned, the goal was to “consolidate the scientific-technical, economic and social development of the nation, as well as to strengthen and to deepen financing agreements aimed at materializing the diverse development projects carried out by the Venezuelan State” (MPPRE, 2014: 247). Arken Imirbaki, Vice-Chairman of the Standing Committee of the National People’s Congress, and Li Yuanchao, Vice-President of China, visited Caracas in May 2013 to negotiate a set of agreements in the areas of hydrocarbons, petrochemicals and mining, telecommunications, technology transfer, and finance. Similarly, Diosdado Cabello, President of the Venezuelan National Assembly, visited China in June 2013. Maduro visited China in September under the framework of 12th meeting of the High-Level Joint Commission. On that occasion, agreements on infrastructure, social development, agriculture, mining, energy, technology, petrochemicals, industrial integration, technical assistance, and cooperation in Special Economic Zones were signed (MPPRE, 2014: 248–55). Xi Jinping visited Venezuela in July 2014 and chaired, with Maduro, the 13th meeting of the High-Level Joint Commission, during which it was agreed to upgrade the bilateral relations to the category of “Integral Strategic Partnership”. In addition, 33 new agreements in various areas were signed. At the multilateral level, Venezuela participated in the Summit of Heads of State and Government BRICS-UNASUR, held in Fortaleza, Brazil, in July 2014 and in the Summit of Heads of State and Government of China, Brazil and the Quartet of CELAC, held in Brasilia on July 17th, 2014. These new regional institutions allowed for closer relations with China by establishing the bases for the CELAC-China Forum First Ministerial Meeting, held in Beijing on January 2015 (MPPRE, 2015: XXI–XXII). Maduro has visited China on two occasions. The first was in January 2015, when cooperation and financing projects for more than US$ 20 billion were negotiated (El Universal, January 17, 2015). The second visit took place from August 31 to September 2, 2015, under the framework of the 15th Meeting of the High-Level Joint Commission. Eleven agreements, including the Framework Agreement for the Joint Development Plan between Venezuela and China (2015–2025) and the Framework

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Agreement for Cooperation in Special Economic Zones in Venezuela were signed. Similarly, the Framework Agreement for a Special Financial Facility of up to US$ 5 billion (for the oil sector) was also negotiated (MPPRE, 2016: 41, 106, 44–5, 105–6, 113, 165, 257, 261–4).

The Results Venezuela’s trade relations with China have been transformed in the last two and a half decades. In 2000, Chinese exports to Venezuela amounted US$ 256,497.137 but in 2015 they amounted US$ 5,314,949.279, a significant rate of growth that demonstrates the major Chinese presence in the Venezuelan market (see Fig. 6.1). However, after 2012, when Venezuela experienced an economic crisis, Chinese exports decreased. However, a gradual recovery in Chinese exports to Venezuela was evident in 2014. Venezuela has also increased its exports to China. These amounted to just US$ 94,785,737 at the turn of the new century but in 2015 Chinese imports from the South American country amounted US$ 6,888,273.198 (see Fig.  6.2). However, as in the case of Chinese exports, Venezuelan exports to China have fluctuated quite irregularly since 2012 when the economic crisis began in the South American country. As a result of the diverse joint ventures, Venezuela has augmented its exports of energy. Data from the World Bank show that Chinese imports of

10,000,000.00

Graph 1 China's exports to Venezuela

8,000,000.00 6,000,000.00 4,000,000.00 2,000,000.00 0.00

Fig. 6.1  China’s exports to Venezuela

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16,000,000.00

Graph 2 China's imports from Venezuela US $ Millions

14,000,000.00 12,000,000.00 10,000,000.00 8,000,000.00 6,000,000.00 4,000,000.00 2,000,000.00 0.00 Fig. 6.2  China’s imports from Venezuela

fuel to Venezuela have grown since 2000. Data from UN Comtrade also shows that the Venezuelan exports of oil products (petroleum oils, oils from bituminous minerals, crude) to China have also increased (see Figs. 6.3 and 6.4). In this case, fluctuations in the trading of energy were evident after 2012. Venezuela and China have promoted joint ventures not only in oil exploration and extraction but also in the assembly, construction, and commissioning of drills; the quantification and certification of reserves (the so-called block Junín 4, Junín 8, and block Boyacá 3 of the Orinoco Oil Belt in Southern Venezuela), and the financing associated with this strategic activity involving Venezuelan state-owned PDVSA and Chinese companies such the China National Petroleum Corp. (CNPC), China Petroleum Technology & Development Corporation (CPTDC), China Petroleum & Chemical Corporation or Sinopec, PetroChina and China National Offshore Oil Corporation (CNOOC), (Cornejo & Navarro, 2012: 304–10). In the case of Junín 4, China’s CNPC invested US$ 16,300 million, forecasting that production would reach 400 thousand barrels per day in 2016 (Ríos, 2012: 55). Venezuela also plans to build at least three refineries in China, the first of which was approved and will be located in Guangdong province. “This is a joint venture between PDVSA and PetroChina Company. It will have a refining capacity of 400 thousand barrels per day” (Ríos, 2012: 56). By November 2016, China and Venezuela had developed around 18 projects in the field of oil production, with an investment of close to US$ 5 billion (Panorama, 2017).

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Graph 3 China's imports of fuel from Venezuela (US$ Thousand)

16,000,000.00 14,000,000.00 12,000,000.00 10,000,000.00 8,000,000.00 6,000,000.00 4,000,000.00

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0.00

2000

2,000,000.00

Fig. 6.3  China’s imports of fuel from Venezuela

12,000,000.00

Graph 4 China's oil imports from Venezuela (petroleum oils, oils from bituminous minerals, crude) US $ Millions

10,000,000.00 8,000,000.00 6,000,000.00 4,000,000.00 2,000,000.00 0.00

Fig. 6.4  China’s oil imports from Venezuela

Financial cooperation is one of the flagships of the bilateral relation. A Joint Fund, known as a Heavy Fund (Fondo Pesado), was created in 2007. This Fund has three tracks. Track A was established in 2007 with initial capital of US$  6  billion: US$4 billion in loans granted by the China Development Bank (CDB) and US$ 2 billion from Venezuela’s Economic and Social Development Bank (Fonden in Spanish). This track was renewed

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in 2010, with an additional Chinese contribution of US$ 4 billion and a Venezuelan contribution of US$ 2 billion. A further renewal, on similar terms, was agreed in July 2014. China’s contribution to the Joint Fund have to be repaid with oil deliveries of 100,000 barrels per day. However, this repayment is subject to oil prices in the international market (this is the so-called loans for oil model). In 2009, Track B was established with an additional contribution of US$ 6 billion (60% CDB and 40% Fonden). This was renewed in 2012 on similar terms. The Chinese contribution must be repaid with oil deliveries of 130,000 barrels per day, the price of which is subject to the price in the international market. Track C was established in 2013, but in this case CDB’s contribution rose to US$ 5 billion, while Fonden’s involvement was reduced to US$  1  billion. The Chinese contribution must be repaid with oil deliveries of 100,000 barrels per day (El Universal, July 23, 2014). In September 2010, the Great Volume Fund, basically destined for infrastructure and housing, was created. China granted a US$ 20 billion loan that had to be repaid over a period of ten years with oil deliveries of 100,000 barrels per day. Venezuela has experienced serious electricity shortages due to lack of adequate investment. China is developing at least 12 electric power projects (5 in thermoelectric generation and the rest in automation of systems and technological contributions) with an investment that exceeds US$ 6 billion. The most important of these projects are Planta Centro, located in the state of Carabobo, in the country’s central region, and the Luis Zambrano thermoelectric plant in the city of El Vigía, in the western state of Mérida. China has also participated in the repair of the Guri Dam in the eastern state of Guyana. As regards mining, a quite sensitive issue in political and social discussions in Venezuela due its potential environmental and social costs, China approved financing projects of around US$ 700 million to be invested in the development of the so-called Arco Minero del Orinoco (Orinoco Mining Arc), a region rich in gold, coltan, diamonds, iron, bauxite, and other strategic minerals. Several Chinese companies will participate in the certification of reserves and their exploitation (Pérez, 2016). China has also financed and provided technical advice to the agricultural sector, through the acquisition and production of agricultural machinery, the promotion of experimental farms in the state of Barinas, and the training of Venezuelan personnel. China has assisted in the implementation of Venezuela’s national irrigation system. Around US$ 8.5 million has been

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invested to rehabilitate 23  kilometers of irrigation canals from Barinas’ Santo Domingo River. PDVSA Agrícola, a subsidiary of PDVSA responsible for the strategy of agro-food sovereignty in Venezuela, signed a Memorandum of Understanding in 2008 to support the country’s agroindustrial development. This Memorandum allowed the Chinese firm Heilongjiang Xinling Grains & Oil Group to provide industrial and technological consultancy for the development of Venezuela’s agricultural sector, for the improvement and better use of soils in the Orinoco Oil Belt, the stimulation of animal and vegetable production and the international commercialization of these products (Sun, 2012: 229–30). As regards Chinese investments in infrastructure, special attention has been given to the rehabilitation of the National Railway System, in particular the so-called North-Llanero axis and the Tinaco-Anaco section. China has also invested in the expansion and modernization of the port of Puerto Cabello and the rehabilitation of the river irrigation system in the state of Guárico. The enlargement of the underground transportation system (Metro) in Caracas and the state of Miranda, the Metro de Valencia in the state of Carabobo, and the Metro of Maracaibo in the state of Zulia has been partially financed by China (Cornejo & Navarro, 2012: 312). China has also helped in the urban reorganization of the poorest zones of some Venezuelan cities through a program known as Misión Barrio Nuevo, Barrio Tricolor. Similarly, China has collaborated in the construction of 20,000 houses in the Fuerte Tiuna military complex in Caracas (in collaboration with Belarus and Russia) and 4537 houses in the Palma Sola housing complex in the state of Barinas (Cornejo & Navarro, 2012: 310–14; Telesur, 2015). In transportation and communications, Venezuela has had three satellites put into orbit with the collaboration of China: the first one, Venesat-1 (named Simón Bolívar) was put into orbit on October 2008; the second, Venesat-2 (called Francisco de Miranda) in September 2012, and the third one, called Antonio José de Sucre, on October 2017. By the same token, the Chinese firm ZTE collaborated in the creation of the Venezuelan Telecommunications Company (VTELCA) in 2010 and the production of mobile phones. There was also an important joint venture for the establishment of the Venezolana de Industria Tecnológica C.A. (VIT), specializing in the assembly of computers at low cost. China also exported to Venezuela components for the assembly of computers and servers, largely for the Venezuelan company Siragon. In the field of urban transport, the Chinese firm Yutong imported and subsequently assem-

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bled in Venezuela buses for the so-called Mission Transport, a social program aimed at improving public transport. Vehicles for the state security forces and for the National Armed Forces as well as Chery automobiles were also sold by China. The Chinese involvement in social programs was also important, as in the case of Mi Casa Bien Equipada, a program that aims to provide the Venezuelan population with appliances from the Chinese brand Haier. Under an agreement signed with Haier, Venezuela committed to importing 229,000 sets of electrical appliances manufactured by the Chinese brand, starting from August 2010 (Sun, 2012: 30). As part of the agreement, a Haier production facility was established in Los Valles del Tuy, in the state of Miranda. In terms of military and security cooperation, Venezuela bought 24 units of K-8 W military aircraft, anti-riot vehicles, trucks, equipment as well as technical services, new systems, and spare parts in 2013. These investments amounted US$ 279 million, expenditure that in recent years has been partially paid for by the Chinese–Venezuelan special financing program. The cultural aspect is also important due the increasing bi-national exchanges, manifested, for example, in the number of Venezuelans that are being trained in different universities and technical institutes in China. In 2016, 147 public servants were trained in China (MPPRE, 2017: 89–90). In December 2016, the Confucius Institute was inaugurated at the Bolivarian University of Venezuela (UBV) in Caracas, while three additional institutes were due to be installed in 2017 at the UBV in the State of Falcón, at the Venezuelan School of Planning and in the Orinoco Oil Belt (Cabrera & Alarcón, 2016).These are just some of the achievements out of a total of 338 projects. However, there have also been many allegations of corruption, such as those revealed by Wikileaks in December 2010 regarding the sale of Venezuelan oil to China at preferential prices. Similarly, officials involved in illicit activities associated with the China– Venezuela Fund and the Economic and Social Development Bank (Bandes) have been arrested (Cornejo & Navarro, 2012: 310). Finally, there has also been criticism regarding the “opacity” or lack of transparency of the agreements signed with China. This notwithstanding, official figures show that China and Venezuela have invested more than US$ 62 billion in the development of cooperation projects. Of this amount, US$ 20 billion corresponds to the Joint Fund created in 2007, and US$ 42 billion to the

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Heavy and Long-Term Fund initiated in 2010 (Navarro, 2017). Everything seems to indicate that China’s presence in Venezuela will carry on, and it will require time to observe the fruits and frustrations that may be generated as a result.

Explaining the Bilateral Relationship: International and Domestic Variables Evaluation of the Chinese–Venezuelan bilateral relationship shows a clear connection with the promotion of foreign policy objectives in both countries, but domestic factors have also been crucial. Venezuela has adopted a strategy for achieving the political goal of maintaining a balance between its relationships with the United States and constructing a multipolar world, but also the economic goals of finding a new market for its oil exports and obtaining new sources to finance its development model. In contrast, China has taken a more pragmatic approach (as it has with other Latin American countries) that seeks to consolidate “non-ideologically-­ related commercial ties” (Sun, 2014: 653). Yanran Xu argues that the Chinese view of the bilateral relationship with Venezuela is largely embedded in the Policy Paper on Latin America published in 2008, in which Chinese leaders highlighted the bonds of friendship that unite China and Venezuela. However, beyond that rhetoric, the fact is that China’s rapprochement to Venezuela aims to further its oil business interests: it supports China’s “going out” strategy which involves not only the state but also Chinese multinational firms. The objective is two-fold: on the one hand, diversifying the oil supply and, on the other hand, promoting the internationalization of Chinese firms (Xu, 2016: 67). Sun-Hongbo (2012: 224) proposes the existence of a model of cooperation between China and Venezuela based on three premises: (1) the existence of a High-Level Joint Commission; (2) oil as the pivot of the bilateral relations and (3) the Joint Fund as financial mechanism. These premises are closely related to Chinese foreign policy objectives. The role played by oil as the pivot is crucial in the context of maximizing energy security and helping in the strategy of Chinese oil firms of “going out”. As explained in the previous section, firms like CNPC, CPTCD, CNOOC, or Sinopec are participating in joint ventures with PDVSA to explore and develop the Orinoco Belt. China also sells drills and tankers to PDVSA

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and cooperates in the financing, engineering, refining, and transportation of oil. The Joint Fund as a financial mechanism is closely related to Chinese oil diplomacy because it is commodity (more precisely, oil) backed; that is, the resources are granted under the logic of “loans for oil”. Moreover, Chinese involvement in Venezuela is remarkably deep in comparison to other Latin American countries. According to Antulio Rosales (2016: 8–9), “from 2005 onward, Venezuela has borrowed more from China than Brazil, Mexico and Argentina, the largest economies in Latin America. It has already borrowed more than US$65 billion from China alone, whereas Brazil, the second-largest debtor to China, has borrowed just over US$ 21.8 billion”. China also perceives Venezuela as a market for its exports, especially for the “strategically-important, higher value-added sectors” (Ellis, 2010: 2). The increasing presence of firms such as Haier, Yutong, or ZTE in the Venezuelan electrical appliances market, and in buses and mobile phones shows the extent to which Venezuela has become a market for Chinese industrial sectors. The Taiwan factor is also a variable. Chávez fully subscribed to the One-China-Policy and, in 2007, suspended visas for Taiwanese commercial representation in Caracas. The Caribbean factor is crucial here: this being a zone of the Western hemisphere in which Taiwan still has a significant diplomatic presence and in which China seeks to improve its political position. The Venezuelan government is quite influential in the Caribbean Basin, most of the countries of which are member of Petrocaribe. As Ratliff (2006: 80) points out, it is good for China “to have this Caribbean basin oil power [Venezuela] on its side”. In the case of Venezuela, the aim of building a multipolar world and reducing Venezuelan dependence on the US market as destination for its oil exports lie behind the strategy that began in 1999. The objective is also to diminish the role of US multinationals in the Venezuelan economy (Cheng & Shi, 2008: 113). For Venezuela, closer relations with China are also a way to further the aspiration for a multipolar world and the anti-imperialist rhetoric. Caracas perceives China as an emerging power that is challenging the United States and could serve a counterweight to Washington in the Western hemisphere. Thus, China provides not just an alternative market and source of investment but also a political and security partner, a source of technology, and a model of economic development to be followed (Cheng & Shi, 2008).

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China has never supported the anti-US rhetoric fostered by Chávez and Maduro. Pundits such as Ellis argue that China “has an interest in the survival of Venezuela as a populist regime” but as long as that goal “does not undermine its more strategically-important relationship with the United States” (Ellis, 2010: 6). S. X. Jiang, a leading Chinese expert on Latin America, has asserted: “China understands well that Latin America is the backyard of the United States”, and that China should not challenge US influence there. He continues, “China and Latin America have been opening to the outside world (…) in the age of globalization (…) cooperation between China and Latin America will benefit regional peace and development in Asia-Pacific and Latin America. This outcome would certainly be in the favor of the United States” (quoted in Ratliff, 2009: 12). Thus, China avoids actions that appear to confront the United States. An example of this cautious position is the cold reception China gave to the Chávez proposal to expand the Bolivarian Alliance for the Peoples of Americas (ALBA)’s relations with Beijing. ALBA is a regional group proposed by Chávez in 2001 and formally established in 2004 as a supposedly new model of integration based on solidarity, cooperation, and complementary. In its golden years, ALBA achieved some influence in the Caribbean Basin and the Andes and became an anti-systemic bloc that challenged US hegemony. During his visit to Beijing in 2008, Chávez proposed a project to install a submarine cable between Caracas and Havana, with ramifications for the rest of the Caribbean and Central America. However, China was reluctant, largely due to “the ideological and political connotations of the project and its belligerence” (Ríos, 2012: 60). China is a country that stresses that its relationships “are not based on ideology nor are directed against a third party nor have a vocation to affect other countries. China seems to escape any form of political commitment to the project led by Chavez that would connote foreign policy ideologically” (Ríos, 2012: 60). As Hi Li (2007: 857) has asserted, “Chávez’s love for bombastic anti-US rhetoric is contrary to Beijing’s strategy of not offending the US in the region. While officially, Beijing would not ­comment on Mr. Chávez’s antagonism toward the US, several Chinese Latin American watchers I interviewed considered some of the Venezuelan leader’s behavior ‘undiplomatic and irrational’, one even called him ‘crazy’”. According to Ríos (2012): 62), “in April 2009, the last time Chavez visited Beijing, the official information about his stay was distributed only once the illustrious visitor left the Chinese capital, one way to avoid becoming a speaker of their allegations against imperialism and to reduce the overall projection of his stay”.

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However, China’s influence on the Venezuela regime is crucial. Ellis argues that China has helped to preserve the economic and political viability of the Chavist project. This contribution by China has had five elements: (1) a source of short-term funds, (2) help in the extraction of commodities, (3) diversification of export markets, (4) generation of symbolic projects for domestic consumption, and (5) an alternative supplier of second-tier military goods (Ellis, 2010: 7). Rosales also considers that China has become a stabilizer of the Venezuelan economic model, a fact that became particularly notable in the Maduro era, when, due to irrational economic policies, the reduction in oil prices, and corruption, Venezuela entered into a deep economic crisis. However, the likely impact of the Chinese presence is a deeper extractivism and reprimarization of the Venezuelan economy. García Agustín (2016: 116) concurs with this argument by highlighting that the relationship with China has simply augmented the Venezuelan dependence on commodities, because Chinese loans are primarily repaid with shipments of oil, as explained earlier in this chapter. The political consequence for Venezuela of its increasing relationship with China is the fear of a new dependency. Particularly after Chávez’s success in the recall referendum of 2004, Venezuela has furthered an anti-­ systemic or counterhegemonic political project that challenges US power. The paradox is that its increasing dependence on Chinese investments, technological support, and economic assistance could very well lead to the replacement of an old dependency (United States) with a new one (China) (see García, 2016). There is another explanation for Venezuela’s interest in political alignment with governments with similar ideological goals. However, this is contested in the case of China because the “political and economic model” implemented in Venezuela, so-called twenty-first century Socialism, differs from Socialism with Chinese characteristics (or a Socialist Market Economy). These two models are based on different ideologies and the political parties that fostered them (the United Socialist Party of Venezuela and the Communist Party of China) have, neither in their past nor in their present, never been similar (Guelar, 2013: 190–1). Hongying Wang (2015: 14) puts the issue in the following terms: China has been cautious in reciprocating Venezuela’s overture for political and ideological solidarity (…) When Chavez called China an important ally in the anti-imperialist struggle, China did not respond (…) China has shown

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no interest in the so-called Bolivarian Revolution, a leftist social movement in Venezuela, which promotes popular democracy, economic independence and equality. Unlike Russia, China has not become an observer of the Bolivarian Alliance of the Americas (ALBA). As one scholar puts it, in Latin America, as elsewhere in the ‘new’ developing world, China is looking for trade partners, not revolutionary allies.

In fact, recent events seem to indicate that China is reassessing its relations with Venezuela. According to Kejal Vyas (2016), “China appears to be recalculating its alliance with the nation where it has made about $60 billion in loans”. Vyas points out that China sent an envoy to Caracas to express his concerns over security and Venezuela’s debt repayment. This was manifested during emergency meetings held between April and June 2016 with representatives of Chinese state companies, according to officials from those companies. Some of those officials would have asserted that “the consensus was that no new money was going to be invested”. Moreover, “there was a clear message from up top: ‘Let them fall’”, said the official. He said Chinese companies were moving employees to Colombia and Panama for personal-safety reasons and because many Chinese-led projects have ground to a halt (Vyas, 2016). Finally, the article points out that “since February [2016], at least three Venezuelan opposition lawmakers as well as economists and oil-industry consultants have gone to Beijing at the invitation of China’s Communist Party to discuss a transitional government and recovery plan to turn around the world’s worst-performing economy, according to several Chinese and Venezuelan people familiar with the talks” (Vyas, 2016). Barbara Hogenboom (2014: 636) describes another concern of China. The point is that following the logic of “loans for oil”, Venezuela has made a long-term commitment to sell thousands of barrels of oil to Chinese companies, but PDVSA is highly indebted and, in consequence, no new investments have been made. Thus, there is a risk of “of ­jeopardizing the company’s future capability of exploiting the nation’s oil reserves”, an issue that “probably also [gives] cause for concern for the Bank and other Chinese stakeholders” (Hogenboom, 2014: 66). Even Chinese scholars recognize the current problems of the bilateral relationship. For example, Niu Haibin comments that Venezuela’s deteriorating situation is a challenge to its economic cooperation with China. Given the low oil prices after 2013, Venezuela needed to increase its exports to China in order to meet its debts schedule, but oil nationalization and a

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high tariffs policy have led to a lack of foreign capital, technology, and management in the country’s oil industry. In this scenario, the cost of production is higher than the price of the product, making it difficult to increase oil production. Niu asserts that due to the new economic ties and friendly relations between the two countries, a deterioration in the relationship should be avoided, but in the current international scenario, the terms of the financing arrangements need to be adjusted. It will also be necessary to explore ways to strengthen the financing mechanisms in the long term (Niu, 2016: 86).

Conclusion This chapter has explored the rapid transformation of Chinese–Venezuelan bilateral relations in the era of Chavism. From a low-profile Chinese presence in terms of trade and investment in Venezuela at the turn of the century, the Asian nation is currently a major trading partner and an important source of investment in the South American country. Presidents of both countries have visited their counterparts, diplomatic, and commercial missions have been deployed, and more than 400 agreements have been signed. All of this evidences that the bilateral relations entered into a new stage in the past few decades. Both domestic and international factors are crucial to understanding this development in Chinese–Venezuelan relations. In the case of Venezuela, the rise to power of the Chavist movement has led to a reconfiguration in the country’s international behavior. Once a consolidated Western democracy and reliable US ally, Venezuela has now become a critic of both the international order and the United States. The problem is that history matters, and, despite the anti-US rhetoric, the Venezuelan economy is closely related to the US economy, a traditional destination for Venezuela oil exports. Chávez perceived China as a potential replacement for the United States as a market and as a source of investment. If we take into account the Venezuelan goal of promoting a multipolar world, the incentives existed to develop closer relations with Beijing. From China’s perspective, the need to secure an oil supply and its commitment to back Chinese firms in their “going out” strategy have been crucial in the rapprochement with Venezuela. The South American country has also become a new market for Chinese exports. By the same token, the apparent convergence on certain foreign policy goal such as the establishment of a multipolar world has also helped to improve bilateral relations.

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The results have been quite clear: as demonstrated in this chapter, bilateral trade has grown exponentially since 2000. Chinese investments have also grown and innovative mechanisms like the Heavy Fund and the arrangement of “oil for loans” have become pillars in the “strategic partnership” between both countries. Thus, to a certain extent, the Chinese– Venezuela relations could be described a success story. This notwithstanding, recent events raise concerns about the future of the bilateral relationship. The major events of the new period of Chinese– Venezuelan relations occurred in a domestic context of political control of the Venezuelan political system by the Chavist movement and a global context characterized by a boom in commodities. The current situation is considerably different. After its defeat in the Parliamentary elections in December 2015, the Venezuelan regime has adopted increasingly authoritarian features, abandoning the characteristics of a hybrid democracy. This has led to increasing political instability that it is accompanied by probably the worst economic crisis that the Venezuelan republic has endured. At a global level, the reduction in oil prices has resulted in a loss of Venezuelan diplomatic leverage based on oil diplomacy. A lack of transparency in the agreements signed with China, allegations of corruption in the management of the Heavy Fund, and fears of the development of a “new dependency” on China, are factors that are also highlighted when describing the current situation of the bilateral relationship. China is aware of this situation. Although the Chinese government has never backed the anti-imperialist and anti-US rhetoric of the Venezuelan government, economic links were keenly pursued with the South American country. China’s investments and undertaking to receive oil for loans are huge and, as a consequence, the current political and economic instability is a real source of concern. In consequence, it is likely that the recent pattern of relations will be reviewed and a new stage could begin.

References Cabrera, G., & Alarcón, R. (2016, December 16). Inaugurado Instituto Confucio en Venezuela. MPPP, Caracas. Retrieved from http://www.mppp.gob. ve/2016/12/inaugurado-instituto-confucio-en-venezuela/ Cheng, J. Y. S., & Shi, H. G. (2008). Sino-Venezuelan relations: Beyond oil. Issues & Studies, 44(3), 99–147. Cornejo, R., & Navarro, A. (2012). La presencia económica de China en Venezuela. In C. Moneta & S. Cesarín (Eds.), Tejiendo redes. Estrategias de las

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empresas transnacionales asiáticas en América Latina. Buenos Aires: Editorial de la Universidad Nacional de Tres de Febrero (EDUNTREF) – International University of Business and Economics – Beijing. El Universal. (2014, July 23). El ABC del Fondo Chino Venezolano. El Universal, Caracas. Retrieved from http://www.eluniversal.com/economia/140723/ el-abc-del-fondo-chino-venezolano El Universal. (2015, January 17). Maduro anuncia acuerdos en China por más de 20.000 millones de dólares. El Universal, Caracas. Retrieved January 7, 2015, from http://www.eluniversal.com/noticias/economia/ maduro-anuncia-acuerdos-china-por-mas-20000-millones-dolares_69479 Ellis, R. E. (2010). Venezuela’s relationship with China: Implications for the Chávez regime and the region. University of Miami, Center for Hemispheric Policy. García, A. Ó. (2016). Venezuela and China: Independency and dependency in the context of interdependent hegemony. Journal of China and International Relations, Special Issue, 104–127. Guelar, D. (2013). La invasión silenciosa. El desembarco chino en América del Sur. Buenos Aires: Debate. Hogenboom, B. (2014). Latin America and China’s Transnationalizing oil industry: A political economy assessment of new relations. Perspectives on Global Development and Technology, 13, 626–647. Li, H. (2007). China’s growing interest in Latin America and its implications. Journal of Strategic Studies, 30(4–5), 833–862. Molina Medina, N. (2009). La nueva política exterior de la Revolución Bolivariana: Un viraje hacia el continente asiático (1999–2008). Revista Venezolana de Ciencia Política, 35, 115–137. Molina Medina, N. (2015). Venezuela y el reconocimiento de la República Popular China en la ONU. Anuario GRHIAL, 9(9), 20–46. Ministerio del Poder Popular para Educación Universitaria, Ciencia y Tecnología. (2008, September 28). Visita de Chávez a China culmina con gran éxito. MPPEUCT, Caracas. Retrieved from http://www.mppeuct.gob.ve/actualidad/noticias/visita-de-chavez-china-culmina-con-gran-exito Ministerio del Poder Popular para Relaciones Exteriores. (2009). Libro Amarillo 2008, tomo I. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2010). Memoria y Cuenta 2009. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2011). Memoria y Cuenta 2010, tomo I. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2012). Memoria 2011. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2013). Memoria 2012. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2014). Memoria 2013. Caracas: MPPRE.

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Ministerio del Poder Popular para Relaciones Exteriores. (2015). Memoria 2014. Caracas: MPPRE. Ministerio del Poder Popular para Relaciones Exteriores. (2016). Venezuela y China avanzan hermanadas en la Asociación Estratégica Integral. MPPRE, Caracas. Retrieved from http://ecuador.embajada.gob.ve/index.php?option=com_con tent&view=article&id=1356%3Avenezuela-y-china-avanzan-hermanadas-enla-asociacion-estrategica-integral&catid=3%3Anoticias-de-venezuela-en-el-mundo&Itemid=19&lang=en Ministerio del Poder Popular para Relaciones Exteriores. (2017). Memoria 2016. Caracas: MPPRE. Ministerio de Relaciones Exteriores. (2000). Libro Amarillo 1999. Caracas: MRE. Ministerio de Relaciones Exteriores. (2001). Libro Amarillo 2000. Caracas: MRE. Ministerio de Relaciones Exteriores. (2002). Libro Amarillo 2001. Caracas: MRE. Ministerio de Relaciones Exteriores. (2003). Libro Amarillo 2002. Caracas: MRE. Ministerio de Relaciones Exteriores. (2005). Libro Amarillo 2004. Caracas: MRE. Ministerio de Relaciones Exteriores. (2007). Libro Amarillo 2006. Caracas: MRE. Navarro, I. (2017). Venezuela y China acuerdan inversiones petroleras por $ 4.250 millones. El Universal, Caracas, 13 de junio de 2017. Retrieved from http://www.eluniversal.com/noticias/economia/venezuela-china-acuerdaninversiones-petroleras-por-4250-millones_656744 Niu, H.  B. (2016). 中国经济新常态下的 中拉经贸关系展望 Prospects of Sino-­ Latin American economic and trade relations under the new normal of China’s economy. Journal of Latin American Studies, Chinese Academy of Social Science, 38(4), 76–93. Panorama. (2017). China y Venezuela suman 790 acuerdos de cooperación en áreas estratégicas. Panorama, Maracaibo, 13 de febrero de 2017. Retrieved from http://www.panorama.com.ve/politicayeconomia/China-y-Venezuela-suman790-acuerdos-de-cooperacion-en-areas-estrategicas-20170213-0063.html Pérez, A. (2016). El Arco Minero del Orinoco representa un extraordinario potencial para China. MPPCI, Caracas, 8 March de 2016. Retrieved from http:// minci.gob.ve/2016/03/el-arco-minero-del-orinoco-representa-un-extraordinario-potencial-para-china/ Ratliff, W. (2006). Beijing’s pragmatism meets Hugo Chavez. The Brown Journal of World Affairs, 12(2), 75–83. Ratliff, W. (2009). In search of a balanced relationship: China, Latin America, and the United States. Asian Politics & Policy, 1(1), 1–30. Ríos, X. (2012). China and Venezuela: Ambitions and complexities of an improving relationship. East Asia, 30, 53–65. Rosales, A. (2016). Deepening extractivism and rentierism: China’s role in Venezuela’s Bolivarian developmental model. Canadian Journal of Development Studies/Revue Canadienne D’Etudes du Développement, 37(4), 1–18.

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Sun, H. B. (2012). Energy cooperation between China and Latin America: The case of Venezuela. In M. P. Amineh & Y. Guang (Eds.), Secure oil and alternative energy. The geopolitics of energy paths of China and the European Union. Leiden-Boston: Brill. Sun, H.  B. (2014). China-Venezuelan oil cooperation model. Perspectives on Global Development and Technology, 13, 648–669. Telesur. (2015, June 29). Venezuela y China aumentan cooperación estratégica. Telesur. Retrieved from http://www.telesurtv.net/news/Venezuela-y-Chinaaumentan-cooperacion-estrategica-20150629-0024.html Vyas, K. (2016, September 11). China rethinks its alliance with reeling Venezuela. The Wall Street Journal. Retrieved from http://www.wsj.com/articles/ china-rethinks-its-alliance-with-reeling-venezuela-1473628506 Wang, H. Y. (2015). The missing link in Sino–Latin American relations. Journal of Contemporary China, 24(95), 922–942. Xu, Y. R. (2016). China’s strategic partnerships in Latin America: Case studies of China’s oil diplomacy in Argentina, Brazil, Mexico, and Venezuela, 1991–2015. Lanham, MD: Lexington Books.

CHAPTER 7

Chile and China, 2000–2016: The Humming Bird and the Panda César Ross

Introduction The internationalization of Chile toward East and Southeast Asia over the last forty years began as a reaction to the international political isolation derived from the world’s rejection of the military dictatorship from 1973 to 1989, but continued as a result of a genuine belief in the benefits of a specific model of international relations (pragmatic and propelled by non-­ state actors), which allowed Chile to have a 20-year advantage in what would be, according to Susan Strange, post-Cold War global relations. This explains Chile’s success not only in the East and Southeast Asia but also in the rest of the world (Strange, 1994). Chile’s foreign policy, vis-à-vis the world generally, and Asia more specifically, has been primarily economic and characterized by an approach that could be called something between neoliberal and neorealist. As might be expected, the benefits associated with this model of

C. Ross (*) Institute of Advanced Studies (IDEA), Santiago, Chile University of Santiago de Chile, Santiago, Chile e-mail: [email protected] © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_7

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international relations has generated great returns in recent years, especially as a result of the enormous economic expansion in Asia, but it has also generated a weakness that, after 40 years, has become structural in nature, and that is one of the main challenges facing Chile’s foreign policy today. The period selected for this chapter covers 2000 to 2016, a full period referred to as the “commodities super cycle”, whose dynamism had a great impact on political relations and bilateral initiatives for cooperation, which were also extended to non-state institutions. In the “super cycle” referred to here, as in the rest of the world, China was the most relevant Asian country for Chile’s relations with Asia and therefore was selected as a case study. As a hypothesis, it is argued that the relations between Chile and China have had a historically pragmatic perspective—both functional and, by extension, superficial. However, this utilitarianism has aided survival through difficult times, such as those of the Cold War, and contributed toward making the most of periods of bonanza, such as the commodities super cycle (2001–2013), which not only made China Chile’s main commercial partner, but also facilitated the beginning of a phase of added complexity in bilateral relations. However, the relations failed to reach the necessary level to mitigate the adverse effects of the contraction of the world market and/or the possible strategic alliances of China with countries that maintain disputes with Chile. The methodology used in this study combines content analysis (hermeneutics), the analysis of the bilateral agenda through a methodology of its own, and a statistical analysis through the reconstruction of trends in bilateral trade, located in the global context and in regional Asia. From a structural point of view, the chapter is divided into three parts. Part I addresses the theoretical approach of Chile’s foreign policy on the basis of what has been called a “double asymmetry” diagram. The methodology used for this has been content analysis (hermeneutics). Part II refers to Chile–Asia relations, where a characterization of Asia’s place (importance) in Chile’s foreign policy, and the place of the most relevant actors within it, is offered. Part III and the final part present Chile–China relations, where both the policy itself and the effects derived from it in bilateral relations are considered in detail. For Part I and II, we have analyzed the bilateral agenda through a methodology of its own, and using a statistical analysis through the reconstruction of trends in bilateral trade, located in the global context and in regional Asia.

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Chile in Double Asymmetry I coined the term double asymmetry maybe ten years ago and it was published for the first time in an article in Foreign Affairs (Ross, 2006). Thereafter, the idea has developed, and become more complex (Bernal-­ Meza, 2016; Ross, 2005c, 2009, 2012) and has been applied to cases related to what I have called downward asymmetry. In this section, a case of upward asymmetry will be applied, which, as I mention in publications referenced here, corresponds to the successful experiences Chile has had. The notion of asymmetry comes from geometry, and it refers to the lack of exact correspondence in the regular arrangement of the parties or points of a body or figure with regard to a center, an axle, or a plane. This idea prevails in the same way in almost all the other sciences that use the concept. In economics, especially in the monetary field, the category has been used to refer to the fixing of exchange rates between currencies, where one of them is usually used as a reference. In the field of political science, the idea (more than the concept) has been used to describe the unequal concentration of power on the different sides of a relation, despite the fact that the contents of power have been in a process of reorganization, especially when considering where the emphasis should be placed. In the field of international relations, the concept acquires the same meaning it has in political science, with the addition of some interesting details. The differences in power establish relations of domination and subordination, incorporated into the analysis used in international politics for a long time. The complexity of double asymmetry is related to the nature of the intermediate states themselves, since they have the opportunity to dissociate their role from their power because of their position within the International Hierarchy of power. The standard biography about relations and international politics accounts for the persistence of the criteria of power as an element that has cataloged the states in the hierarchy of the international system. Its interpretations are characterized as describing a reality that seems unchangeable. Both at the top and the bottom of the hierarchy, there are strong restrictions to modify the conduct of states. At the top lie the dominant states, for which the incentives and threats to change are low, because their position allows them to reach their goals with no great effort. At the bottom, where the weak states lie, the situation is reversed: their destiny is usually dissociated from internal wills and their international policies, and they are usually tied to external eventualities.

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For intermediate states, as we call those located between the top and the bottom of the system, the situation is different. They are subjected to a more dynamic reality, regardless of the nature of their power (economic, military, technological, etc.). It is fundamental to take into account both the concentration of power and the roles of the states, inasmuch that this dimension explains many of the outcomes obtained by the intermediate states. According to the author’s observations, there are three types of intermediate states: submissive, rebel, and pragmatic. Submissive states are those that by anomy and/or option have the survival of the state at the center of their external policy, which can be considered as minimalist realism, since it aims at the minimum: survival. Their common strategy is mimicry and invisibility. Rebel states can be either passive and/or active. The principles that guide them are related to the defense and preservation of their dignity and national identity at any cost. These types of states can be classified as maximalist and/or constructivist idealist. Finally, pragmatic states, whether actively and or passively, are those whose external policy is based on the defense of certain minimal yet not tradable principles. They could be classified as neorealist, neoliberal, or constructivist. It is usual that the pragmatic state selects and adjusts certain topics within the agenda of the dominant state. Its strategy is usually a transactional type, using options like hedging and bandwagoning. This type of state is usually more adaptable in order to successfully survive within the structure of the double asymmetry. In the case of Chile, as an Intermediate State (Fig.  7.1), this double asymmetry is present in the simultaneous relation the country has with both of the major economies of the world as well as with those spatially neighboring countries, whose trivial power is clearly less than that of Chile. Upward asymmetry has resulted in great economic dividends, while downward asymmetry has happened as relations continuously advance and retreat. With regard to the first type of asymmetry, upward asymmetry, which could also be referred to as virtuous asymmetry (Ross, 2012),1 the country has succeeded in establishing a pragmatic (neo-realistic) relationship, paying particular attention to its international insertion, using three forms of opening: uni-, bi-, and multi-lateral, which have reinforced Chilean economic growth through two main means: exports and foreign direct investment. In the first phase (1975–1989), this process relied on good decisions and good

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Dominant States Downward Asymmetry Upward Asymmetry

INTERMEDIATE STATES

Downward Asymmetry Upward Asymmetry

Weak States

Fig. 7.1  Double asymmetry of intermediate states. (Source: Elaborated by the author)

solutions, and an internal political context that prevented the potential social costs of many of the measures, which could have translated to political instability capable of reversing those decisions. In the second phase (1990–2016), the good economic results associated with continuity, extension, and refinement of the international insertion model reinforced the legitimacy of the overall process and strengthened the international aspect of the Chilean strategy. Without doubt, the latter has been the most brilliant phase of national foreign policy until now, as it succeeded in institutionalizing through relevant agreements (AAPs,2 ACEs,3 and TLCs4) Chile’s links with the main economic areas of the world. At this point, more than being an economic choice, it was a way of being in a globalized world, the nature of which ensured that

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all national agendas were, ultimately, international agendas. After 30 years, the country has attained a way of life (economic, technological, political, social, cultural, etc.) whose intense links with the world are irreversible. Chile’s asymmetric relationship with more powerful stakeholders has resulted in the international recognition of the country, expressed in a series of indicators illustrating this new position, which has increasingly reinforced the country’s relative capacity to negotiate and has led some people to have illusions regarding the country’s capacity to exercise leadership at a regional level. In the second type of asymmetry, downward asymmetry, which can also be called regressive asymmetry,5 Chile appears as a strong country while others act as weak states. It involves aspects of greater difficulty, since here the interdependence is more complex, as it is subject to multiple variables and it is diffused by an ideological interpretation, in which several neighboring countries assume the historical role of “victims”, like actors located in the “south” or in the “periphery” of the relationship. Without doubt, this is the type of asymmetry that operates in the relationship between Chile and its neighbors in the north, Bolivia and Peru. The single Chilean need of nurturing its growth with clean, cheap energy, as well as the urge to articulate effectively the bi-oceanic corridors in order to allow Chile to physically consolidate its draft as a “bridge country” between the economies of the Southern Cone of America and other economic regions of the world, especially East Asia (Ross, 2005a), imposes the redefinition of downward asymmetric relations to transform them from their current status, regressive asymmetries into virtuous asymmetries. This means, however, replacing the prevailing definition of integration, where integration is seen as a maximalist goal (Ross, 2005b),6 with another, in which integration is seen as a tool for development (Di Filippo & Franco, 2000). Accordingly, the main challenge to Chile’s foreign policy is no longer continuity, which was expanded and improved upon during the years of democratic governments, although Chile should also re-invent these other relations while preserving continuity, as the complex interdependence of these relations requires the country to formulate new and untested options.

Chile–Asia Relations (2000–2016) From 2000 to 2016, Chile’s policy vis-à-vis Asia had both continuity and change: a residual continuity regarding the structure of the relations the country had with that region of the world in the past; and change aligned with the transformations that have taken place in Asia regarding the pre-­ eminence of their economies.

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The Historical Pattern In this period, Chile’s Asian policy put its emphasis on building a relationship whose contents were mainly economic. Chile’s policy and relations with Asia were characterized by an old-style political pragmatism, an economic neo-liberalism, and a political relationship of very low intensity, associated with the interests of the economic agenda. Under this framework, the ranking of Asian countries within Chile’s foreign policy has been related to the economic potential of the link, which has been restricted to a schema that we have described as a “virtuous asymmetry”, a form of cooperative trade integration sustained by the primary exports of Chilean commodities and by the importation of manufactured goods from Asia—in other words, by complementing their strengths and minimizing their weaknesses. Therein lies the success, and limitation, of what has been accomplished in this field. During almost the entire decade of the 1990s, the first place was occupied by Japan, a country whose more than one-hundred-year relationship with Chile should be considered in more depth. As I believe I have shown in several publications, it is a deep, long-lasting relationship, characterized by a high degree of bilateral understanding and loyalty. The active factor is economic, but not exclusively so, as has been demonstrated at different historical moments when the outcomes of this cooperation were very uncertain but managed to remain intact. Following the Asian financial crisis, China went from second to first place in terms of international trade and on the political agenda of Chile with Asia. China’s global impact was also manifested in this country, especially through the dynamics of bilateral trade, characterized by high Chinese demand for commodities and its production of cheap manufactured goods. In third place are the countries grouped in the NICs or NIEs, formed by South Korea, Hong Kong, Singapore, and Taiwan, or Taipei. Despite the heterogeneity of these countries, or economies, the integration scheme has mirrored that of Japan and China. Similarly, the political ties have been of low intensity. In a fourth place, there is India and the so-called ASEAN4. India, with its own development path and its association with China, will tend to gain dynamic relevance in the next few years, so it has this position only momentarily. In addition, it constitutes a singularity within the Asian front, because, since the beginning of its relationship with Chile (in its post-independence era), it has been a country whose political agenda and

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values locate it in a very different place in comparison with the other countries of East and South Asia (ESA), especially considering what could be called the weight of the “democratic clause” in its foreign policy. For its part, the ASEAN4 have been positioned in this place longer, due to their size, although there have been brighter times in this relationship, as during the admission process of Chile to the APEC (2005a), when Malaysia played the role of a very prominent ally, momentarily increasing the political dimension of the link between the two countries, although this did not result in structural transformation of this bilateral relationship. In fifth place, we find the emerging economies of Southeast Asia (Cambodia, Laos, and Vietnam),7 whose weight in the Chilean agenda is still small. However, they offer interesting potential for small and medium-­ sized exporting enterprises, whose standards have yet to overcome the barriers and competition conditions of the larger economies of Asia. Continuities and Changes in the Pattern of Chile–Asia Relations Following the Asian Crisis of 1997, China won an unprecedented place in the international trade matrix of Chile and, to a lesser extent, in its international policy. In the last 16 years of Chile–Asia relations, we have seen continuity and change in bilateral relations. Continuity has been structural and it has been related to the features stated in the previous section. The changes have been linked, as in the rest of the world, to the commodities super cycle (2000–2013), which contributed significantly to the increase in China’s presence and influence. In fact, as was stated by The Economist on July 7, 2013: But from 2000 until very recently, China’s soaring demand for resources as it rapidly industrialised and urbanised led to shortages and unprecedented price rises, as supply could not keep up with the escalation in demand. (Flood, 2013)

Asia’s has a significant place in Chile’s global trade. It represents 40% of the total and shows a pattern linked to trends in global trade (see Fig. 7.2). More specifically, and despite the corrections made to the statistics for 2016, as yet unfinished during the writing of this chapter, the tendency has been toward contraction since 2011, although with a trajectory moving toward stabilization.

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Chile: Total trade with Asia and world aggregates, 2000-2016 (in US$ MM each year)

1,80,000 1,60,000 1,40,000 1,20,000 1,00,000 80,000 60,000 40,000 20,000 0

1

2

3

4

5

6

7

Total Asia

8

9

10 11 12 13 14 15 16 17 World aggregates

Fig. 7.2  Total trade with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December figures were calculated from the average of the previous months using the formula (months/8) × 12)

It is worth noting that despite the enormous global impact of the crisis of 2007–2008, and the permanence of its effects, Chile’s link with Asia shows an important strength, due to its ability to absorb the fall and find new directions for an already consolidated relationship (see Fig. 7.3). As discussed at the beginning of this section, and in the chart that expresses world and Asian imports, the period 2000–2016 shows an upward tendency, only interrupted by the Subprime Crisis (2007–2009) and by the end of the commodities super cycle, as previously mentioned (see Fig. 7.4). Asian imports, despite experiencing a decline, have fared better than world imports according to the curve shown in Fig. 7.5. On the other hand, Chilean exports show the same trend, albeit with an even lower variation than that of imports. Accordingly, as regards Chile’s international trade, Asia has been a factor of stability, revealing its regional importance for Chile. As we can see in Figs. 7.6, 7.7, and 7.8, the individual countries, however, have a differentiated importance, depending on the size of their economies.

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Chile: Total trade with China, Japan and South Korea 2000-2016 (in US$ MM each year)

40000 35000 30000 25000 20000 15000 10000 5000 0

1

2

3

4

5

6

7

China

8

9

Japan

10

11

12 13 14 15 16 17 South Korea

Fig. 7.3  Total trade with China, Japan, and South Korea, 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months, using the formula (x/8) × 12)

90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Chile: Exports with Asia and world aggregates 2000-2016 (US$ MM FOB)

Total Asia

World aggregates

Fig. 7.4  Exports with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12)

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Chile: Imports with Asia and world aggregates 2000-2016 (US$ MM CIF)

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

World aggregates

Total Asia

Fig. 7.5  Imports with Asia and world aggregates 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12)

Chile: Total trade with China, Japan, South Korea, Asia and world aggregates 2000-2016 (in US$ MM each year)

200000 150000 100000 50000 0

1

2

3

4

5

China Total Asia

6

7

8

9

10 11

Japan World aggregates

12 13 14 15 16 17 South Korea

Fig. 7.6  Total trade with China, Japan, South Korea, Asia, and world aggregates 2000–2016

18,000

Chile: Imports with China, Japan, South Korea, 2000-2016 (US$ MM CIF)

16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 China

Japan

South Korea

Fig. 7.7  Imports from China, Japan, and South Korea 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12)

25,000

Chile: Exports China, Japan and South Korea 2000-2016 (US$ MM FOB)

20,000 15,000 10,000 5,000 0 China

Japan

South Korea

Fig. 7.8  Exports to China, Japan, and South Korea 2000–2016. (Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12)

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(Source: Elaborated by the author, based on information from the monthly newsletter of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12) If we analyze Chile’s main partners in Asia, we can see that after signing the bilateral FTA (2005a), China became Chile’s leading trading partner within Asia. Similarly, the period 2000–2016 clearly demonstrates that there was a general expansion of trade, as well as a very significant increase from the subprime crisis onward, as a final phase of the commodities super cycle. The disaggregation of the hierarchies of Chile’s main Asian partners also proves that China became Chile’s leading partner, significantly more important than Japan and Korea, the other great allies of Chile’s economy (see Fig. 7.8). However, despite the end of the commodities super cycle (Flood, 2013), the impact of this economic tendency has been moderated and China has not exhibited a political strategy in Latin America or in Chile to mitigate this effect, so as to preserve its bargaining position. In contrast, Japan and South Korea seem to be more active in this respect, striving to recover their historic places and to take advantage of the break in the dynamic expansion of China.

Chile–China Relations Chile’s policy vis-à-vis China has been almost an extension of the already widely cited idea of pragmatism by Deng Xiaoping, expressed as “colors of the cat”. In Chilean policy, China had a functional role since the Government of Popular Unity (1970–1973) was a political ally to balance the enormous influence the United States had in the Allende (1970–1973) and Pinochet (1973–1990) governments, and as a trading partner to the democratic governments, from 1990 to the present. Logically, it was a relationship between a giant that is no longer “asleep”, as reflected in Napoleon’s quote (Ross, 2002), and a dwarf. This link has been marked by utilitarianism and, therefore, it has been typically functional and superficial. All in all, the super cycle generated a new need to be understood in a deeper way (China and Chile), an issue that has been reflected in an increase in cultural exchanges and a genuine interest in knowing more about each other. The super cycle generated a more complex friendship, which I have tried to explain through the metaphor used in the title of this chapter, as a relationship between the Chinese Panda and the Chilean hummingbird.

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The Panda and the Hummingbird The panda is large, with slow and unhurried movements. It does not move more than 500 meters per day and in this small space it finds all its food (mainly bamboo), so it barely competes with anyone else. The panda, aware of its own size, moves slowly, but each centimeter of progress generates a visible effect in its environment. China, due to its “economic miracle”, reached such a size and weight within the world economy, that is, in first or second place in the world market (depending on the methodology used). However, each movement made by China seems to be just one second in its long history, one link in a very long chain, one grain of rice in a whole harvest. The hummingbird is very small, with quick and nervous movements. It expends a large amount of energy, so it must consume nectar from many flowers; it cannot choose only one flower to feed from, but it must go from flower to flower to survive. The hummingbird does not seem to have a large effect on nature, but it plays an important role: as it moves from flower to flower, it connects plants of the same species and thereby it helps in their reproduction. Chile, without being a major power, is part of the global chain of value and so is present in many industrial products containing copper, steel, molybdenum, silver, gold, timber, and other elements of national production. Both creatures live in distant places, they do not interfere directly with each other, and they could survive without the slightest interaction, but circumstances have put them on the same path and they have found a way to understand each other. The panda and the hummingbird, separated by obvious differences, have found an effective way to harmonize the differences in their sizes, in what might be called a virtuous asymmetry, a formula the hummingbird learned ancestrally, as part of its genetic condition. The small and the weak are often keen observers, strategists, calculators, and masters of camouflage: in sum, innate survivors. The panda, in turn, learned that the hummingbird could bring what was needed from far away, almost without altering the panda’s habitat. The Bilateral Policy: Dialogue Between a Panda and a Hummingbird After the bilateral FTA was signed in 2005, there were a small number of interactions that year, but they were very relevant. Moreover, if we observe what happened in the following year, it can be concluded that the impact of

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the FTA on the volume of political relations was quite significant, although it was not exempt from the larger effects of the global economic crisis and the contraction of economic growth in China, which affected the momentum and frequency of these relations in the official register (see Fig. 7.9). As can be seen in the disaggregated chart in Fig. 7.10, the upward tendency is characterized by an erratic pattern, consisting of four short cycles revealing movements of expansion, crisis, and contraction: 2000–2003, 2003–2005, 2005–2008, and 2008–2013. A detailed review of the official dialog between the two states, which includes the action of state and non-state actors, focused on five main dimensions: economic relations, integration, cooperation, diplomacy, visits, and meetings. Within each cycle, the five dimensions had a highly symmetrical behavior, although it is possible to observe that the dimension with the highest frequency was economic relations while the lowest was visits and meetings. The predominance of the economic dimension is not only the strongest feature of these bilateral relations, but also the key that has marked the International Relations of Chile in a virtuous asymmetry in an upwards direction, while being the source of a structural weakness that is difficult Total of Chile-China interactions 2000-2013

80 70

Interactions

60 50 40 30 20 10

13 20

12 20

11 20

10 20

09 20

08 20

07 20

06 20

05 20

04 20

03 20

02

20

01 20

20

00

0

Fig. 7.9  Total number of Chile–China interactions 2000–2013. (Source: Elaborated by the author, based on information contained in the annual reports of the Ministry of Foreign Affairs of Chile, period 2000–2013)

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Interactions by dimensions Chile -China 2000-2013

70 60 50 40 30 20 10 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Visits and meetings Integration

Diplomacy Economic relations

Cooperation

Fig. 7.10  Interactions by dimension Chile–China 2000–2013. (Source: Elaborated by the author, based on information contained in the annual reports of the Ministry of Foreign Affairs of Chile, period 2000–2013)

to tackle, since the success of bilateral trade has tended to understate the political dimension, which is the basis of the links that, historically, have allowed the relationship to not only survive in the long term, but also to survive the main challenges that usually stress real international relations. Economic Policy: A Case of Simple Asymmetrical Interdependence? As has been described and analyzed by many authors,8 the seductive effect of the expansion of the Chinese economy and the subsequent growth of its demand for commodities from primary export economies such as Chile has been massive and sustained, especially since the Asian crisis. The associated economies did not miss out on this great opportunity to sell as much as possible to China, without proper value addition and despite setbacks. For example, some Chilean vineyards went from selling bottled wine to selling wine in bulk (wholesale) and even to intermediate levels of processing (broths); some Argentine and Brazilian farmers went from selling soy sauce to selling the soy in its most primitive state (seed).

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Chile: Total trade with China, 2000-2016 (in MM US$ each year)

40000 35000 30000 25000 20000 15000 10000 5000

09 20 10 20 11 20 12 20 13 20 14 20 15 20 16

08

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20

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Fig. 7.11  Total trade with China 2000–2016. (Source: Elaborated by the author, based on the Monthly Newsletter information of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (x/8) × 12)

Nonetheless, as we can see in Fig. 7.11, the expansion of demand was so intense and caused such an extraordinarily positive effect on prices that nobody refused to make these choices. It wasn’t until the end of the super cycle that a real awareness struck home when copper, soy, or oil prices fell to less than half of their prices in 2013. In fact, China made an enormous effort to sustain the mirage of a Latin American “miracle” during a decade when Europe and the United States were driven by the effects of the recession resulting from the crisis of 2007–2008. In 2013, and especially in 2014, there was an abrupt encounter with reality, with the reinstatement of the classical dynamics of primary export economies, in which the oscillation of international prices determines the rhythm of expansion, crisis, and contraction of exports and, subsequently, the rhythm of fiscal deficits and their social and political consequences. As observed in the bilateral trade chart (Fig. 7.12), the signing of the bilateral FTA had a very positive impact on trade, despite the fact that the latter was affected by the crisis of 2007–2008, an event that only affected exports in 2008 and imports in 2009. Both sectors, however, recovered quickly and they only began to shrink rather symmetrically from the end of the super cycle, in 2013.

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Chile: Exports and imports with China 2000-2016 (in US$ MM each year)

25,000 20,000 15,000 10,000 5,000 0

1

2

3

4

5

6

7

8

Exports China

9

10 11 12 13 14 15 16 17 Imports China

Fig. 7.12  Exports and imports with China, 2000–2016. (Source: Elaborated by the author, based on the Monthly Newsletter information of the Central Bank and Foreign Trade Indicators, also prepared by the Central Bank of Chile. (1) From 2000 to 2003, Hong Kong is included within China; (2) 2016: From January to August, the figures are real. From September to December, figures were calculated from the average of the previous months using the formula (months/8) × 12)

China retains its prominent position, remaining well above its Asian competitors, Japan and South Korea. According to an analysis carried out by DIRECON,9 in which the bilateral trade of the period 2005–2012 was compared, the FTA has been very successful.10 In summary, it was stated that “during 2012, the commercial exchange of Chile with its main partner [China] totaled US$ 32.651 million, constituting around 21% of the Chilean foreign trade. This reflects an increase of 22% annual average 2005, the year before the entry into force of the FTA. In the meantime, the trade balance has been positive for Chile in the last ten years, totaling in 2012 US$ 4.687 million”. Since the FTA came into effect, “exports to China have grown at an annual average of 20.7%, a rate equivalent to the expansion of copper in the same period. When analyzing the main types of products exported by Chile to China in 2012, copper features markedly, indicated by the frequent shipments of this commodity from Chile to China” (Ministry of Foreign Affairs of Chile, n.d.). The same report says “despite this fact, it can be concluded that the results exposed so far show potential opportunities for not only mining goods, which have already begun to exhibit attractive performance. The tariff benefits granted in the FTA have allowed the introduction of new

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products, which show a significant rate of growth, and is expected to continue over time, in order to consolidate the placement of this type of products in this market” (Ministry of Foreign Affairs of Chile, n.d.). This assertion, however, does not tally with the results after 2013, which show that the mining sector remains the major engine of this relationship. The same report argues that imports, which were equally dynamic, show a very wide diversification, revealing the productive nature of the robust Chinese industry. Thus, the report states “Imports, for its part, totaled US$ 14.432 million in 2012, showing an increase of 13.7% c­ ompared to the previous year. In the meantime, purchases from the Asian country have increased by 23.9% on average per year since 2005. The 15 main products imported from China constituted about 25% of the total Chilean purchases from this market” (Ministry of Foreign Affairs of Chile, n.d.). Clearly, these figures confirm not only Chile’s bilateral asymmetry, but a type of relationship that in the past was called “center-periphery”, previously with reference to Spain (fifteenth to nineteenth centuries), the United Kingdom (nineteenth century), the United States (the entire twentieth century), or to Japan (from the second half of the twentieth century onward), but now with reference to China, without substantial alteration of the pattern. With regard to the companies doing business with China, the same report notes that “the ten leading exporters in 2012 accounted for 70% of the total exported, highlighting the National Corporation for Copper (CODELCO) located in the first place with a share of around 30% of total exports, followed by Minera Escondida Ltda. with 12%. Also in 2012, the number of firms exporting to China doubled, reaching 921. Additionally, the number of exported products to the Asian country grew from 290 products in 2005 to 506 in 2012” (Ministry of Foreign Affairs of Chile, n.d.). Accordingly, the number and type of export companies expanded and diversified, but with an evident concentration in value and sector, which is a sign of the fragility of the success achieved before 2012; an issue that was confirmed from 2013, when the commodities super cycle began to decline. The contraction of exports to China is more than obvious proof that the new sectors and businesses lacked the attractiveness of copper, iron, and molybdenum, and, accordingly, that the Chilean link to the Chinese global value chain remains very fragile. To complete its analysis of bilateral trade, the same report stated that “unlike the export sector, where few companies concentrate the main shipping, purchases from China come from a large number of enterprises

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with a relatively low share in total imports. Indeed, the top ten only concentrated around 19% of the total purchases in 2012. While the number of import companies doubled after the Treaty entry into force, increasing from 7.122 in 2005 to 16.687 in 2012, the number of imported products only rose 11%” (Ministry of Foreign Affairs of Chile, n.d.). This observation shows that despite the positive impact of FTA, the link is still weak. Finally, the report argues that “in the year 2012, the flows of FDI11 from China to our country materialized in the mining sector with an investment of US$9 million” (Ministry of Foreign Affairs of Chile, n.d.). This implies a very low presence, the impact of which is almost imperceptible in the national FDI picture, providing further insight into what has been stated regarding trade as a whole. There has been spectacular growth, but it has been built on fragile ground, which prevents us from taking an overly optimistic view of the future, especially once intra-industrial integration between India and China is consolidated and the development of primary-industrial integration between Africa and China is completed. Both dynamics have been under way for more than a decade at the time of writing.

Conclusion In Chile’s case, double asymmetry describes the simultaneous relation the country has, both with the major economies of the world as well as with those—that is, spatially neighboring countries—whose trivial power is clearly less than Chile’s. Upwards asymmetry has led to great economic dividends, while downward asymmetry has led to relations that advance and retreat continuously. However, its links with the Asia Pacific do not compel Chile to deal with the main challenge derived from this paradox, which is double asymmetry. However, Asia Pacific region of the world demands a continuity that is quantitatively expressed and, most especially, is one of greater depth, which Chile has achieved through the institutionalization of its economic relations through a range of agreements (PSTAs, ECAs, FTAs) that are moving in the same substantive direction. During the period under review, as we have seen, a disaggregation of the hierarchies of Chile’s main Asian partners, reveals that China not only became Chile’s main economic partner in Asia, but that it is today significantly more important than Japan and Korea, at least quantitatively.

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Overall, China’s new position in the Chilean economy faces great challenges, derived from the end of the commodities super cycle. However, the Asian power has not exerted a political strategy to mitigate this effect in Latin America in general or in Chile in particular in order to preserve the bargaining position, which it has reached up to this point. On the contrary, as we have stated, Japan and South Korea seem to be more active in this respect, striving to retrieve their historic places and to take advantage of the break in China’s dynamic expansion. Chile’s policy on China can almost be seen as a historic variation of a pragmatic approach taken by a very large number of Chilean governments. Based on the author’s own investigations, it could be argued that this policy has been in place from the Government of the Popular Unity (1970–1973) onward, according to which China has played a functional role for Chile in political and economic areas. In the period 2000–2016, Chile’s policy on Asia had continuity and change: a residual continuity, with regard to the structure of the relations Chile had with that region of the world in the past; and change aligned to the changes taking place in Asia, in regard to the pre-eminence of their economies and the so-called commodities super cycle. Although the super cycle generated a more complex type of friendship, its dominant practicality and functionality have condemned it to superficiality, and consequently, it has not provided an enduring foundation for trust and commitment. This weakness becomes critical when markets contract, as they do today, and it becomes evident that a very thin thread connects the panda and the hummingbird. The bilateral future should not be based merely on more trade: a relationship capable of weathering difficult times should be developed. However, if this does not happen, it will be vital to strength Chile’s international and Asian relations in order to diversify and intensify the links with additional countries, whose status should be limited to that of trading partners. Foreign policy should consist of much more than economic interest, and, so far, this lesson has only been partially learned. As can be deduced, the great challenge of the bilateral relationship does not lie in recovering the pace of trade to pre-2013 levels, but in the re-­ politicization of bilateral relations at the highest sense and complexity. Despite the actors involved, the area of perceptions, negotiations, and decisions belong to the political sphere and that is the deficit that Chile and China must address.

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Notes 1. I have coined the expression of virtuous asymmetry as a metaphor to describe the relationship between at least two actors whose power is asymmetric but that manages to establish a link of “variable sum”, or one where both can benefit. In Estudis de l’Àsia Oriental, January 14, 2016. Available at: http:// asiaoriental.blogs.uoc.edu/2016/01/14/autor-convidat-cesar-ross-2-relacions-entre-xile-i-asia/. Ross, César (2012) “Los Desafíos de la Política Exterior Chilena.” In Mario Artaza and César Ross, La Política Exterior de Chile, 1990–2009: Del aislamiento a la integración global. Santiago: RIL Editores/USACH. 2. AAP: Acuerdos de Alcance Parcial; PSTA: Partial Scope Trade Agreement. 3. ACE: Acuerdo de Complementación Económica; ECA: Economic Complementation Agreement. 4. TLC: Tratado de Libre Comercio; FTA: Free Trade Agreement. 5. Referring to the asymmetry that always results in a setback for the weakest actor, despite being subject to advances and reverses. 6. Whose negotiation is almost always subject to zero-sum logic and where the commitment of states has been more rhetorical than political. 7. One of the few studies about the relationship between Chile and these three countries is the thesis by Alejandro Miranda Contreras, of USACH International Studies Master’s Program, that I had the opportunity to supervise and which was subsequently published in 2014 by Magician Editors under the title of Chile en el Asia Pacific: Economic relations with Vietnam, Cambodia and Laos in the last decade. 8. Including my own work. 9. General Directorate for International Economic Relations, Ministry of Foreign Affairs of Chile. (n.d.). http://www.direcon.gob.cl 10. The agreement was signed in 2005 and launched on October 1, 2006. 11. FDI: Foreign Direct Investment.

References Bernal-Meza, R. (2016). Contemporary Latin American thinking on international relations: Theoretical, conceptual and methodological contributions. Revista Brasileira de Política Internacional. Retrieved from http://www.scielo.br/ pdf/rbpi/v59n1/0034-7329-rbpi-59-01-00005.pdf Di Filippo, A., & Franco, R. (2000). Integración Regional, Desarrollo y Equidad (p. XXI). México: Siglo. Flood, C. (2013, July 7). Commodities: Death of the ‘super cycle’ exaggerated. Financial Times. Retrieved from https://www.ft.com/content/05db28bce309-11e2-9bb2-00144feabdc0

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General Directorate for International Economic Relations, Ministry of Foreign Affairs of Chile. (n.d.). FTA Chile-China. Retrieved from https://www.direcon.gob.cl/2013/09/8372/ Ministry of Foreign Affairs of Chile. (n.d.). The Free Trade Treaty Chile – China. Retrieved from http://chile.gob.cl/china/es/asuntos-comerciales/oficinacomercial/tratado-de-libre-comercio-chile-china/ Ross, C. (2002). Relaciones entre Chile y China: treinta años de relaciones atípicas, 1979–2000. Si Somos Americanos. Revista de Estudios Transfronterizos, III(2), 33–48. Ross, C. (2005a). El Este de Asia y el Cono Sur de América: ¿hacia un nuevo modelo de integración? In C. Ross (Ed.), Chile y APEC 2004: al encuentro de una oportunidad. Iquique: Universidad Arturo Prat. Ross, C. (2005b). Argentina y Chile: los desafíos de la integración en tiempos de crisis. In P.  Lacoste (Ed.), Argentina, Chile y sus vecinos (Vol. II). Mendoza: Caviar Bleu, Colección Cono Sur. Ross, C. (2005c). Chile en la Doble Asimetría: ensayo sobre política internacional. Si Somos Americanos. Revista de Estudios Transfronterizos, VII(1), 109–139. Ross, C. (2006, April–May). Chile: los desafíos de la política exterior de Michel Bachelet. Foreign Affairs. Retrieved from https://www.researchgate.net/ publication/268371372_Chile_los_desafios_de_la_politica_exterior_de_ Michelle_Bachelet Ross, C. (2009, November 5). Los desafíos de la Política Exterior Chilena 2010–2014. Le Monde Diplomatique, 102, 23. Retrieved from https://www. lemondediplomatique.cl/Los-Desafios-de-la-Politica.html Ross, C. (2012). Los Desafíos de la Política Exterior Chilena. In M.  Artaza & C. Ross (Eds.), La Política Exterior de Chile, 1990–2009: Del aislamiento a la integración global. RIL Editores; USACH. Strange, S. (1994). Rethinking structural change in the international political economy: States, firms and diplomacy. In R. Stubbs & G. R. Underhill (Eds.), Political economy and the changing global order. London: The Macmillan Press.

CHAPTER 8

China and Argentina, Paraguay, and Uruguay: Similarities and Differences Eduardo Daniel Oviedo

Introduction The international rise of China is a political reality that has affected all the countries in the world, even states distant from China such as Argentina, Paraguay, and Uruguay. China’s influence has spread throughout the world, but the impact of China’s global rise on its relationships with these three South American economies had some special differences. For this reason, this chapter examines the identities of and differences between the interactions between the parties, particularly the common and contradictory interests arising from the 2008 financial crisis onwards to the beginning of the “trade war” between China and the United States. The research focuses on political, diplomatic, trade, investment, and migration fields, and on the basis of the differences in cultural heritage, political regimes, and economic structures between China and the three countries.

E. D. Oviedo (*) National Scientific and Technical Research Council (CONICET), Buenos Aires, Argentina National University of Rosario (UNR), Rosario, Argentina © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_8

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Over 2008–2017 period, Argentina and Uruguay had diplomatic relations with the People’s Republic of China (henceforth China or PRC), while Paraguay recognized the Republic of China (henceforth Taiwan). This difference in diplomatic relations requires that we analyze the political relationships between China and the three countries and, also, the interactions between Taiwan and Paraguay. Under this framework, the Chinese government politically defined Argentina as a “comprehensive strategic partner”, Uruguay as a “strategic partner”, and had not established any form of official linkage with Paraguay. However, these three different political statutes, granted by the Beijing government, were no barrier to China’s development of economic relations, nor to their obtaining trade surpluses with the three countries during the decade studied. As a large trade market and a source of capital, China plays an important role in the economic modernization of the three countries. In 2016, China was the leading trade partner of Uruguay and the second most important of Argentina, as well as being the main partner for Paraguayan imports. This complementarity in trade benefited both parties through the interchange of goods and services. At the same time, Chinese economic growth also caused unequal interaction with these three countries. In fact, not only did China’s economic growth consolidate its center-­ periphery relationship and enlarged asymmetries with the three South American countries, but these economies also transferred huge amounts of dollars to China through bilateral trade between 2008 and 2017. Unlike other South American economies (e.g. Brazil or Chile), the official statistical data of Argentina, Paraguay, Uruguay, and China allow us to define the trade relation between the three countries, revealing China’s involvement in a “lost trade decade”, particularly in Argentina. In the investment and financial fields, there are different modalities in China’s capital exports. Foreign direct investment (FDI), investments through tax havens, currency swaps, and loans for infrastructure projects have been developed with Argentina. Consequently, China became one of the major contributors of capital in Argentina in the last decade. In contrast, no such investments have been made in Uruguay and Paraguay. According to statistical data, Taiwan contributed international aid to Paraguay, but it hasn’t executed an effective strategy on trade and investment in this country. In the field of migration, there are differences in policy, witnessed by the large numbers of Chinese immigrants in Argentina, the role of Taiwanese immigration in Paraguay, and the restricted policy of Uruguay toward Chinese citizens.

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In order to test these assertions, the chapter is divided into two main parts. The first part introduces the essential differentiations in terms of cultural heritage, political regimes, economic structures, and their impact on the modernization process. The second part analyzes similarities and differences in respect of diplomatic, political, trade, investment, and migration policies between China and the three countries. Finally, it draws some conclusions based on the results of the five areas studied in the framework of the three main differences.

The Roots of Relation: Three Main Differences Our study of relations between China and the three South American countries starts from three substantive differences: both sides belong to different civilizations, political regimes, and economic structures. These three features play a central role in the modernization and the consolidation of political institutions in the four countries. China is a multi-ethnic society, a hybrid that combines Han civilization with Western influence. It also houses other civilizations, dominated by the hegemony of the Han ethnical group, exercised throughout the entire territory of China, including Taiwan. In fact, there are other civilizations coexisting within the Chinese state, such as Tibetans, Uyghurs, Mongolians, and other ethnic groups who live in China with different cultural heritage and identities. Confucianism is a feature of Han civilization, first among equals according to China’s philosophical roots, which makes China a Confucian society. On the other side, the three South American countries are part of Latin American civilization, as “the immediate offspring” of Western civilization in Samuel Huntington’s words (Huntington, 1997: 44), with Catholic roots1 and influenced by indigenous cultures.2 Unlike the homogeneity of the Han civilization, the Latin American countries are mestizo societies, distinguished by their Aboriginal roots as much as by diverse migratory waves, giving a unique culture to the region, and separating it from its mother civilization (the Western European one) and from its ancient civilization (the indigenous one). The four states have adopted Western political systems. China, however, has a totalitarian regime, with a communist one-party system. This is not a Chinese political system, since the regime was created in the Soviet Union as the result of Marxist-Leninist thought. In contrast, Argentina, Paraguay, and Uruguay are democracies at different stages: Uruguay has a consolidated democratic regime, while Argentina and Paraguay can be

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classified as non-consolidated democracies.3 All parties have an interest in consolidating their political regimes and the economy is a key factor to strengthening democracy in Argentina, Paraguay, and Uruguay through modernization, while China, following the decline of Marxist-Leninist ideology, maintains the legitimacy of exercise of power through its success in economic reform. According to Inglehart and Welzel (2009: 15), modernization theory asserts that most Chinese advances in economic modernization will most likely allow for the transition to a democratic system. Next, there are differences in the relationship between economic modernization and the respective democratic systems. While China modernized its economy via a totalitarian regime and the transition to democracy still needs to be made, the three South American countries have democratic political regimes but have failed to implement successful economic modernization. The productive structures involved are essentially different. Over the last four decades, China has fast transited from an agricultural-based economy to an industrial export model, while the three South American states are economies based on agriculture, limited industrialization, and highly concentrated exports. The three economies exported primary goods, mainly agricultural commodities, and China sold manufactured goods to them. These economic and export structures generated interactions based on the center-peripheral relation between the two sides: the three South American economies supplied agricultural and other primary goods to the Chinese market and imported manufactured goods from China. In addition, China and the three Latin American countries have economies of different sizes, differing international reserve levels, and China benefits from an economy of scale through its capital-export capacity (see Table 8.1). All of these characteristics put the four countries in different positions in the international economic structure and reveal asymmetrical relations between the parties, confirming a North–South scheme.4 China is thus a North country and the three Latin American states belong to the South. These three elements strongly influenced the modernization processes in the four countries. The Chinese political regime implemented a monist model of modernization, with coercive enforcement from top to bottom (Bobbio, Matteucci, & Pasquino, 1995: 117–18), while the South American democratic countries executed pluralist models, from bottom to top, based on dialogue and negotiation between the social actors (Oviedo, 2009: 4). In the former, the modernizing elites are the Han ethnical group and the Chinese

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Table 8.1  Comparative select economic indicators: 2017 Items

China

Argentina

Paraguay

Uruguay

GDP, in current US$ millions Percentage of China GDP ranking Total reserves, including gold, current US$ millions FDI, net inflows, current US$ millions Share of economic sectors in GDP Agriculture Industry Services

12,237,700 2 3,235,681

637,430 5.2 21 55,314

39,667 0.3 90 7877

56,156 0.4 77 15,959

168,223

11,516

507

−878

7.9 40.5 51.6

5.6 21.8 72.6

10.3 34.5 55.2

5.2 24.3 70.5

Source: Elaborated by the author based on data from the World Bank (2017)

Communist Party, while the modernizing elites in the South American countries are atomized in different social and political groups (Oviedo, 2015a: 157). The Confucian tradition seems to be more practical than Catholic tradition in favoring social cohesion and modernization. The dissimilar economic structures extended the asymmetries between the parties and the components of the trade exchange configured both the North–South scheme and center-peripheral model, as mentioned in the previous paragraph. As a result, the success of the Chinese modernization program consolidated the political regime in China and this country controlled the interdependent relations between the parties throughout the time period studied. Also, these three factors inter alia clearly explain the success of modernization in China and the failure of modernization in the three cases analyzed, considering that modernization is a substantive means of consolidating democracy in these countries, both in consolidated and non-consolidated democracies.

Similarities and Differences In their relations with China, Argentina, Paraguay, and Uruguay themselves differ in the diplomatic, political, trade, investment, and migration fields. At the same time, the three countries also have common interests in their interactions with China. Therefore, this section of the chapter pays attention to the similarities and differences between these five areas of the relations between the three countries and China.

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Diplomacy: A Key Difference Argentina and the PRC have had diplomatic relations since 1972, Uruguay and the PRC since 1988. Conversely, Paraguay has continued to recognize Taiwan since both parties established diplomatic relations in 1957. According to the Central Bank of Paraguay (1961–2017), this economy started to export goods to the PRC in 1991 and it has imported manufactures since 2000. Exports to Taiwan began in 1982, and imports from this market in 1963. Taiwan has an Embassy in Asunción and a Consulate General in Ciudad del Este, a city strategically located on the triple border between Argentina, Brazil, and Paraguay. China has no embassy, consulate, or office in Paraguay, a situation mirrored by Paraguay’s lack of diplomatic representation in China. Argentina has an Embassy in Beijing (including Consular Section, Cultural, Commercial, and Agricultural Office), General Consulates in Hong Kong, Guangzhou, and Shanghai and a Trade and Cultural Office in Taipei. The Agricultural Office is relevant since Argentina only has five such offices in the world (Brazil, United States, European Union, China, and Russia). The PRC accredits an Embassy and Trade Office in Buenos Aires and Taiwan has a Commercial and Cultural Office. Uruguay has an Embassy in Beijing (including a Consular Section), a General Consulate in Shanghai, and consulates in Beijing and Hong Kong. According to The Foreign Relations Yearbook of the Republic of China (2000, chapter 6), in 1992, Taiwan established a Taipei Trade Office in Montevideo and the Uruguayan government considered it as an international organization, even granting tax exemptions to staff. However, the Taiwan authorities closed this office and Uruguay has remained under the diplomatic jurisdiction of the Taipei Commercial and Cultural Office in Argentina. Uruguay has no office in Taiwan.5 The “diplomatic truce” (waijiao xiubing) between the Chinese Communist Party (CCP) and the Nationalist Party (Guomindang) spans the entire period studied. The resultant peaceful situation in the Taiwan Strait stabilized the diplomatic relations between the three countries and China on the Taiwan question between 2008 and 2016. This situation varies considerably from the tension produced during the presidency of Chen Shui-bian (2000–2008) and his failed independence policy. The commitment assumed by the two parties in the “diplomatic truce” froze the number of states that recognized China and Taiwan from 2008 to Gambia case.6 During the truce years, several Latin American g ­ overnments

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approached the PRC in order to establish diplomatic relations,7 although Beijing respected the pact agreed with Taipei. So, it is clear that both sides put the interests of the Taiwan Strait above diplomatic recognition. This political pact hampered the efforts of President Fernando Lugo (2008–2012) of Paraguay to recognize the PRC, abandon support for Taiwan in the United Nations, and end its checkbook diplomacy (ABC, 2008). The latter is the name used to describe the Taiwanese policy on bilateral cooperation and aid in countries that recognize Taiwan. For example, in Paraguay, this appeared as donations for housing construction, agricultural support, and even for the construction of the National Congress building (Última hora, 2017) and the remodeling of the Ministry of Foreign Affairs in Asunción (Ministerio de Relaciones Exteriores del Paraguay, 2017). In 2013, the Gambia case alerted countries that recognize Taiwan to the fact that, if they were to disrupt their diplomatic relations with the island authorities, they would probably not be recognized by China, given the commitment assumed in the “diplomatic truce”. In 2016, the political alternation in Taiwan changed the orientation of the island’s authorities. The alternation meant the handover of political power from the Nationalist Party Leader, Ma Ying-jeou, to Democratic Progressive Party Leader, Tsai Ing-wen. As a result, the Chinese government decided to end their former compromise when they established diplomatic relations with Gambia in March of that year. This new political situation in the island provoked tension in the Taiwan Strait and this affected other countries’ policy on China. For the Paraguayan government, the rupture of the “diplomatic truce” brought political expectations of a change in the diplomatic orientation that had been in place since 1957. However, this potential change had no effect on Paraguayan diplomacy during the period under study. On the contrary, the two countries reinforced their links. President Tsai Ing-wen made a State visit to Paraguay in June 2016. During the visit, President Horacio Cartes decorated President Tsai with the National Order of Merit in the degree of “Collar Mariscal Francisco Solano López” (the highest distinction grated by the country) and the two presidents signed a joint declaration. In 2017, the Paraguayan president visited Taiwan, and, in August 2018, President Tsai made a second visit to Paraguay. On this occasion, both Presidents opened the Taiwan-Paraguay Polytechnic University. The role of US policy in the Taiwan question is key. Once Donald Trump became US president, he made the Taiwan question a central issue

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on the Chinese–American bilateral agenda. As President-elect, Trump had expressed doubts about the “one-China policy” and had received a phone call from President Tsai Ing-wen. However, shortly after taking office, Presidents Donald Trump and Xi Jinping had a telephone conversation. Office of the Press Secretary of the White House (2017) announced that President “agreed, at the request of President Xi, to honour our ‘one China’ policy”. President Trump also sent a congratulation letter to President Xi, and his daughter Ivanka Trump visited the Chinese Embassy, on the occasion of Chinese New Year. In April 2017, President Xi’s visit to the United States and the meetings with President Trump in Florida marked a turning point in bilateral relations. For this reason, the situation in the Taiwan Strait after the ending of the “diplomatic truce” opened up new opportunities in the Latin American foreign ministries regarding foreign policy toward China. In fact, after re-establishing diplomatic relations with Guinea, the PRC established diplomatic relations with Panama (2017), Dominican Republic, and El Salvador (2018). However, the pressure placed by the United States on the three countries, expressed through a number of political-economic sanctions and the recall of two ambassadors and one charge d’affaires accredited in the three capital cities suggests that diplomatic recognition of the PRC can lead to complications with the Trump administration. The so-called trade war between the United States and China also launched a new phase in the Taiwan question. Argentina must also take a political decision on the new situation in the Taiwan Strait, given that the Trump administration supports economic reform in Argentina and mainland China supports Buenos Aires on the Malvinas8 issue. Historically, both states provided mutual support in these controversies. The Argentine government has considered China’s role as a permanent member of the Security Council of the United Nations and, in some aspects, they take a similar approach to issues such as the defense of the principle of territorial integrity, although diplomatic tensions between Argentina and the United Kingdom were lessened after President Macri took office in December 2015. The Argentine support for One China Principle makes more rigid its trade and financial strategy toward Taiwan than Chile and Brazil, which is “allowed” by the PRC regime, and it is applied by these two countries only to economic and cultural exchanges, that is, it is about maintaining political, economic, and cultural ties with China and economic and cultural relations with Taiwan. However, Argentina prefers not to strengthen its economic relations with the Taiwan

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authorities, showing respect for China’s support on the Malvinas question. For its part, Uruguay has greater autonomy than Argentina on the Taiwan question, although its government maintains its “one-China policy” and does not have a trade office in Taiwan. Strategic Relations Between a Great Power and Three Small Powers According to the categorization of the Chinese government,9 the three countries each have a different status in their relations with China. In 2001, Presidents Fernando De la Rúa and Jiang Ze Min established an integral cooperative association between Argentina and China (Oviedo, 2010: 421). In 2004, it rose to a strategic partnership and, in 2014, it was upgraded to a comprehensive strategic partnership. Unlike Argentina, Uruguay and China had friendly and cooperative relations of long-term stability, equality, and mutual benefits (Ministry of Foreign Affairs of China, 2017). According to Chinese official classification, this category falls into the category of a friendly and cooperative partnership. During President Tabaré Vázquez’s visit to China in 2016, the two parties agreed to upgrade their relationship to a strategic partnership. Paraguay falls outside these categories, but, in fact, it is a strategic state for both China and Taiwan, due to the fact that it is the only South American country that does not have diplomatic relations with the PRC and in which the Taiwan government has its only political base in this region. In different speeches and documents, the Chinese authorities have advocated for the principle of equality of states (included as one of the Five Principles of Peaceful Coexistence) and have not distinguished between rich and poor countries. However, the Chinese government divides countries into a Confucian pyramid-shaped structure according to certain strategic relation categories. Perhaps this classification shows us the future of Chinese diplomatic practice, in which international order turns into a Pax Sinica. However, what strategic benefits does China seek to gain particular countries? China, as a great power, has global interests, and the small powers are usually relevant to China on specific issues. For example, China built a Deep Space Station in the south of Argentina to further its space policy. Argentina and Uruguay give PRC diplomatic support in isolating Taiwan. Uruguay’s reasons for signing a Free Trade Agreement with China coincide with China’s global free trade policy and this is useful for removing the protectionist barriers of the Southern Common Market

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(MERCOSUR). In 2017, Argentine President Macri took part in the One Belt and One Route Forum: China’s largest global initiative. Although the three countries are small economies, they export raw materials that complement the supply of goods that China cannot produce and they are markets for Chinese manufactured goods, investment destinations, and objects of cultural diplomacy expansion. In addition, China’s growing influence in Latin America (area of US hegemony) provides the Chinese government with leverage in a diplomatic game with the United States in East Asia, the heart of Chinese strategic interests. Economic interactions with the Latin American countries increase China’s political influence. Its “railroad diplomacy” has helped Argentina to renew the rolling stock of its railway network. The Central Bi-Oceanic railway project plans to link the Pacific coast of Peru to the Atlantic coast of Brazil: two strategic partners of China. Railroad diplomacy has also appeared in Uruguay, with President Vázquez proposing to supply China with Uruguayan products in exchange for Chinese trains and railway supplies (Silva, 2009), and there is a project for national network construction. Paraguay stands apart from these projects, as it does not have diplomatic relations with China, although this is not a problem, given that the Nicaragua Canal project advances in a country whose government maintains diplomatic ties with Taiwan. On the other hand, railroad diplomacy is a threat to Paraguayan and Taiwanese interests in the region, in the sense that these projects financed by China further orient the South American economies toward Beijing and keep Paraguay away from China’s investment capabilities. As developing economies, the three countries are aiming for modernization. This is the main instrument for overcoming their asymmetries with China and other Northern countries. In fact, China’s modernization has widened the asymmetry between both sides: the most important feature of the political interaction. The clearest evidence comes from a comparison of gross domestic products (GDP): in 2017, China was the second largest economy in the world and Argentina ranked number 21, Uruguay 77, and Paraguay number 90, according to World Bank data (see Table 8.1). Asymmetry is also visible in several macroeconomic indicators, such as levels of industrialization, trade, investments, and international reserves, among others. However, economic data is not the only way to explain the gap between the political powers. Military expenditure measured in terms of GDP percent widens this asymmetry, especially in relation to the size of the economies, which was, according to the World

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Bank, 1.9 percent of GDP in China, 0.9 percent in Argentina, 1.2 percent in Paraguay, and 2.1 percent in Uruguay in 2017. Moreover, other qualitative variables, such as nuclear capacity, diplomatic features, and other factors enlarge this asymmetry in China’s favor. The “Lost Decade” in Trade? The bilateral trade between China and the three countries simultaneously reveals different and similar features. Total trade in the 2008–2017 period witnessed rapid growth in Paraguay and Uruguay cases, but much less in Argentina. Table 8.5 shows that total trade between Uruguay and China grew from US$  1004  million in 2008 to US$  4204  million in 2017. According to Table 8.2, Argentine–Chinese trade increased by around 20 percent in the same period; while trade between Paraguay and China grew from US$ 2441 million to US$ 3477 million, according to Table 8.3. On the other side, Paraguayan–Taiwanese trade was at a fairly modest level, rising from US$  59  million in 2008 to US$  69  million in 2017 (see Table  8.4). This last statistic is important in that Paraguay recognizes Taiwanese authorities. Therefore, it is impossible to assert that there is a Taiwanese policy to commercially attract Paraguay. The increase in Chinese–Argentina total trade comes from Chinese exportation growth. This grew by 73.5 percent between 2008 and 2017, while Argentine exports declined by 28.2 percent in the same period. In Table 8.2  Argentina–China bilateral trade: 2008–2017 (millions US$) Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

Exports 6397 3668 5799 6173 5165 5762 5006 5174 4423 4593 52,160

Imports

Total

Balance

7104 4823 7649 10,573 9952 11,312 10,795 11,749 10,467 12,329 96,752

13,501 8491 13,448 16,746 15,117 17,074 15,801 16,923 14,890 16,922 148,913

−707 −1155 −1850 −4400 −4787 −5550 −5789 −6575 −6044 −7736 −44,592

Source: National Institute of Statistics and Censuses (INDEC), INDEC Informa, Buenos Aires, 2009–2018

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Table 8.3  Paraguay–China bilateral trade: 2008–2017 (millions US$) Year

Exports

Imports

Total

Balance

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

95 33 34 29 39 57 49 30 20 27 413

2.346 1952 3255 3427 2964 3216 2881 2255 2491 3450 28,237

2441 1985 3289 3456 3003 3273 2930 2285 2511 3477 28,650

−2251 −1919 −3221 −3398 −2925 −3159 −2832 −2225 −2471 −3423 −27,824

Source: Central Bank of Paraguay (2008–2017)

Table 8.4  Paraguay–Taiwan bilateral trade: 2008–2017 (millions US$) Year

Exports

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

15 3 5 32 10 7 25 20 15 39 171

Imports

Total

Balance

44 26 29 50 48 37 38 38 28 30 368

59 29 34 82 58 44 63 58 43 69 539

−29 −23 −24 −18 −38 −30 −13 −18 −13 +9 −197

Source: Central Bank of Paraguay (2008–2017)

2015, 82 percent of Argentine sales concentrated on four commodities: soybeans (68.4 percent), soy oil (7 percent), beef meat (3.3 percent), and petrol crude oil (3.3 percent). The causes of Argentine export stagnation inter alia were (1) the decline in international commodity prices; (2) stagnation of sales of soybeans; (3) the Chinese protectionist policy on value-­ added products (such as soybean meal, pellets, biofuel); (4) the development of a soybean crushing industry in China; (5) the continued decline in sales of soybean oil and crude oil to China. On the other hand, Chinese exports included many different manufactured products. The

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Table 8.5  Uruguay–China bilateral trade: 2008–2017 (millions US$) Year

Exports

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

171 235 373 665 1938 2324 2625 2146 1740 2500 14,717

Imports 833 769 1.124 1439 1662 1929 2123 1763 1552 1704 14,898

Total

Balance

1004 1004 1497 2104 3600 4253 4748 3909 3292 4204 29,615

−662 −534 −751 −774 276 395 502 383 188 796 −181

Source: Uruguay Chamber of Industry (2017)

most important of them in the same year was parts for telephones or cell phones (12.5 percent). A historic problem identified by the author is the difference between the official statistic data released by the two states. For example, according to the INDEC, the Argentine deficit was around US$ 6 billion in 2015, while according to the Ministry of Commerce of China it was about US$ 3 billion. A report from the Chamber of Exporters of the Argentine Republic (2016: 11) asserts that Argentina reported about US$ 540 million in exports to China, which is higher than Chinese imports from Argentina reported by Chinese authorities in 2015. Seventy percent of the difference relates to soybeans. In the same year, Argentina reported approximately US$  2859  million more in imports from China than reported by China as exports to Argentina in the same year. Fifty percent of this difference relates to parts for telephones or cell phones. For this reason, INDEC and Ministry of Commerce of China authorities signed an agreement to harmonize bilateral trade statistics on December 2016. In 2017, Chinese exports were 99.2  percent of Chinese–Paraguayan total trade. Table 8.3 shows that China’s exports grew 47 percent between 2008 and 2017, while Paraguayan exports declined by 71.6 percent in the same period. It should be noted that, as a landlocked country, Paraguayan soybean is generally exported to Argentina, Uruguay, or Brazil through the Parana-Paraguay Waterway, and from these countries re-exported as soybeans or its by-products to other destinations, such as China. In contrast, Chinese sales were dispersed across different industrial products. For

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example, in 2016, the most important were apparatus, machines, and motors (46.3  percent); consumer goods (14.7  percent); apparatus and electric appliances (8.5 percent); and chemical and pharmaceutical products (8.2  percent). On the other hand, Tables 8.3 and 8.4 show that Paraguay’s exports to China and Taiwan are irrelevant in trade volumes and declined in the period under research. Paraguayan exports to the two economies were US$ 27 million and US$ 39 million in 2017, respectively. During her state visit to Paraguay, Taiwan President Tsai Ing-wen announced an increase in the import quota for meat from Paraguay, under corresponding sanitary conditions. By contrast, unlike Argentina and Uruguay, exports from Paraguay to Hong Kong are more important than Paraguayan exports to China or Taiwan. According to the Central Bank of Paraguay, in 2013 and 2014 the country exported US$ 113 million and US$ 140 million, respectively, to Hong Kong but sales have fallen annually from 2015 to 2018. The most important products are beef meat and frozen beef offal. Although Paraguay imports many of China’s industrial products, the country re-exports a large part of these products to Argentina and Brazil. Paraguay works as a trade intermediary, because “the 80 percent of products imported from China have other Mercosur countries as final destination, mainly Brazil” (América Economía, 2015). According to El Cronista newspaper (2011), since 2011 Brazilian industrialists have been on alert, and El Universo newspaper (2011) reports that the Brazil’s government has investigated imports from Paraguay. Uruguay’s El Observador (2011) newspaper reports that the Brazilian government thinks that a similar situation happens in Uruguay, although not in Argentina. Therefore, this last country was the most affected of the three states in the official bilateral trade with China. Over 2014–2016, the China National Cereals, Oils and Foodstuffs Corporation (COFCO) suddenly increased its share in the world market of grains. In 2014, COFCO bought Nidera, a Dutch grain company with an operating base in Argentina. In 2016, the holding bought Syngenta, a company involved in food processing, manufacturing, and marketing, with a greater presence in Paraguay. This country is the fourth largest soybean exporter (after the United States, Brazil, and Argentina), and the buying of Syngenta by COFCO opens the way for increased soybean exports from Paraguay to China, despite the former’s diplomatic relations with Taiwan.

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In the case of Uruguay, the increase in total trade comes from the two countries’ growth in exports. Table 8.5 shows that Chinese exports grew 205 percent between 2008 and 2017, and Uruguayan exports increased by 1461 percent in the same period. In 2015, 93 percent of Uruguayan sales concentrated on four commodities: soybeans (44 percent), beef meat (34 percent), wool (10 percent), and meat by-products (5 percent). On the other hand, Chinese sales were dispersed across different manufactured products. The most important of these are cell phones (8.4  percent), computers (4.4 percent), insecticides (3.4 percent), and car parts (3 percent). The trade exchanges described above generated annual unfavorable balances in the three South American economies. Through trade, Argentina and Paraguay have transferred to China huge amounts of US dollars, given the size of these economies. According to Table  8.6, Argentina transferred US$  44,592  million to China and Paraguay US$ 27,824 million. Uruguay has a balanced trade with China and it only transferred US$ 181 million dollars in the same period. In total, the three countries transferred US$  72,597  million to China between 2008 and 2017. According to Brazil’s Ministry of Industry, Foreign Trade and Services, Brazil has had a US$  73,974  million surplus from Brazilian-­ Chinese trade in the same period. In the case of Chile, according to Prochile agency, the surplus was US$ 46,949 million in the same period. Thus, Argentina and Paraguay were the losers in the trade exchange with China, although the levels of loss were different. Argentina has been the biggest loser. As regards Paraguay, although it seems to be a big loser according to the statistical data, it should be remembered that Paraguayan soybean exports to China are not included in bilateral trade with China and Paraguay also diverted Chinese products to Brazil and Argentina. Table 8.6  Trade between China and the three countries: 2008–2017 (millions US$)

Total trade Exports to China Imports from China Balance Total balance

Argentina

Paraguay

Uruguay

148,913 52,160 96,752 −44,592

28,650 413 28,237 −27,824

29,615 14,717 14,898 −181 −72,597

Source: Argentine INDEC, Central Bank of Paraguay and Uruguay Chamber of Industry (2008–2017)

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Paraguay became an intermediary for Chinese manufactures in the Mercosur, similar to Mexico’s re-exports of Chinese products to the United States market in the NAFTA framework. China’s FDI and Other So-called Investments in the Three Countries According to China’s official statistical data, China’s FDI in Latin America and the Caribbean (LAC) increased from US$ 3677 million in 2008 to US$ 14,076 million in 2017, after reaching US$ 27,227 million in 2016. The Cayman Islands and Virgin Islands represent 94.8  percent of the 2016 total. Only 5.2  percent was distributed between the remaining countries, of which Argentina and Uruguay together represented 16.2 percent, or 0.8 percent of the total invested in the LAC countries. It is important to note that Taiwan invested in Paraguay up until 2006, but from 2006 to 2017 there was no Taiwanese FDI in this country. On the other hand, Chinese official statistical data record investments in Paraguay between 2008 and 2013, coinciding with the presidential mandate of Fernando Lugo (2008–2012), with no investments between 2014 and 2017, although the statistics of the Central Bank of Paraguay indicate that China invested in that country during those years. According to Table  8.7, Chinese FDI flows to Argentina went from US$ 10 million in 2008 to US$ 214 million in 2017, reaching a peak of US$  742  million in 2012. In 2016, they represented 0.7  percent of China’s total FDI in LAC or 12.7  percent if the Cayman Islands and Virgin Islands are excluded. In addition, it is important to note that up to 2016 China’s FDI stock in Argentina is about similar to the stock of the Pacific Alliance. According to the 2016 Statistical Bulletin of China’s Outward Foreign Direct Investment, the stock of China’s FDI in Chile, Table 8.7  China’s outward FDI flows to Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) Country Argentina Paraguay Uruguay

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

10 3 –

−22 6 5

27 27 0

185 5 0

743 1 9

221 0,1 9

269 0 1

208 0 36

181 0 49

214 0 −14

Source: Ministry of Commerce, National Bureau of Statistics and State Administration of Foreign Exchange of the People’s Republic of China (2017: 136–137)

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Table 8.8  China’s outward FDI stock in Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) Country

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Argentina Paraguay Uruguay

173 4 2

169 11 7

218 39 7

405 44 8

897 46 17

1658 46 25

1791 47 210

1948 47 182

1943 47 225

1539 46 198

Source: Ministry of Commerce, National Bureau of Statistics and State Administration of Foreign Exchange of the People’s Republic of China (2017: 141)

Colombia, Peru, and Mexico combined reached US$ 2102 million, while in Argentina it was US$  1943  million (see Table  8.8). This situation changed in 2017, with Argentina having a stock of US$ 1539 million and the countries of the Pacific Alliance combined reaching US$ 2621 million. As with the statistics on trade, the statistical data on FDI flows and stocks from China to Argentina reported by both sides differ. According to Chinese records, Chinese FDI stock in Argentina up to 2015 reached US$ 1948 million (see Table 8.8). In the following year, the Ambassador of the PRC in Argentina, Yang Wan Ming, stated that China is the third largest investor in this country (Dinatale, 2016). However, the Central Bank of Argentina records that China ranked 18th, with a stock of US$ 674 million up to 2015. The discrepancy between the two official records motivated the Ministry of Commerce of China and the Central Bank of Argentina to sign a Memorandum of Understanding on Establishing the Statistical Cooperation Mechanism for Direct Investment in July 2014. According to Table 8.8, China’s official statistical data show the cessation of direct investment flows from 2014 to 2017, but Table 8.9 indicates a growing trend of investments stock in Paraguay, from US$ 4 million in 2008 to US$ 46 million in 2017. In contrast, according to the Central Bank of Paraguay data, China has registered investments since 2008, but these are lower than reported by Chinese statistical data, peaking at US$ 2.7 million in 2012. According to the same data, 2006 is the last year in which Taiwan invested in Paraguay. From 2006 to 2017 (the final year of analysis of the present study), there were no Taiwan investments in Paraguay. Hong Kong’s investments have been more important than Chinese investments. According to the Central Bank of Paraguay, Hong Kong invested US$  5.4  million in 2012, US$  9  million in 2013, and US$ 5.1 million in 2015. However, Hong Kong and China’s investments

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Table 8.9  China’s FDI stock in Argentina, Paraguay, and Uruguay 2008–2017 (millions US$) Country

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Argentina Paraguay Uruguay

110 0.3 –

124 0.3 0

191 0.8 0

239 1.2 0

572 2.7 75.8

607 0.6 102

726 1 66.8

661 4.5 79.4

618 1.8 −9

– 10.5 −21.1

Sources: Central Bank of Argentina (2008–2017), Central Bank of Paraguay (2008–2017) and Central Bank of Uruguay (2009–2017)

in Paraguay are small compared with investments made in other countries in the region. As with Argentina and Paraguay, the official FDI statistics issued by China and Uruguay are contradictory. The Chinese government reports higher levels of investment than those reported by the Central Bank of Uruguay. This last institution divides the FDI statistical data into different geographical regions and the item “Total Confidential Data by Region” includes investments from East Asia between 2010 and 2017, without determining the country of origin. For this reason, it is not possible to determinate whether they correspond to China or other economies. Uruguay’s statistical data show that Chinese investments have been extremely small and there are no records for investments from Taiwan and Hong Kong during the 2008–2017 period. In addition to FDI, China exports capital through tax havens. For example, in 2010, China Petrochemical Corporation (Sinopec) and China National Offshore Oil Company (CNOOC) announced investments in Argentina, but these investments did not appear in the official FDI records. In 2012, Industrial and Commercial Bank of China (ICBI) bought 80 percent of Standard Bank and established a branch in Buenos Aires. According to the ICBC (2017) website, this transaction is one of ICBC’s largest investments in financial services outside of China and is the largest bank investment ever made by China in Latin America. A third modality is loans for infrastructure projects. In 2016, China’s authorities announced loans to Argentina for US$ 23,100 million (Sarmiento, 2016), but not all the projects were carried out. The fourth modality is the currency swap agreement. Through this financial mechanism, China contributed US$  11,000  million of low-rate credits to stabilize Argentina’s international reserves during the last two years of the Cristina Fernández de Kirchner administration and the first months of Macri government. This

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agreement was renewed in 2017 and extended to US$ 19,000 million. In addition, the governors of the two countries’ Central Banks signed an agreement for the exchange of information relating to taxes in 2010, and the two countries’ security ministers signed an agreement for cooperation on security matters in 2016.10 Both governments have an agreement on the Promotion and Reciprocal Protection of Investments in place since 1992. As a result, China became one of the major contributors of capital in Argentina. At the same time, this South American country was an ideal exemplar of the practice of the Chinese government’s stated aims on investment and financial matters, as stipulated in China’s first Policy Paper on LAC, published by the Chinese government in 2008 (Oviedo, 2018). The main capital flows took place through currency swaps, loans for infrastructure projects, and investments through tax havens. Given the Fernández administration’s isolated position, China expanded its influence in Argentina until it became its only external source of capital and initiated the Argentine dependence on Chinese capital. This situation remained in place until April 2016, when the Macri administration returned the country to the international financial system and reduced Argentina’s dependence on PRC, although the Chinese government still has a strong influence over the Argentine economy and is an alternative source of capital (Oviedo, 2018). According to the Global Taiwanese Businessmen Service Network (2015), Taiwan’s investments in Paraguay’s major industries include optical discs, department stores, plastic products, sports venues, warehousing, animal husbandry, and fishing tackle. Up to December 2013, these investments added up to the amount of US$ 150 million, distributed across 37 items. There are about 200 stores in Paraguay, particularly in Asunción and Ciudad del Este. However, due to the intense competition from products imported from Taiwan, Hong Kong, China, Miami, and other places, there was a high turnover rate of small shops specializing in general household appliances, toys, stationery, hardware, department stores, electronic goods stores, and grocery. While there has been no Taiwanese FDI in Paraguay since 2006, Taiwan’s international aid is important for this country. As previously mentioned, the construction of the National Congress building, the remodeling of the Ministry of Foreign Affairs, and other projects were financed by the Taiwanese authorities. These included the program to build 4500 social housing units for US$  71  million during President

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Table 8.10  Project lists of International Cooperation and Development Fund in Paraguay Year Project name

Project status

1

Feed Production Project

2

4

Health Information Management Efficiency Enhancement Project Orchid Industry Development and Tissue Culture Plantlet Propagation Project Pacu Fingerling Breeding and Cultivation Project

5

Taiwan Youth Overseas Service

6

Taiwan ICDF Overseas Volunteers Program

7 8 9

2015 Healthcare Personnel Training Program Aquaculture Project Assistance to rural populations affected by the food emergency due to the effects of the drought Floriculture Project Healthcare Personnel Training Program Mobile Medical Mission (Budgets from Taiwan ICDF) Re-lending Project for SMEs

Projects under implementation Projects under implementation Projects under implementation Projects under implementation Projects under implementation Projects under implementation Completed projects Completed projects Completed projects

3

10 11 12 13

Completed projects Completed projects Completed projects Completed projects

Source: International Cooperation and Development Fund (2017)

Duarte’s five-year tenure, and the projects in pacu cultivation, feed production, orchid industry development, and so on. Table 8.10 shows seven completed projects and six projects under implementation, financed by the Taiwan International Cooperation and Development Fund. Unlike Argentina, Uruguay has not received Chinese infrastructure loans and has not signed a currency swap agreement. Therefore, the investment flows in the studied period are limited to China’s FDI, Chinese investments coming from tax havens, and, probably, China’s IED, recorded in confidential data in Uruguayan official reports. In addition, several Chinese companies have established offices in Montevideo, such as Chong Qing Lifan, COSCO Group, Huawei, ZTE Corporation, Noble Group, COFCO, BBCA Biochemical Co Ltd. In addition, the governments of Uruguay and China have an agreement in force since 1993 on the Promotion and Reciprocal Protection of Investments.

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Chinese Immigration The main feature of the migratory relations between China and the three countries is the migratory flow direction. Whether for political, economic, religious, or social reasons, the greatest number of migrants come from the PRC.  This trend started when the Reform and Opening-Up policy relaxed the restrictions established during the Maoism period toward Chinese people leaving the country (Liu, 2009: 331). It is interesting to note that, after 40 years of successful Chinese modernization, the migration flow continues from China toward Latin America and not vice versa, although in recent years more LAC citizens work and study in China than in the past.11 The problem lies in estimating the number of Chinese living in the three countries. First, there is the problem of who should be considered as Chinese. Should we include just huaqiao or also include huaren?12 Second, we would need to include both mainland Chinese and the Taiwanese. Third, how would we calculate the number of illegal Chinese residents? For example, according to Argentina’s National Census of 2010, 11,804 Chinese were living in Argentina, including 8929 mainland Chinese and 2875 Taiwanese (National Institute of Statistics and Censuses, 2010). In contrast to official statistics, several unofficial reports and newspaper articles have estimated the number of Chinese residents in Argentina at 120,000  in that year (Najenson, 2011; Sánchez, 2010). In 2016, the Chinese Ambassador in Argentina Yang Wan Ming asserted that the Chinese community had reached 180,000 Chinese (Dangdai, 2016). These figures are in contrast to the very few Chinese immigrants living in Paraguay and even fewer in Uruguay. According to the National Statistics Institute of Uruguay, the 2011 census records 1261 Asians living in Uruguay. A report from the Ministry of Commerce of the PRC (2016: 5) indicates that up to 2015 there were around 300 Chinese citizens residing in that country. In Paraguay, the situation is different since there is significant migration from Taiwan, and there is no data for the number of mainland Chinese living in that country. Taiwan’s official Overseas Community Affairs Council Statistical Yearbook (2011: 13) estimates that in 2011 there were more than 4000 Taiwanese in Paraguay, and in 2014 the number surpassed 5000 (OCAC, 2014). According to the General Directorate of Statistics, Surveys and Censuses of Paraguay (2013: 61), Chinese residents numbered 232 in 2011, 359 in 2012, and 61 in 2013.

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These figures clearly show a disparity between the three republics in the numbers of Chinese migrants. Beyond the different socioeconomic ­conditions of each country and the potential identified by immigrants for their own well-being, it is clear that Argentina is more open to the Chinese immigrant than Paraguay and Uruguay. In Argentina, the Migrations Act of 2004 is a novel law of openness and respect for human rights. On the other hand, according to Andrés Raggio (2018: 338), Uruguay had restrictive immigration laws in regard to some areas of the world that became more flexible only in the late 1990s and the early years of the new century, but its character as a “homogenized society” undermines almost every possibility of having successful immigration in this country. Different factors have led to an increase in the number of Chinese people in Argentina: (1) Argentina’s permissive immigration law; (2) the increase in the number of Chinese residents in the 1980s and 1990s who then “called” for their relatives, particularly those from Fujian Province; (3) the arrival of entrepreneurs, managers, technicians, or other staff of Chinese companies based in Argentina, as well as professors, students, researchers, and technicians engaged in university, scientific, or cultural exchanges in the last decade has increased the rate of temporary immigration; (4) the search for freedom to exercise religious activities or traditional practices, as Yi Guan Dao (一贯道) in the last decade of the twentieth century and Fa Lun Gong (法轮功) in the first decade of the twenty-first century; (5) the increase in illegal immigration operated by triads dedicated to people trafficking in Argentina. Two issues have dominated the migration agenda in the bilateral diplomacy. From 2001, the Chinese government prioritized the formation of interest group that increases China’s influence over Argentina and the role of the Chinese Embassy in the protection of Chinese citizens and their interests in the country (Oviedo, 2015b: 258). Specifically, in article 2.7 of the 2014–2018 Joint Action Plan Between the Government of the Argentine Republic and the Government of People’s Republic of China, signed during the visit of President Xi Jinping to Argentina in 2014, both governments agreed to “promote mutual assistance in order to fight illicit immigrant trafficking and prevent irregular migration as well as to protect the security and rights of the citizens of one Party in the territory of the other”. The first part of the clause was clearly an Argentinean proposal and the second part, linked to the protection of the safety and rights of immigrants, was the result of the Chinese government’s complaints about the acts of violence perpetrated against the Chinese community in

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Argentina, particularly in December 2001. This clause is highly significant because Argentina and China have never signed a specific bilateral agreement on the m ­ igratory issue (Oviedo, 2015b: 258), apart from article 5 of the Treaty of Friendship of 1947, after Argentina recognized the Republic of China in 1945.

Conclusion Relations between China and the three South American countries have developed on the basis of different civilizations, political regimes, and economy structures. These three factors are essential for understanding the levels of modernization processes in both parties. China is a multicultural state led by the Chinese Communist Party and Han civilization, based on Confucian thought, and influenced by Western civilization. In contrast, the current Latin American culture was imposed by Western civilization on the indigenous culture and has been transformed by migratory waves. The four states have Western political regimes, but China has a totalitarian one-party system while Argentina, Paraguay, and Uruguay are democracies at different level of consolidation. The economy is a key factor to consolidate political regime. From our perspective, China has been very successful in its drive for economic modernization, but there are expectations that there will be a political transition toward a more democratic system. On the other hand, the South American countries have transformed from authoritarian regimes to democracies but have failed to implement economic modernization processes. In addition, the countries’ dissimilar productive structures have generated center-peripheral exchanges, and the success of modernization in China has only enlarged the power asymmetries and, consequently, created North–South relations between both parties. The three countries honor the “one-China policy”. Argentina and Uruguay recognize the PRC government and Paraguay recognizes the Republic of China government as representative of the Chinese state. Paraguay does not have official relations with China but this has not been an impediment to developing trade exchanges or receiving Chinese investments. According to statistical data from both Paraguay and Taiwan, Taiwan has provided international aid (through several donations and technical projects), but there has been no strategy to involve Taiwan in Paraguay’s trade and investment. Of course, there has been speculation about whether Paraguay would recognize the PRC, especially during

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Fernando Lugo’s government, but the Chinese government put the diplomatic commitment between CCP and Guomindang above the interests of diplomatic recognition in the 2008–2016 period, and Paraguay has not changed its political orientation since 1957. The two State visits of President Tsai Ing-wen to Paraguay after the ending of the “diplomatic truce” confirmed the Paraguayan political orientation to recognize and establish diplomatic relations with Taiwan. In June 2017, both governments celebrated 60 years of diplomatic relations. In addition, the end of the “diplomatic truce” in 2016 has opened up an opportunity for Paraguay to revise its policy toward China, especially following the establishment of diplomatic relations between China and Panama, Dominican Republic, and El Salvador, but the Cartes administration continued relations with Taiwan until the end of the presidential mandate in August 2018. According to Chinese governmental classification, Argentina is a “comprehensive strategic partner” and Uruguay is a “strategic partner” of China. While this chapter has criticized this stratification on the grounds that it violates the principle of equality of states, there are clear differences between these categories of relationships that relate to developing areas and levels of interaction. Paraguay falls outside this framework, but it is a strategic country for China and Taiwan. For China, establishing relations with Paraguay means eliminating Taiwan’s official political influence in South America. For Taiwan, the relationship allows it to continue to have a base of official support in the subcontinent. China has increased its presence in the three countries. It has the most influence in Argentina, through exports, investments, loans, the currency swap, the number of immigrants, support on the Malvinas question, and the Deep Space Station constructed by China in the south of Argentina. Argentina’s and Uruguay’s governments support China on human rights and provide international isolation capacity to the PRC in its struggle against Taiwan. Uruguay’s intention to sign a Free Trade Agreement with China coincides with China’s global free trade policy, but Chinese protectionism raised its head when Argentina wanted to export soybean by-­ products to China. Uruguay has benefited from an increase in exports, unlike Argentina. “Railroad diplomacy” has been successful in Argentina and the Chinese government has proposed a similar agreement to the Uruguayan authorities. However, power asymmetry increased in all areas, driven by the growth and modernization of the Chinese economy. As mentioned above, the increase in China’s influence on Latin America provides the Chinese government with a card to play in the diplomatic game

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with the United States in East Asia, which is at the heart of Chinese interests at the moment. In theory, the center-periphery model is unfavorable for countries that export raw materials. However, the deployment of the model in South America has generated different consequences for different countries, from the winners (Brazil and Chile), to states with trade equilibrium (Uruguay), to trade intermediary states in the China-Mercosur relationship (Paraguay), to loser economies (Argentina). That is, the same model, different results. In summary, in the trade field during the period under analysis, the following results can be evidenced: (1) the rapid increase of total trade between China, Paraguay, and Uruguay, but much less in Argentina’s case; (2) the exports of the three countries were concentrated on a few commodities (soybeans, cellulose, beef, and petrol crude oil) and imports were dispersed across various manufactured goods; (3) official statistical data are dissimilar and with large disparities in US dollars exchanged; (4) in Paraguay, exports to Hong Kong exceeded sales to China and Taiwan; (5) the three states have deficits in trade with China, but the characteristics of the deficits are different; (6) Argentina and Paraguay had chronic deficits in the researched period whereas Uruguay has had surpluses since 2012; (7) Argentina has transferred enormous amounts of dollars to China and the use of a currency swap agreement and loans for infrastructure initiated its foreign debt with China; (8) Paraguay is an exception, because it is a trade intermediary that re-exports Chinese products to Brazil and Argentina. However, some of these Chinese products are sold in Paraguay and affect local entrepreneurs. In the investment field, it is worth noting that (1) Argentina has received the highest FDI of the three countries and, according to Chinese official data, at the same level as all the members of the Pacific Alliance taken together; (2) Uruguay has not taken advantage of a decade of Chinese investments in the region and, according to Uruguayan and Chinese records, Chinese investment in that country is almost non-­existent; (3) Paraguay has not received investments from Taiwan since 2006 or from China since 2013; (4) the FDI official statistical data of China and the three countries do not coincide and Uruguay’s official statistics include some FDI as confidential information; (5) the arrival of Chinese investments in Argentina and Uruguay via tax havens is a fact, but we are unable to clarify their amounts and which tax haven is being used; (6) Argentina has benefited from loans

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for infrastructure and currency swaps and it became the main destination of Chinese capital exports in South America (jointly with Brazil and Venezuela), excluding the two above-mentioned tax havens; (7) Paraguay receives significant international aid from Taiwan through donations and projects; (8) Uruguay assumed that investment would grow through signing an FTA with China, but there is no scientific evidence of this result in countries that have signed FTAs with China, such as Chile. The migration trend from China toward the three countries continues, with a significant increase in the number of Chinese residing in Argentina. Census figures from the three countries do not tally with the actual numbers of Chinese living in these three countries, and there are non-official estimates that far exceed census records. Up to the end of 2016, different estimates asserted that there are 180,000 Chinese citizens living in Argentina, 300 in Uruguay, and 5000 Taiwanese in Paraguay. Thus, there is a disproportion between the number of Chinese living in Argentina and the number of Chinese in Paraguay and Uruguay. Different factors increased the number of Chinese living in Argentina: from family reunification, temporary immigration, and religious practices to illegal immigration. Two issues dominate the bilateral diplomatic agenda on immigration. The Chinese government seeks to protect Chinese citizens and their interests in the country and the Argentinean government fights illicit immigrant trafficking and irregular migration. Finally, it is clear that their relationship with China is very important for modernization in the three South American countries. However, Chinese domestic modernization has widened the asymmetries between China and the three countries, while trade exchange has been centerperipheral. Trade complementarity was interrupted by Chinese protectionism toward agricultural by-products. In this regard, when we are talking about the China–US “trade war” as an abandonment of the multilateral system, it should be noted that, from the point of view of developing countries that export agricultural commodities (such as Argentina, Paraguay, and Uruguay), the multilateral system had been abandoned by protectionist states, such as China, France and other great powers, a long time ago. It is time to put a stop to this problem in the various international forums.

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Notes 1. Catholics have greater presence in Argentina (92  percent) and Paraguay (89 percent) than in Uruguay (52 percent). The number of Catholic devotees declined in the last decade and the number of the non-Catholic Christians and other religious practices increased. However, the ­enthronement of a Latin American pope on March 2013 strengthened the Catholic Church in the region. 2. The number of people who in the 2010 Argentine census considered themselves as indigenous or descendants of them were 955,322 persons, constituting around 2.38 percent of the total population of this country. According to the General Directorate of Statistics of Paraguay and III National Census of Population and Housing for Indigenous Peoples (2013), the indigenous population in 2012 was 112,848 inhabitants, representing 1.69 percent of the total population, officially estimated at 6,672,631 inhabitants. According to the 2011 Uruguayan Census, the total population is 3,251,654 inhabitants, of which 159,319 are of indigenous descent and 15,412 of Asian ancestry. 3. This chapter follows the Huntington criterion of at least two consecutive political alternation needed to consolidate a democratic system (Huntington, 1994: 239). 4. It is necessary to clarify the difference between North–South relations and the center-periphery scheme. While the first indicates the positions of states in the international system in terms of power, particularly in the economic field (China in the developed North; Argentina, Paraguay, and Uruguay in the undeveloped South), the second refers to the composition of trade exchanges between different economic structures. As a central country, China exports manufactures to these three countries. As peripheral economies, the three countries export raw materials or primary goods to China. 5. In Latin America, Argentina, Brazil, Chile, Mexico, and Peru have trade and cultural offices in Taiwan. 6. The Gambia case clearly illustrates the understanding between Beijing and Taipei. On November 14, 2013, the Government of the Republic of the Gambia ceased diplomatic relations with Taiwan. Four days later, the Taiwanese authorities interrupted diplomatic relations. However, the PRC government did not establish diplomatic relations with the Gambia until March 2016, after Tsai Ing-wen assumed as President of Taiwan. 7. On November 19, Chinese Foreign Ministry spokesman Qin Gang did not deny a journalist’s statement that a Chinese researcher had said that since 2008 mainland China refused to establish diplomatic relations with five countries (Ministry of Foreign Affairs of People’s Republic of China, 2013).

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8. The author considers the term Malvinas Islands, widely used in the Spanish and Portuguese languages, as the name of the archipelago located in the south Argentine Sea and the subject of sovereignty controversy between Argentina and the United Kingdom. 9. Strategic partnership is a term that appears in international documents signed by Chinese diplomats. This internal classification stratified the states through different levels of association based on the Chinese national ­interest, delineating Chinese external orientation. Up to February 2017, the Baidu Encyclopedia classified them as follows: comprehensive strategic partnership of coordination (Russia); all-weather strategic cooperative partnership (Pakistan); comprehensive strategic cooperative partnership (Vietnam, Thailand, Burma, Cambodia, Laos, Mozambique, and Congo Brazzaville); comprehensive strategic partnership (United Kingdom, Italy, Peru, Malaysia, Spain, Denmark, South Africa, Portugal, Indonesia, Mexico, Mongolia, Argentina, Venezuela, Brazil, France, Algeria, Belarus, Kazakhstan, Greece, Australia, New Zealand, Egypt, Saudi Arabia, Iran, Serbia, Poland, Uzbekistan, Chile, Ecuador); all-dimensional strategic partnership (Germany); strategic cooperative partnership (South Korea, India, Sri Lanka, Afghanistan); strategic partnership (Turkmenistan, Nigeria, Canada, Tajikistan, Kyrgyzstan, Ireland, Ukraine, Angola, the United Arab Emirates, Qatar, Costa Rica, Jordan, Sudan, Czech Republic, Morocco, and Uruguay); all-round cooperative partnership (Belgium, Singapore); comprehensive cooperative partnership (Croatia, Nepal, Bangladesh, Romania, Netherlands, East Timor, Ethiopia, Tanzania, Maldives, Bulgaria, and Kenya); friendly and cooperative partnership (Hungary, Senegal); friendly partnership (Jamaica); important cooperative partnership (Fiji); new cooperative partnership (Finland); innovative strategic partnership (Switzerland). 10. The purpose of the Framework Agreement for Cooperation in Security Matter (2016) is “taking the most effective action against transnational organized crimes”, among which are mentioned economic crimes, money laundering, and related crimes. 11. In 2016, the Ministry of Public Security approved a total of 1576 foreigners living in China, an increase of 163  percent over the previous year. According to public information, from 2004 to 2013, the total number of Chinese green cards issued was 7356, while foreigners living in China are about 700,000 people (Zheng, 2017). 12. The overseas Chinese, called huaqiao (华侨) in Chinese, are Chinese citizens living outside Chinese territory, while ethnic Chinese, called huaren (华人) in Chinese, are citizens with non-Chinese nationality but of Chinese origin. In the latter case, the Chinese embassies abroad lacks jurisdiction to exercise diplomatic protection.

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General Directorate of Statistics of Paraguay. (2013). Surveys and Censuses of Paraguay. Paraguay. Evolution of Total Population. Period: 1950–2002. Projection 2012 and III National Census of Population and Housing for Indigenous Peoples. General Directorate of Statistics, Surveys and Censuses of Paraguay. (2013). Statistical Yearbook of Paraguay. Asunción. Huntington, S. P. (1994). The third wave: Democratization in the late 20th century. Barcelona: Paidós. Huntington, S. P. (1997). The clash of civilizations and the remaking of world order. New York: Penguin Book. ICBC. (2017). Industrial and Commercial Bank of China official website. Retrieved from https://www.icbc.com.ar/institucional/institucional2.do?codTmst= 1&N2=01%20ICBC%20Argentina Inglehart, R., & Welzel, C. (2009, March–April). Development and democracy: What we know about modernization today. Foreign Affairs. International Cooperation and Development Fund. (2017). Completed projects and projects under implementation. Paraguay. Retrieved from www.icdf.org.tw Liu, G. (2009). Changing Chinese migration law: From restriction to relaxation. Journal of International Migration and Integration, 10, 311–333. Ministerio de Relaciones Exteriores del Paraguay. (2017). Palacio Benigno López. Retrieved from http://www2.mre.gov.py/index.php/institucion/ palacio-benigno-lopez Najenson, J.  H. (2011, November 16). China in Argentina: A belated debut. Americas Quarterly. Retrieved from https://www.americasquarterly. org/node/3088 National Institute of Statistics and Censuses. (2009–2018). INDEC Informa. Buenos Aires. National Institute of Statistics and Censuses. (2010). Argentina’s national census. Buenos Aires. National Statistics Institute of Uruguay. (2011). 2011 Census. Anex 4: Population born abroad, by sex and large age groups, by country of birth. Montevideo. Oviedo, E. D. (2009). La puja por el ascenso internacional: modernización autoritaria frente al desafío de modernizar en democracia. Pautas políticas chinas a tener en cuenta en América Latina. In the IV Fórum Internacional de Sinologia: Pedra, Papel, Tesoura: Dinâmicas de Modernidade na China. Lisboa. Oviedo, E. D. (2010). Historia de las relaciones internacionales entre Argentina y China. Buenos Aires: Dunken. Oviedo, E.  D. (2015a). Modernization, political regime and foreign policy in Argentina, China and Taiwan. In E. D. Oviedo & D. Navarro (Eds.), Argentina y sus relaciones con países del Este Asiático. Mendoza: Aconcagua University Press. Oviedo, E. D. (2015b). Argentina and China: An analysis of the actors in the soybean trade and the migratory flow. Journal of Chinese Political Science, 20, 243–266.

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Oviedo, E. D. (2018). Chinese capital and Argentine political alternation: From dependence to autonomy? Chinese Political Science Review, 3, 270–296. Raggio, A. (2018). Entre teros y dragones: el estado de las relaciones culturales entre Uruguay y China y su incidencia en el comercio. In S. Xu & E. D. Oviedo (Eds.), Foro Internacional sobre Confucianismo. Barcelona: Ediciones Bellaterra. Sánchez, G. (2010, November 27). La comunidad china en el país se duplicó en los últimos 5 años. In D. Clarín (Ed.), Buenos Aires. Sarmiento, R. (2016). China financiará obras de infraestructura por U$S 25.000 millones en Argentina. Télam. Retrieved from http://www.telam.com.ar/ notas/201607/157164-china-argentina-diego-guelar.html Silva, P. (2009). Vázquez ofreció productos por trenes a China. El Obser vador. Retrieved from http://www.cncs.com.uy/vazquez-ofrecio-a-chinaproductos-por-trenes/ Office of the Press Secretary of the White House. (2017). Readout of the president’s call with President Xi Jinping of China. Retrieved from https://www. whitehouse.gov/the-press-office/2017/02/09/readout-presidents-callpresident-xi-jinping-china Última Hora. (2017). Cancillería destacará en un acto 60 años de relaciones con Taiwán. Asunción. Retrieved from http://www.ultimahora.com/cancilleriadestacara-un-acto-60-anos-relaciones-taiwan-n1092921.html Uruguay Chamber of Industry. (2017). Retrieved from https://www.uniondeexportadores.com/es/ World Bank. (2017). World Bank open data. Retrieved January 17, 2017, from http://data.worldbank.org 中华人民共和国商务部, 《对外投资合作国别(地区)指南。乌拉圭》北京2016 年。Ministry of Commerce of the People’s Republic of China. (2016). Guide to countries (regions) for Foreign Investment Cooperation: ‘Uruguay’. Beijing. 中华人民共和国国家商务部、国家统计局和国家外汇管理局, 中国对外直接投资 统计公报, 北京, 2017 年。Ministry of Commerce, National Bureau of Statistics and State Administration of Foreign Exchange of the People’s Republic of China. (2017). Statistical Bulletin of China’s Outward Foreign Direct Investment. Beijing. 中华人民共和国外交部, 2013 年11月18日外交部发言人秦刚主持例行记者会, 北京。Ministry of Foreign Affairs of People’s Republic of China. (2013). Foreign Ministry spokesperson Qin Gang’s regular press conference on November 18, 2013. Retrieved from http://www.fmprc.gov.cn/mfa_chn/fyrbt_602243/ jzhsl_602247/t1100045.shtml 中华人民共和国外交部, 中国同乌拉圭的关系, 北京2017年。Ministry of Foreign Affairs of People’s Republic of China. (2017). Relations of China with Uruguay. Retrieved from http://www.fmprc.gov.cn/web/gjhdq_676201/gj_676203/ nmz_680924/1206_681192/sbgx_681196/

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中华民国侨务委员会、中华民国侨务统计年报, 2011年9月。Overseas Community Affairs Council. (2011). Statistical yearbook of the Overseas Community Affairs Council. Retrieved from http://www.ocac.gov.tw/OCAC/File/Attach/313/ File_2430.pdf 中华民国侨务委员会、巴拉圭华侨服务据点, 地区侨情简介, 2014 年 3月 27 日。, Overseas Community Affairs Council, Paraguay Overseas Chinese Service Point. (2014). Brief introduction of regional overseas Chinese situation. Retrieved from http://www.ocac.gov.tw/OCAC/SubSites/Pages/ VDetail.aspx?site=cd50a4b7-d548-440c-ae33-465a05087e07&nodeid=1231 &pid=5994 中华民国外交部, 中华民国八十九年外交年鉴。Ministry of Foreign Affairs of Republic of China. (2000). The foreign relations yearbook 2000, Republic of China, Taipei. Retrieved from http://multilingual.mofa.gov.tw/web/web_ UTF-8/almanac/almanac2000/mofa_10.htm 全球台商服务网, 巴拉圭。投资环境简介, 2015 年 1 月。Global Taiwanese Businessmen Service Network. (2015). Paraguay. Introduction to investment environment. Retrieved from http://www.twbusinessnet.com/countryPage. do?id=11&country=PY 正经君, 一年暴增 163% 哪些外国人拿到了中国“绿卡”?, 观察者, 2017 年 2 月8 日。Zheng, J. J. (2017, February 8). What foreigners a year jumped 163 percent to get a Chinese green card. The Observer. Retrieved from http://www. guancha.cn/gczhengjing/2017_02_08_393105.shtml

CHAPTER 9

Revisiting Chinese and Latin American Economic Development: An Unintended Consequence of Different Industrialization Strategies Li Xing

Introduction Historically, Latin America began its industrialization process before the newly industrializing economies (NIEs) in East Asia and China, but the economic growth of the latter quickly surpassed their Latin American counterparts, including all indicators of economic and social development. Today the topic of China’s economic relations with the Global South has become both salient and controversial. China’s economy has been expanding rapidly in the past decades, and the emerging powerhouse is searching for energy resources, raw materials, and markets to maintain its

Li Xing (*) Jiaxing University of China, Jiaxing, China Research Center on Development and International Relations, Department of Politics and Society, Aalborg University, Aalborg, Denmark e-mail: [email protected] © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_9

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economic growth. China has no other choice but to globalize and diversify its development strategy in order to deal with its serious natural resources shortage, meet the need of the world’s largest domestic population, and fuel the world’s most vibrant economy. Africa and Latin American countries are a natural component of China’s “go global” strategy. Since the 2000s, China-Latin America relationships have intensified year on year, but also have faced many controversies and problems (Christensen & Becard, 2016). China-Latin America trade has been soaring, ranging from natural resources and commodities to agricultural products. Seen from the perspective of Ricardo’s theory of comparative advantage, ChinaLatin American trade is considered as a “match made in trade heaven” (Skira, 2007)—China needs natural resources and new export markets, while Latin America needs financial aid and loans to develop its infrastructure and provide social programs. China has become the second-largest trading partner and third-biggest source of investment for Latin American countries, as bilateral trade soared over 20 times in the past ten years. Seen from a macro-international political economy perspective, China’s global rise and its outreach to Latin America have helped the region diversify its external economic and political relations without having to make choices to the detriment of the United States’ hegemony in the region. China’s economic empowerment contributed to Latin America’s economic boom in the first decade of the century and explains the increase in the region’s room for maneuver in the world system to carry out preferred domestic and foreign policies (Domínguez & de Castro, 2016). China-Brazil trade relations are becoming more and more important for Brazil, bringing many benefits to the country, particularly from the exporting of commodities, such as iron ore and soybeans. There is a comparable situation in many other Latin America countries, which have profited from China’s rapid growth of demand for primary products and from rising world prices. However, a clear pattern has emerged of a bilateral economic relationship, shaped by an “unequal exchange of trade”, with China exporting manufactured products and Brazil exporting commodities and raw materials. Many critics argue that the trade relationship with China is causing the “primarization” of Brazilian exports and “deindustrialization” of its economy, thus generating negative impacts on Brazil’s long-term economic development. When looking into the asymmetric nature of the China-Latin America economic relationship in terms of the relative importance of bilateral trade to each partner, as well as the composition of trade flows and the balance of FDI flows, we face difficult questions: how should we define the China-­ Latin America relationship? Is this South-South cooperation or a North-­

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South pattern? Is it a win-win or win-lose situation? Many of the central problems addressed by the Latin American dependency theorists of the 1960s and 1970s, such as the “Prebisch–Singer thesis” and “unequal exchange”, are seen as being reproduced in the current China-Latin American trade patterns. It is claimed by some Western opinion-makers that the current configuration of the China-Latin America trade relationship is not advancing the region’s economic development and has limited the movement of Latin America toward high value-added exports (Atlantic Council, 2015). Hence, the China-Latin America economic relationship, despite China’s “South-South cooperation” and “win-win” rhetoric, should be defined as North-South, both from the perspective of the structure of trade, and from the military-strategic and global security point of view (Bernal-Meza, 2016).

Objective and Analytical Propositions In light of the above question, the objective of this chapter is to provide a framework for understanding the debate on the China-Latin America economic relationship in the contemporary era. The author has three analytical propositions that function as “arguments” throughout the chapter: 1. The relationship is identified as a “comparative-advantage” outcome of China’s economic expansion driven by its soaring demand for resources and commodities: China needs huge amounts of resources and is willing to pay a good price, while Latin America has the resources and is happy with the price. The former is a “world factory” for the global market, while the latter enjoys a “commodity boom” as a result of its status as a commodity-supplier for the former. As a consequence, the China-Latin America trade data show a tendency of “unequal exchange” and “primarization” between the two sides, with China exporting mainly manufacturing products while importing raw material and commodities. There is an interplay between China’s export growth strategy in taking a larger share of global manufacturing products and in upgrading the competition in the global value chain (GVC) and the Latin America import-­ substitution approach, which is vulnerable to the fluctuation of the global commodity market, as explained by the “Prebisch–Singer thesis”, although the region enjoyed a period of increased income brought about by the “commodity boom”.

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2. There is a correlation between the type of state and the industrialization strategy pursued. In other words, the prerequisites of the export-orientation industrialization strategy correlates with the prerequisites of particular state-market-society relations, such as an authoritarian and independent role taken by the state in planning, policy-making, and implementation, a disciplined and skillful labor force, heavy investment in education and technology, enforced socio-political stability, opening up to international competition, and so on. Some political and social facets of these state-market-­ society relations have their cultural and historical roots in China. However, it is not known whether these unique prerequisites can be reproduced and replicated in Latin America and Brazil. 3. The global rise of “Made in China” since the 1990s was externally driven by two parallel “deindustrialization” processes taking place both in core developed economies (North) and in semi-peripheral and peripheral developing countries (South). The differences were that, in the former, deindustrialization was caused by intended capital and production relocation to China in order to take advantage of cheap labor and low production costs; whereas, in the latter, deindustrialization was caused by an unintended “commodity boom” by selling raw material and commodities to “Made in China”. In other words, the “deindustrialization” process in the North was a strategical plan aiming to move the competition to high-tech innovation industries and to enlarge its share of the “soft economy” in terms of financial and service sectors. On the other hand, the “deindustrialization” in the South was an outcome of “comparative advantage”, largely driven by the rise of commodity prices. Theoretically, the author argues that the perspectives contained in world-system theory include some valuable analyses of opportunities and constraints in relation to countries’ geopolitical and geoeconomic position and their industrialization strategies. On the one hand, world-system theory assumes that the three hierarchical stratifications of the world system—core, semi-periphery, and periphery—shape the development of developing countries because their relative resources and their room for maneuver and mobility are constrained by the structural inequalities of the world system. Similarly, the Latin American “Dependency School” was historically based on Latin American experiences (Cardoso & Enzo, 1979; Frank, 1967). The development problem of Latin America was seen as a

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historically distinctive one, rooted in the external influences—political, economic, and cultural—on national development policies. Dependency is not just seen between nations; it includes unbroken ties among classes and groups across nations who have common interests. However, world-­ system analysis does not support the notion that development is possible through national strategies such as import substitution, as a way of dealing with obstacles in order to benefit from upward mobility in the world system. One the other hand, the capitalist world system is also conceptualized as a dynamic one, in which changing positions within the system’s structural morphology are possible by taking advantage of global capital mobility and relocation of production. Historically, the division of labor within the capitalist world economy brought about and resulted in flows of commodities, labor, and capital across different geographical areas through chains of production, exchange, and investment. The East Asian NIEs and China had skillfully seized opportunities in external markets and joined the upward competition within international value chains, despite the fact that they were also vulnerable to external turbulence. The development experience from Latin America’s pursuit of import-substitution industrialization (ISI) shows that the strategy was not able to delink the region from its dependency on technology and finance. Although the import-­ substitution strategy aimed to decrease the effect of unequal exchange in global market competition, it also delinked the region from the competition in the global value chain, which is seen as a path to achieving upward mobility to industrialization.

The “Chinese Developmental State” and Its Export-­ Oriented Industrialization The East Asian NIEs, apart from Japan, have since 1960s recorded a high economic growth rate. Throughout the 1970–1980s, the region achieved average annual economic growth rates of around 7%, which is much higher than the average 5% growth in the rest of the world. The per capita GDP of these states exceeded US$1000  in 1976 and increased to $4000  in 1987 in nominal terms (Fukuchi & Kagami, 1990: 22). The share of their manufacturing sectors as a contribution to GDP increased steadily. The demographic structure of these countries underwent great and rapid change, with a decline in fertility rates, an increase in education level, more affluent households, and rising life expectancy.

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Largely inspired by the intense curiosity about this first successful case of rapid industrialization outside the Western sphere, the East Asian NICs became the object of various academic studies and interpretations. The World Bank invested in a special study report on The East Asian Miracle (1993). Since the 1980s, there have been numerous studies (Borthwick, 1992; Chan, 1990; Deyo, 1988; Wade, 1990) providing different explanations and interpretations. This global attention was perhaps partly due to the intense level of interest in the first case of successful industrialization outside Western culture, and partly because the NIEs provided rare examples of developing countries breaking down the assumptions of the world system’s core-periphery structure supported by dependency theory and world-system theory. The Flying-Geese Pattern of EOI Growth The period from about 1960 to 1990 witnessed the adoption of an export-­ led growth paradigm by the first generation of NIEs—Japan—and then by the second generation, South Korea, Taiwan, Hong Kong, and Singapore. Their subsequent economic success was followed by the third generation—Thailand, Malaysia—and then by the addition of China from the 1980s, a historical turning point. This unique phenomenon of industrialization in East Asian is described as having a “flying-geese” pattern.1 The flying-geese configuration suggests that a group of nations in this region were flying together in layers, with Japan in the front layer (Fig. 9.1). The layers represent the different stages of economic development of various

Fig. 9.1  The flying-geese model of East Asian economic relations. (The left side is author’s own drawing; HKTDC Research, 2012: 7)

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countries. The flying-geese model both symbolizes a lifecycle of industries through which production, technology, and know-how are passed down from the front layers to the back layers, and entails a product-cycle (PC) theory of trade and investment. EOI refers to a trade and economic policy, or a development strategy, that aims to promote the industrialization process of a country through exporting manufacturing goods within the industrial areas over which the nation has a comparative advantage. Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries. EOI is an outward-looking strategy that emphasizes participation in international trade by encouraging the allocation of resources and labor in export-oriented industries. Some of the central features of EOI strategy can be summarized as: (1) focusing on export promotion by adopting policy measures such as export subsidies; (2) educating and training labor forces in line with skill formation; (3) applying advanced technology and tax concessions for export promotion. An EOI strategy is not cost-free, rather, it depends on many internal and external preconditions. Firstly, EOI growth is dependent on foreign markets where the demand for the products exists. Secondly, the domestic productive and financial infrastructure is constructed in line with the requirements of the foreign markets, thus downplaying domestic priorities. Thirdly, one of the determining factors of comparative advantage for competition in global export markets is price. Low-priced products imply cheap labor and human exploitation and wage suppression. Last but not least, global export markets often suffer from vulnerability due to fluctuations in the export market. The 2008 global crisis in the developed core of the world economy revealed the problem of sustainability faced by EOI countries in terms of over-reliance on export-led growth. The Chinese Developmental State: State-Market Embeddedness Another noticeable feature of East Asian economic success is the correlation between the EOI growth model and the type of states involved—developmental states. Likewise, China’s economic success can also be explained by referring to the core features of the East Asian economic development paradigm, which Chalmers Johnson calls the “Capitalist Developmental State” (Johnson, 1982, 1995). “Catching-up” strategies can clearly be seen in the East Asian experience: building on a strong authoritarian leadership and an elite bureaucracy, pursuing developmentally oriented policies, including the

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direct role of the state in governing the market. In the 1990s, there was plenty of literature on themes s­ urrounding the newly industrializing countries in East Asia, such as Evans (1995), Haggard (1990), Wade (1990), Weiss and Hobson (1995), Woo-­Cumings (1999). In line with the explanations and interpretations provided by this literature, China’s economic success in the past three decades can be understood as reproducing the East Asian development path: economic development has been led by a strong and pro-development state that is capable of shaping national consensus and maintaining overall political and macroeconomic stability in order to pursue wide-ranging economic modernization. Sharing a few unique features with those former East Asian development states, the Chinese developmental state (CDS) has been able to foster an “embedded” economic success shaped by unique state-market-society relations, as follows: 1. The CDS regards economic development as the utmost over-­arching objective of the state. It struggles to promote economic growth and maintain socio-political stability as well as to keep a manageable balance between growth and distribution so as to prevent a crisis between capitalist accumulation and class/sectoral exploitation. It plays a proactive role in steering economic development and in fostering, guiding, and ensuring long-term economic growth and technological modernization. It is an indispensable actor in mobilizing financial resources and implementing industrial policy. 2. The CDS designs national development plans and goals that are globally oriented and that are based on de-ideologized policies in pursuit of various development strategies. It is eager to learn from and absorb worldwide development experiences without abandoning its own policy-making sovereignty as to when, where, and how to adopt foreign ideas and practices. The state is determined to play an active guiding role in financial control over the economy, even in the face of international pressure to liberalize its financial sectors. 3. The CDS has set up an infrastructure of productive forces and labor markets targeted at the global market so that its export-oriented economic growth is sustainable on a long-term basis. Its national education and research system is also shaped to serve economic growth and overseas markets. 4. The CDS initiates state-driven industrial policies with macro-­ national planning and national objectives. It recognizes and empowers bureaucratic elites capable of administering the system and of

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decision-making, without being subjected to political influence by various interest groups, so that it can function professionally and independently. The CDS economic policy-making process involves close government-business collaboration in order to correctly respond to market signals with policy adjustment. 5. The CDS believes that free market transactions need explicit “professional guidance” and “directed credit” to select the competitive winners or prioritize some industries/sectors over others. State and private sectors are encouraged to cooperate to pursue common economic goals. Government not only regulates business enterprises but also assists them with overheads and other preferential policies. It channels targeted investment at strategic private businesses, while business enterprises assist government to reach social and economic objectives. 6. The CDS does not allow liberal ideologies to interrupt the national consensus and does not permit the paradigms of political pluralism to challenge its development goals. It does not see Western democracy as a political system that will necessarily lead to economic and social development. It believes what a country needs at its initial developmental stage is discipline and hardwork, more than democracy and individual rights.

Can the CDS Be Duplicated Externally? We should point, however, out that the success stories of EOI industrialization in East Asia in general and in China in particular were the result of the interplay of many mutually related external and internal factors. Such a historically unique experience cannot be copied or duplicated elsewhere. In the East Asian case, it was the synergy of external factors, such as the US security umbrella, a favorable international environment, foreign assistance, and direct investment, correlating with internal factors, such as the role of state, cheap labor, an export-led development policy, the role of education and cultural aspects. Ignoring any one single factor would produce weak and incomplete explanations for their success. In the Chinese case, the geopolitical factors, among others, in the early period of China’s economic reform from the end of 1970s to the 1980s offered China favorable international conditions under which its export-­ based economic growth was made possible. It was during this period that the United States was willing to open its market to China as part of their

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alliance against the Soviet Union. Thus, Chinese economic success should be understood as the combined effect of external and internal factors, such as the reestablishment of socio-political stability after Mao’s death, and the national spirit of reform and economic development after a long period of political turmoil economic stagnation. The role of overseas Chinese diasporas was another unique “Chinese phenomenon” contributing to China’s economic takeoff in the 1980–1990s. There is a consensus that overseas Chinese diasporas, whose economic power is greater than that of any other diaspora of any other state, were one of the main economic and technological underpinnings of China’s economic growth, connecting China with the rest of the region and world ever since China started its economic reform at the end of the 1970s. Overseas remittances and investments contributed by Chinese diasporas accounted for a substantial proportion of global investment in China. It is no exaggeration to claim that Chinese diasporas were a vital key to China’s economic rise as well as to its further integration with the regional and global economy. A commonality of both the Chinese and East Asian newly industrialized economies (NIEs) was the fact that the EOI growth strategy opened doors to upward mobility in which foreign technology acquisition, absorption, and innovation played an essential role in helping these countries move from low value-added industrial products to high value-added ones. Much of the success of Japan, the NIEs, and then China can be attributed to their ability to encourage the acquisition of foreign technology and to implement or to improve it more efficiently than their competitors. Their ability to acquire and develop technology is also supported by foreign direct investment (FDI). Today, inspired by China’s economic success, more and more developing countries are attempting to follow the kind of Chinese top-down, state-led, and interventionist development path. However, they should pay careful consideration to the important cultural and historical specificities underpinning China’s success. Apart from the internalities and externalities described above, another central specificity, which is unlikely to be duplicated, is socio-political and socio-economic “embeddedness” with Chinese characteristics (Li, 2016). This concept of “embeddedness” explains how Chinese cultural and political uniqueness influences economic activities and shapes distinctive institutional forms, along with a variety of forms of property and business ownership, reflecting the traditional culture of clientele-based socio-economic relations. Such uniqueness shows how the dis-embedded forces of marketization and commodification were balanced by the embedded forces of socio-cultural and political structures.

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Latin American Structuralism and Import-­ Substitution Industrialization Latin American structuralism has played a central role in debates about economic development theory and policy since the 1950s. Raúl Prebisch (1950) studied the trajectory of structuralism across a long historical context. He was best known for his ideas on international trade and the importance of taking into account structural features (typically) when undertaking economic analysis. Prebisch separated out the purely theoretical aspects of economics from the actual practice of trade and the power structures that underlie trading institutions and agreements. He divided the world into the economically industrialized “center” (the United States and Europe) and the “periphery” (primary producers). The Prebisch–Singer hypothesis (also called the Prebisch–Singer thesis) argued that the price of primary commodities declines relative to the price of manufactured goods over the long term, which causes the terms of trade of primary-product-based economies to deteriorate. The hypothesis was based on the observations that (1) manufactured goods have a greater income elasticity of demand than primary products, especially food products; (2) as incomes rise, the demand for manufactured goods increases more rapidly than demand for primary products, in addition to the fact that primary products have a low price elasticity of demand, leading to the decline in their prices. Prebisch emphasized the importance of understanding structuralism, that is, economic inequality and distorted development as an inherent structural feature of the capitalist world system. Early structuralist advocates emphasized both internal and external disequilibria arising from the productive structure and the dependent relationship developing countries had with the developed world. The conceptualization of structuralism and its underlying ideas of “inward development” paved the way for ISI industrialization strategy. Import-Substitution Industrialization The rationale for import-substitution industrialization is a strategy derived from the Prebisch–Singer hypothesis and from the structuralist thinking mentioned above. Ideas about ISI are revealed in the works of Raúl Prebisch (1950), Hans Singer (1949, 1998), Celso Furtado (1963, 1964, 1965), and other structural economic thinkers, who suggested the procurement of production means to decrease the imports of manufactured

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goods in order to cope with the phenomenon of terms of trade deterioration. They gained prominence with the creation of the United Nations Economic Commission for Latin America and the Caribbean (UNECLAC or CEPAL). The thinkers and theorists who developed this economic framework shared a common belief in a state-directed, centrally planned form of economic development (Renato, 1986). In this context, the term “Latin American structuralism” also refers to the period of import-­ substitution industrialization in many Latin American countries from the 1950s until the 1980s. An assessment of Latin American structuralism requires the measurement of its ability to understand the dynamic structure of the capitalist world economy. Whereas its approach to domestic economic constraints and short-run policy problems is frequently a target for criticism. After a brief eclipse during the late 1970s, Latin American structuralism is currently a vital tool for understanding development problems rather than an effective development strategy. Import-substitution industrialization (ISI) is a trade and economic policy that seeks to promote rapid industrialization by reducing the external dependency of a country’s economy. The intention is to create development and self-sufficiency through the construction of an internal market while setting up high barriers to foreign goods in order to encourage domestic production. The state must protect those infant industries or industrial sectors that can reasonably be expected to gain comparative advantage. Many Latin American countries implemented an ISI policy with the goal of becoming more self-sufficient and less vulnerable to adverse terms of trade. The ISI policy works by having the state lead economic development through nationalization, subsidization of vital industries (agriculture, power generation, etc.), increased taxation, and highly protectionist trade policies (Street & James, 1982). It uses tariffs, import quotas, and subsidies to promote and protect import-substitute industries. Ideally speaking, ISI strategy aims not only to make these countries less reliant on external finished products, but the goal is for them to also build their economy through industrialization. ISI strategy is expected to allow those countries with self-sufficiency in production to build their own national economy and to provide domestic jobs. Logically, ISI strategy can protect these states from external shocks to the price of goods and from a deterioration of the terms of international trade, that is, increases in domestic employment and resilience will lessen the impact of global economic shocks such as recessions and depressions.

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EOI Versus an ISI Growth Model from a World System Perspective One of the central difference between EOI and ISI is their different approach to development, with the former closely linking their industrialization with the core of the capitalist world order that controls the market and the technology, with the latter attempting to break the dependency relation by reducing or cutting relations with the core. For the East Asian NICs, their geopolitical and geoeconomic importance, which made their positions vital to the US-led post-war world order, had already determined the imperativeness of their inseparable linkage with the core. Perhaps this was the historical premise and precondition underlining their EOI strategy. As pointed out earlier in this chapter, the East Asian EOI strategy was responsive to changes in the world economy, including the movement of foreign investment and technology. The world-system theory developed by Wallerstein (1974, 1979, 1997, 2004) provides a broad theoretical perspective allowing us to understand the historical evolutions and changes involved in the rise of the modern capitalist world system. This system expanded over a long historical spectrum, bringing different parts of the world into its division of labor, leading to a perpetual condition of economic core—semi-periphery—periphery relations. Under this condition of the single division of labor within one world market, a political structure consisting of sovereign states and multiple cultural systems interacts within the framework of an interstate system (1974). The world system is conceptualized as a dynamic one in which changing positions within the system’s structural morphology are made possible by taking advantage of global capital mobility and the relocation of production. Historically, the division of labor within the capitalist world economy brought about and resulted in flows of commodities, labor, and capital across different geographical areas through chains of production, exchange, and investment. The capitalist world economy is perceived by Wallerstein as a rigid system with limited possibilities for transformation to take place from within. Although he admits that, historically, some states have been able to upgrade their position in the world economy’s hierarchy, this does not fundamentally alter the embedded, unequal nature of the system (Wallerstein, 1975: 24). In line with this understanding, Latin America is seen as a striking case where “both import substitution industrialization and primary/secondary export industrialization, which Wallerstein argues

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were possible means to move ahead in the world economy, were ineffective” (Grell-Brisk, 2017: 3). The aim of ISI to develop a self-sufficient national economy is not an easy thing. Industrial capacity involves huge investments in technology, innovation, errors, and successes continuously competing with international economic actors, many of whom may have had decades of experience and knowledge working on developing the said product (Bruton, 1989). The protectionist policy of ISI, albeit seemingly protected from harsh global competition, does not lead to comparative advantage and specialization. The defects of ISI strategy are summarized in a research article: [I]mport substitution industries create inefficient and obsolete products as they are not exposed to international competition. Other disadvantages include unemployment increasing internationally as World GDP decreases through the promotion of inefficiency. Countries that adopted import substitution policies faced many undesirable effects such as chronic problems with the balance of trade and payments. Although import substitution was supposed to reduce reliance on world trade, there was a need to import raw materials, machinery and spare parts. The more a country industrialized the more it needed these imports and import substitution industrialization (ISI) was strongly biased against exports. (Sanderatne, 2011)

Competition in Global Value Chains (GVCs) The value chain describes “the full range of activities that firms and workers do to bring a product/good or service from its conception to its end use and beyond. This includes activities such as design, production, marketing, distribution and support to the final consumer” (GVC Initiative, 2016). GVCs are connected with global supply chains (GSCs), which emphasizes “the manufacturing and distribution-related steps” (GVC Initiative, 2016). The GSCs include human resources and activities involved in goods and services and their global supply, distribution, and post sales activities. A value chain can be confined within a specific geographic location, whereas a global value chain implies the involvement of multiple economic actors across multiple geographic spaces. A knowledge of GVCs helps us to understand the role that industrial sectors can contribute to economic development by using exports as a tool for development. It also offers an analysis of how a sector is addressing the issues of employment creation, skills development, geographic diversification of industry, and other development issues.

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GVC analysis emphasizes the importance of positioning national production modes within global value chains. Export-oriented economies tend to choose a closer integration into the world economy and to expect an increase in the share of international trade in economic activity. An EOI growth strategy goes hand in hand with the influx of foreign direct investment, contributing greatly to the integration of EOI countries’ manufacturing with GVCs. Historically, Japan and most East Asian NICs, including China, have fully embraced competition within the GVCs, whilst struggling with the challenge of making GVCs work better for their national development strategies (Taglioni & Winkler, 2016). Given that companies and countries that embrace GVCs must deal with external competition, GVCs tend to marginalize “import substitution as a viable industrialization strategy” for low- and middle-income countries including “nationalistic industrial policies for high-income countries” (Taglioni & Winkler, 2016: xiii). Seen from the perspective of world-system theory, GVCs are precisely the means by which core countries benefit significantly from the surpluses generated, while peripheral countries gain comparatively little share. Recent research studies show that GVCs have functioned as a competitive vehicle which Chinese manufactured products can use to enter global markets, especially markets in high-income countries. This can be empirically verified by the significantly positive correlation between the share of processing exports and the income of trading partners, implying that processing trade is an effective means for “Made in China” products to enter high-income countries (Xing, 2016). One research study uses “R&D spending as percentage of GDP” as the input variable and the “contribution of R&D and related business activities to the value-added manufacturing exports” as the output variable. Its findings show that China has achieved significant efficiency and effectiveness in its innovation system compared with many other countries (Zeng, 2017).

Dialectics and Dynamism in the Capitalist World System: The Chinese Experience The success of Chinese EOI growth strategy verifies world-system theory analysis that in order for capital to be shifted away from declining sectors into “profitable” sectors, the declining sectors need to be relocated to semi-peripheral or peripheral countries, relative to their labor conditions

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and technological level. Some of these countries will benefit from global capital mobility and production relocation. Historically, it was in such pivotal moments that opportunities for upward mobility within the system were generated and regenerated (promotion by invitation) (Wallerstein, 1979). China’s high economic growth in the past four decades reflects the positive spillover effect of taking advantage of the system’s upward mobility (seizing the opportunities). China is seen as one of the primary beneficiaries of the latest round of global capital relocation (Li, 2008). “Room for maneuver” implies to the external conditions for “upward mobility” in the world capitalist economy that is conducive to internal development. Seen from a long historical perspective, the global core— semi-periphery—periphery hierarchy as defined by world-system theory has been a relatively stable structure over centuries. The semi-periphery is seen as the “buffer zone”, which acts as a stabilizing fixture, engaging in an equal amount of core and peripheral activities, allowing them to benefit just enough from global commodity chains to avoid falling back into the periphery but not enough to move into the core (Grell-Brisk, 2017: 3). The world system’s rhythmic cycles and the rise or fall of hegemonic powers provide both upward and downward mobility. “Promotion by invitation” refers to the upward mobility path enjoyed by semi-peripheral or peripheral countries during the period of the rise of a new emerging economy of global scale, or whose internal development is favorable to global capital mobility and production relocation. This upward mobility is stimulated by the favorable external environment created by the promotion of and at the invitation of the rising hegemon, or by a group of driven nations, in connection with their own market interests. East Asia, Japan, and the East Asian NIEs, including post-Mao China, are good examples of this type of upward mobility by external promotion. The current Chinese “Belt and Road Initiative” (BRI) and the China-led Asian Infrastructure Investment Bank (AIIB) are also good examples of “promotion by invitation”, which have the potential to increase the “room for maneuver” and “upward mobility” for countries along the Belt and Road regions. “Seizing the opportunities” indicates a country’s internal capability for taking advantage of a new situation or condition taking place in the international political economy and to adjust their internal development mobility accordingly. In line with world-system theory analysis, the rise of China, together with its capital outward expansion and global hegemonic strategy, seemingly represents another rhythmic cycle of the rise of a new hegemon, which is an opportunity in terms of room for maneuver and upward mobility for some countries, but a challenge and downward mobility for others.

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Figure 9.2 indicates that the success and expansion of China’s EOI is based on the three major inputs into the “Made in China” process that consist of capital, technology, and commodities from different parts of the world. As one study shows, “China has in fact become an important regional ‘integrator’ through its many global and regional production networks. China’s exports (over 50% being processing trade) embody raw materials, parts and components, technology and equipment, and financial and economic services from different Asian economies, converting ‘Made in Asia’ into ‘Made in China’ products for the world market” (Wong, 2013: 288). One remarkable outcome of the “Made in China” model is that China is able to move gradually from being the largest producer of low value-added and labor-intensive products to becoming the

Fig. 9.2  The global “Made in China” strategy. (A revised and extended figure based on Wong, 2013: 288, Fig. 2)

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largest high value-added and high-tech exporter. According to Worldatlas. com (2017), in 2013 China replaced the United States as the world’s largest exporter of high-tech products.

The Impact of “Made in China” on the World System’s Stratifications Since the 1990s, China’s EOI, manifested in a global “Made in China” strategy, has generated a major impact on countries on different stratifications of the system. Both developed and developing countries have been following a similar pattern, that is, consciously or unconsciously embarking on a phase of deindustrialization. But, according to some scholars, deindustrialization should not necessarily be regarded as a negative phenomenon, but rather as an expected consequence of the changing industrial dynamism in the relationships between manufacturing output, employment, and trade (Rowthorn & Wells, 1987). Others contend that “deindustrialization is a universal phenomenon that most countries experience at a certain stage of economic development, it has to be understood that the factors that cause deindustrialization differ widely across countries, thereby dictating different deindustrialization paths” (Kim & Lee, 2014: 65). Made in China and Deindustrialization in the Core It is argued that since the late 1970s when China began to implement its economic reform and open-door policy, the world witnessed a relocation of production to China during the last two decades of the twentieth century. The relocation of productive capital and the outsourcing of manufacturing resulted in a wave of deindustrialization in developed economies. This was particularly acute in the United States, where the aggregate value added from non-productive sectors, such as finance, property, and services, as a percentage of GDP, exceeded that of manufacturing for the first time in 1980, while the process of outsourcing manufacturing abroad accelerated. A similar process occurred in Japan and Europe as well. The leapfrog growth of the “soft economy” in the developed core, that is, speculative financial business, as a result of liberalization and deregulation policies, eventually created a bubble economy, leading to the 2008 global financial crisis. It was realized that the root cause of the crisis was

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the over-financialization and planned deindustrialization of national economies. The financial and service sectors were unable to absorb the supply of labor, and could not produce additional value to compensate for the reduction in the industrial sector. The result was higher unemployment and lower economic growth. Since the year 2000, the United States has lost/outsourced five million jobs and about half of them went to low wage workers in China and elsewhere between 1999 and 2011. However, following the rise in Chinese wages of by 12%–15% a year for the past 15 years, many jobs have begun to return to the United States in recent years. Unfortunately, most of these jobs are taken by robots, not by workers. According to a research report, “Up to 800 million global workers will lose their jobs by 2030 and be replaced by robotic automation”, and “in the US alone, 39 to 73 million jobs may be eliminated by 2030, but about 20 million of those displaced workers may be able to easily transfer to other industries” (BBC News, November 29, 2017). Taking a look at the China-US 2017 trade data (Fig. 9.3), we can see that the largest component of China’s export to the United States was manufactured products, while the United States’ exports to China were largely agricultural products and commodities (US airplane exports to China are not included in the data). The ongoing trade war against China initiated by the Trump Administration is an attempt to change the situation. The extensively pursued unilateral protective trade policies of the Trump Administration against its worldwide trade partners since 2017, under the slogan “America First” and “Made in America”, are seemingly aimed at a new round of national “re-industrialization” by bringing the lost industries back to the United States. Made in China and Deindustrialization in the Semi-Periphery and Periphery This chapter argues that there is an organic connection between the deindustrialization process in the North and the deindustrialization in the South, both connected with the rise of “Made in China”. As discussed in the previous section, the economic financialization and deindustrialization of the core have had an important impact on the structure of core—semi-­periphery—periphery relations, and China is obviously a major beneficiary of this.

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Fig. 9.3  China-US trade in 2017. (Source: U.S. Census; MarketWatch, June 15, 2018)

Many semi-peripheral and peripheral countries, such as countries in Latin America, are also benefiting from the impact, but in a different way. While China has reaped huge benefits from FDI relocation and production outsourcing from the core, Brazil, Argentina, and other Latin American countries have benefitted from exports of raw material and commodities to feed China’s global manufacturing. The “commodity boom” in the Latin American region during the 2000s played an important role in increasing the export earnings of the region. Growing demand from China for primary products and raw materials was one of the central factors in stimulating the boom, while the negative effects of the boom gradually became more visible and costly. Regarding the debate about the opportunities and constraints of China’s increasing presence in Latin America, the author’s various studies show that the rise of China does present a dual effect for semi-periphery and periphery countries in the coexistence of opportunities and constraints

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in terms of “room for maneuver” and “upward mobility” (Li & Christensen, 2012). China’s competition is seen to lead to the peripherization of existing semi-periphery countries within the current world system, because “China’s competition will completely undermine the relative monopoly of the existing semi-peripheral states in certain commodity chains. The value added will be squeezed, forcing the traditional semi-­ peripheral states to accept lower wage rates close to the Chinese rates [which they cannot do it]” (Li, 2005: 436; 2008). China’s competition breaks down the relative monopoly of the existing semi-peripheral states in certain global commodity chains and causes a certain degree of deindustrialization or peripheralization of many existing semi-periphery countries due to the change in their position from being an exporter of manufacturing goods to a commodity-supplier. This line of thinking and argument is also shared by many scholars in Latin America (Bernal-Meza, 2012; Dussel Peters, 2016; Guelar, 2013; Sevares, 2015). Table 9.1 shows that the top five items exported from Latin American to China are primary commodities, while its top five imports from China are industrial products. Brazil has been largely seen as a good example of relative deindustrialization in the sense of its declining share of the ­manufacturing sector in gross domestic product. The country’s trade balance in manufactures is viewed as the main cause of the problem, whereas Brazil’s trade with China, its largest trading partner, is perceived to have contributed to the relative deindustrialization and “primarization” of the Brazilian economy due to its lack of competitiveness in the domestic market and in exports (Jenkins, 2015). One study shows that “China has leapt over Latin America to become the most competitive exporter of manufactured goods in the world—leaving 92 percent of Latin America’s manufacturing exports under threat from China in 2009” (Gallagher, 2010). Table 9.1  Top 5 China-Latin America exports and imports, 2011–2015 LAC exports to China 1. Soybeans and other oilseeds 2. Iron ore and concentrates 3. Crude petroleum 4.Copper 5. Copper ores, concentrates Total, top five

LAC imports from China 19.2% 16.8% 11.8% 11.4% 10.0% 69.2%

Telecommunications equipment Data processing machines Optical instruments, apparatus Ships, boats, floating structures Other electrical equipment Total, top five

Source: UN Comtrade (cf. Ray & Gallagher, 2017: 4, Table 1)

9.7% 3.8% 3.3% 3.3% 2.3% 22.5%

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China’s economic relations with Africa have generated consequences that are similar to the Latin American situation. According to various data, China’s outward capital expansion to Africa is bringing about a new circle of “unequal exchange” and “dependency” reflected in a North-South nexus, which has led to criticism shaped by “neo-imperialist” and “neo-­ colonialist” discourses (Li, 2019).

Conclusion This chapter has reviewed and discussed the historicity of two different development strategies—EOI vs ISI—in China and Latin America, and the consequences deriving from them. Chinese EOI has led to the global rise of “Made in China”. As we have seen, China’s success cannot be accounted for by simplistic explanations, but is considered to be the synergy of different internal and external factors, such as the uniqueness of Chinese developmental state characteristics, the opportunities arising from Chinese-US rapprochement, the open-door policy, the role of the overseas Chinese diaspora, etc. The implications and the impact of China’s rise and policy orientation are far-reaching, both for the core and for the semi-peripheral and peripheral countries. China’s rise is said to have different implications for and impacts on different parts of the world. It could be argued that China is becoming a leading counter-hegemonic socio-political and socio-­economic force to the “core” of the existing world order, while it could also be seen as a new emerging hegemon to the semi-peripheral and peripheral parts of the world system. China’s EOI and its global “Made in China” strategy has been sustained by the importation of raw materials and commodities, paving the way for a decade of “commodity boom” and a rise in income in Latin America. However, paradoxically, China’s capital and trade expansion in Latin America and other regions in the Global South is seen as reproducing a new North-South axis. Many studies, including this book, point to an emerging situation of deindustrialization in Latin America, including declining competitiveness as the region fails to focus on higher value-­ added activities. Economic relations between China and the Global South are increasingly identified as regenerating patterns of “neo-colonialism”. In essence, Prebisch was right in his argument that a focus on primary goods leads to deteriorating terms of trade in comparison with manufactured goods. This kind of situation is one that Latin America is currently suffering in its overall economic relations with China.

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China’s investments in Latin America will continue to grow, in two major areas in particular—resources and infrastructure. If the region can grasp the new opportunities presented by Chinese trade and finance, this new influx of Chinese investment will help Latin American countries meet their development goals. But economic relationships with China always present two sides: one offering great opportunities in terms of increased political and economic room for maneuver and upward mobility, and another presenting serious challenges in terms of economic dependency and an unequal exchange of trade relations. The author concludes that it is in Latin America’s political and economic interest to find strategic convergence with Beijing’s capital expansion and global strategy. Latin America will improve its “upward mobility” by learning from China’s development experience, by increasing its economic opportunities and diversifying its trade partners, and by taking advantage of the room for maneuver in global governance in an era of the emergence of a new world order. Within the near future, both China and Latin America will have to go through a considerable period of accommodation and adjustment.

Note 1. The term was coined in the 1930s by a Japanese economist Kaname Akamatsu (1935) who developed the theory of a multi-tier hierarchical “flying-­geese” model in which industrialization could be promoted and spread from developed countries to the less developed countries as costs in those economies rose.

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CHAPTER 10

Conclusion: China and Latin America in the Global Political Economy: The Development of a New Core-Periphery Axis Raúl Bernal-Meza

By 1990, China was becoming an indispensable country for the global economy. Kristof (1993: 59) noted that “The rise of China if it continues, may be the most important trend in the world for the next century.” A decade later, when analyzing China’s relations with a part of the periphery of the world system, Li and Shaw (2013: 5) agreed with this analysis, stating that “Today, China’s inexorable rise as one of the key global political and economic powers—emerging society as well as market?—has been globally hailed as one of the most important events in [the] modern world system.” China became a key player in the global economy because its production model stimulated the growth of the rest of the world’s economies through the creation of a virtuous circle of investment, production, and R. Bernal-Meza (*) INTE, Arturo Prat University, Iquique, Chile Department of International Relations, National University Center, Buenos Aires, Argentina © The Author(s) 2020 R. Bernal-Meza, Li Xing (eds.), China–Latin America Relations in the 21st Century, International Political Economy Series, https://doi.org/10.1007/978-3-030-35614-9_10

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market, which has had an impact on a global scale. At the beginning of the 1990s, Latin America’s, particularly South America’s, main trading ­partners and sources of financial and foreign direct investment remained the United States and some EU countries (Spain, France, Germany), as well as Japan in the East Asia region. At this time, China was not a significant actor, either economically or politically, for any of the Latin American countries. The exceptions were its commercial relations with Chile, dating back to 1971, and political relations in terms of cooperation with Brazil within the framework of the United Nations, which were strengthened from 1985 (Bernal-Meza, 2012a; Oliveira, 2012). But South America, in the main, was not to escape the forces that that were being generated by the virtuous circle. The rapid rise of China’s economic presence in Latin America accelerated from the mid-1990s onwards and spread widely in the early 2000s. It was the result of what Oviedo (2012a, 2012b) called the “Struggle for Modernization”. That is to say, it resulted from the confrontation between the Chinese development model—export oriented—and the Latin American model of modernization—industrialization by substitution of imports—destined to satisfy the demand of its internal markets. When analyzing the evolution of the GDP of the world’s 20 leading economies between 1980 and 2000, we can see how China (also India and South Korea) rose in the world rankings, while countries like Brazil, Mexico, and Argentina receded. The success of Chinese modernization, under an authoritarian political system, exposed the failure of Latin American leaders to promote, under democratic political systems, successful economic modernization in the region. Brazil’s economy had always been larger than that of China up until 1990, when China surpassed Brazil. As Li Xing argues in his chapter, the synergy of internal factors (state-­ market-­society relations) and external factors (geopolitical, geo-economic relations) came to shape China and the Latin American countries development strategies in different directions and link their development and economies with the global market (competition, production chain, value chain). The Latin American economies began to be dragged by the dynamics of Chinese foreign trade, which was creating a dependence on the underdeveloped economies that were pulled toward the propellant center (Oviedo, 2014: 151). This dynamic deepened, as China became the axis of world economic dynamism and began to displace other industrialized economies from that position: in the core of the European Union, from

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Germany and France as a whole, in Asia, from Japan and then, in the world economy, from the United States. The continuity of this trend was signaled in the literature for several years. For Eichengreen, Park, and Shin (2011: 8), in 2011, the Asian power was already responsible for 30% of the global demand growth. The rise of China in the hierarchy of world economic power was influencing the international economic insertion of Latin American countries and modifying their respective production and export structures. This process would be named “productive specialization”. According to Álvarez (2017), the relationship between China and Latin America and the Caribbean developed in three stages. The first was in the context of the Cold War, when the relationship was restrained by the global dominance of the United States and the Soviet Union. During the second stage, from the mid-1990s until the end of the twentieth century, the strategy was mainly economic. In the third stage, from the beginning of the twenty-first century, China perceived that it could and should build not only a relationship, but also a presence that would give it the opportunity to enter the political discourse as an actor with enough sufficient capacity and space to develop a dialogue and autonomous and direct international relations with other States. As long as China maintains its development model, based on a strategy of production and export of manufactures, its demand for raw materials will continue and that will be the tendency in the medium and long term. In this scheme, the commercial complementarity produced by the harmony of interests between China and the South American countries, based on primary imports and exports of manufactures, constitutes the key link between both segments, because the Chinese demand for raw materials harmonizes with the regional supply (Oviedo, 2014), a phenomenon discussed by the authors of this book when analyzing the relationship between China and other countries. China’s power also began to influence the region’s foreign policies (Becard, 2008; Bernal-Meza, 2012a; Oviedo, 2010; Ross, 2002), through the predominance of Chinese global political interests in the definition of bilateral and multilateral Latin American agendas, without extending its political objectives to other agendas that did not correspond to its interests. In a first stage, these interests were linked to the recognition of a single China (including Taiwan), the consideration of the Tibet issue as an internal Chinese issue, and the non-questioning of its government before the United Nations Human Rights Commission for the violation of

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human rights. At a later stage, China’s objective to be recognized as a market economy would be added. Since then, Chinese pragmatism has dominated bilateral relations under the framework of the political economy of an East-South axis, a framework in which relations between both parties are developed. At the same time as it pursued the complementarity of commercial exchange, China specialized its Latin American semi-periphery and periphery partners, replacing the exports of manufactured goods of its more industrialized partners in exports to third markets, as indicated in the chapters by Becard on Brazil and Bernal-Meza and Zanabria on Argentina. This situation deepened the structural heterogeneity of Latin America, both from the point of view of the productive structures, between those who had achieved international economic insertion through industry, such as Brazil, Mexico, and Argentina, those countries like Chile that had abandoned the ISI strategy by opting for a new primary model-exporter and export of services (third sector of the economy), and those that did not go beyond the primary-export stage, such as Venezuela, Paraguay, and others. Simultaneously, the importance of China’s economic relationship with each country was growing. The evolution of this process had as a correlate the consolidation of the commercial, financial, and investment importance of China for each country and, consequently, for the entire region. The reason for this harmonious co-dependency and increasingly important relationships has been the extraordinary growth of the Chinese economy and the differences in the level of scientific and technological development, which made China increasingly attractive as an international economic exporter and importer and an investor in the South American region. It is thanks to these differences in their industrial sectors that the growth in Latin American primary exports to China coincided with the rise of Chinese industrial exports to Latin America. Thirty years ago, Brazil had a stronger economic presence than China in the world economy and Brazilian industrial exports greatly exceeded Chinese industrial exports. The current reality is just the reverse. These differences are clearly evidenced in this book. Li, in his chapter, compared the success of the Chinese industrialization strategy and its export-oriented model with the failure of the industrialization by import substitution model followed by Latin America. His conclusion is confirmed in the analyses contained in the various chapters of this book. The disparity between the different models of socio-economic modernization represented by China and Latin America reveals the other side of

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the coin of China’s successful international economic insertional and the Latin American failure. Mainly since the return to democracy in South America, after which a new cycle of integration projects began—specially the bilateral agreement between Argentina and Brazil of 1986, which would later give rise to Mercosur in 1991—there were efforts to achieve modernization and development. But these failed. The result would be reflected in the core-periphery commercial structure between Mercosur and China. The Latin American democracies did not manage to transform their productive structures, they did not diversify their exports, they did not radically reduce poverty levels, nor did they reduce the profound inequalities in wealth distribution. China specializes its trading partners in the semi-periphery—industrial countries such as Brazil and Argentina—and the periphery (the rest of the countries), and substitutes their exports of manufactures in third markets, with the exception of Chile, which has played a leading role in China’s strategy of insertion in the global market economy. It is interesting to ask why China used Chile as its first ever partner to promote an international free trade agreement; Ross develops some important points on this topic in his chapter. China used Chile as a regional center for financial exchange (Yuan for dollars and vice versa), when bilateral trade exchange is favorable to Chile and deficit for China and with Chile’s foreign direct investment in China being higher than Chinese investment in Chile. China’s involvement with the rest of the Latin American countries has deepened the structural heterogeneity of the region, both from the point of view of their productive structures and their economic relationships through regional and subregional integration. This has resulted from the heterogeneity of the strategies applied by China in relation to each Latin American partner. As a consequence, there is a diversity of positions and perceptions in Latin American countries about what China represents for each country’s respective conditions of economic development and about the challenge represented by the Chinese economic presence in the short and medium term for their industrial modernization policies and South American productive and export diversification. The criticisms that Bernal-Meza (2012a, 2012b) and Oviedo (2009) made of China, to the effect that the Asian power did not differentiate between subregions or the economic, demographic, and consumption dimensions of the countries when drafting its policy document regarding Latin America, proved to be deeply mistaken. China had and has clearly differentiated strategies for its relationship with the different countries of

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the region, even though the common pattern for all is to be part of its great periphery, in the framework of the world economy, fulfilling a role of primary-exporting partners within a center-periphery relationship. As the chapters in this book conclude, bilateral trade China-Latin American is clearly core-periphery or North-South. This trade has its complement in Chinese loans and investments, which have grown rapidly and which integrate and consolidate the pattern of economic relationship between the two partners. This pattern is determined, in structural terms, by the primary production and export specialization of Latin America (Oviedo, 2016; Sevares, 2016). It is an inter-industrial and highly concentrated trade (Ortiz Velázquez & Dussel Peters, 2016). The Chinese presence has increased in practically all areas. The military and science and technology aspects are still incipient. But along with the economic links, there are also cultural, academic, and political activities (Dussel Peters, 2016). The Chinese presence is transforming that country into the most influential actor in the region, because unlike the United States and the European Union, China has altered and modified the different processes of commercial integration and the relationship between the commercial partners within these integration agreements. As the research coordinated by Dussel Peters (2016: 11) demonstrated, in the last 15 years, China has significantly disrupted Latin American trade integration. The contributions of Bernal-Meza and Zanabria, Oviedo, Briceño-Ruiz and Molina Medina provide important analyses in this regard, from different national perspectives. From 2007–2008, China became the second largest source of foreign direct investment and a significant provider of financing through a variety of loan mechanisms. The “turnkey” infrastructure projects allowed Chinese companies to provide the technology, financing, and often the workforce and maintenance and post-sale processes. The most serious economic consequence of this is that these projects do not have links with the productive and social apparatus of the respective countries of Latin America, or the Caribbean (Bernal-Meza, 2012a, 2012b; Ortiz Velázquez & Dussel Peters, 2016: 18). The beginning of the investment stage coincided with the decisions contained in the “White Paper for Latin America” of 2008, which supports the argument that China’s investment strategies in Latin America were very precise political decisions (Oviedo, 2017; Sevares, 2016). In this way, the more dependent Latin America is on Chinese imports and its capital exports, the more committed the region is to its interna-

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tional economic and financial autonomy. However, as Legler, Turzi, and Tzili-Apango point out in their chapter in this book, it is not clear that there is a clear policy of counter-hegemony behind this strategy, vis-à-vis the United States. Paradoxically, despite the quantity and quality of China’s foreign direct investment (OFDI) output, and despite the fact that the region is the second capital export destination for China, China’s investment treaties with Latin America do not promote the OFDI of China in the region (Liss, 2018). The author quotes Lin (2015: 11), who concluded that OFDI “demonstrates the intention of Chinese state enterprises to secure sources of oil and mineral resources in Latin America and the Caribbean”. Other analysts have concluded that Chinese state-owned companies do not have the commercial motivation to invest in Latin America and the Caribbean, but are rather trying to apply a long-term development strategy (Liss, 2018: 9–10; Sevares, 2015). This certainly seems to be the case in the examples analyzed in three chapters of this book in respect of Brazil, Argentina, and Venezuela.

China and Latin America in World Politics China modified and influenced the international insertion of Latin American countries through the predominance of Chinese global political interests in the definition of the Latin American bilateral and multilateral agenda. Considering both aspects—modification and influence—and in light of the conclusions of the chapters by Legler, Turzi, and Tzili, Li Xing, and Bernal-Meza and Zanabria, for example, the position of the Latin American countries is of a clear imbalance in favor of China. This situation, in a continent with intermediate development countries in its midst and constituting a geo-economic space of great importance in the global economy as well as from an ecological perspective (e.g. the natural resources of Amazonia (fresh water) and strategic minerals (such as litio and cobalt) also favors China’s position in the structure of world power, strengthening its geo-economic and political presence in South America. For China, international cooperation with Latin America—the context in which, according to the Chinese vision, the economic relations between both parties are developed—is based on their common status as belonging to the “developing world”. The discourse of Chinese foreign policy has historically insisted on its status as a country similar to those of the semi-­ periphery and periphery. In the development of this rhetoric, the exercise

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of “public diplomacy” has been fundamental, with its language of cultural exchange, visiting diplomacy, investment mechanisms, and commercial attraction (Rodríguez, 2013; Yang, 2013; Yun, 2013). This aims to attract and influence other actors, in whose praxis as soft power, economic relations have played a central role, being very important in the diffusion of the Chinese image via the Chinese diaspora present in Latin America and cultural diffusion through the Confucius institutes. The more dependent Latin America is on Chinese imports and its capital exports, the more committed the region is to its international economic and financial autonomy, whereas South American society’s outlook seems to be favorable to China, especially when confronted with the history of relations between Latin America and Western Europe in the nineteenth century and with the United States in the twentieth century. China occupies the place that previously occupied the United States and before Great Britain. However, the contributions of the authors of this book and the research discussed in their respective chapters clearly indicate that China follows the same historical pattern of the former powers.

The Win-Win Rhetoric: The Conceptual Axis of Chinese Public Diplomacy The discourse of Chinese foreign policy has historically insisted on its status as a developing country, seeking not to project to Latin America the image of an expanding world power, and that its policies and strategies vis-à-vis Latin America are similar to the history of Latin America in terms of the relations between the western imperialist powers and the periphery. China has become the only world economic power to generate a pattern of North-South specialization or development-underdevelopment with Latin America (Bernal-Meza, 2012a, 2012b; Ellis, 2009; Li, 2010, 2012a; Oviedo, 2012a; Sevares, 2007, 2012) whose political stance is a “win-win rhetoric”. Neither England in the nineteenth century nor the United States in the twentieth century used such an argument. China takes a utilitarian view of Latin America. Explaining the public diplomacy of China, Yun Tso Lee (2013: 83) points out that the reasons for China’s view of Latin America, “rests on obtaining resources and raw materials, mainly hydrocarbons, in order to continue to feed back its rise peaceful and recover his throne as the country of the center of the world”. Obviously, these are not Latin America’s objectives as regards its interna-

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tional insertion. Therefore, Latin American and Chinese interests do not coincide in the context of the evolution of international economic relations. As can be seen from the chapters of this book, despite the impact of the structure of China-Latin America economic relations on the development of the region and the influence that China will have on the international order of the future, Latin American countries have no common strategy to face the challenges posed by the emergence of China as a world power and the consolidation of its structure of economic relations. As we pointed out before, the different strategies followed by China are a decisive factor in this. But, at the same time, there are clearly homogeneous elements in the various relationships. As is argued in the chapter on Argentina, the relations of this country with China have two characteristics that are reproduced in the relations of the other South American countries with the Asian power. The first of these is that the structure of economic relations developed between Beijing and the Latin American countries are functions of Chinese development. That is, they fulfill particular roles in China’s industrial and financial development, favoring and extending their capabilities within the global capitalist economy. The second common characteristic is that these functions unfold in the context of a “harmony of interests” relationship (Oviedo, 2014), in which each party offers, commercially and financially, what the other requires. The harmony of interests allows the South American countries to export what they produce: raw materials, commodities, and basic products, and to import industrial goods, equipment, and capital, and to obtain loans (loans, currency swaps) and investments. However, it is a relationship that, while complementary, is also unequal. The currency swaps—currently only in practice in Argentina, but already agreed with Mexico, Chile, and Brazil—help China to impose its currency internationally. If the end of the cycle of global demand for commodities—or the primary-­export boom—has ended up deepening the need for Chinese financing, loans, and investments, it is because the Latin American productive structure did not take advantage of the temporary relative advantages that the cycle of increase in demand generated. Furthermore, the international prices of commodities exported by South America during the 2000–2008 cycle could have led to a more virtuous specialization, with greater added value than currently exists. The lack of adequate policies, the misuse of import revenues in populist government policies (De Gori, Gómez, & Ester, 2017; Sevares, 2016), and the weakness and lack

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of competitiveness of Latin American production led to an increasing dependence on Chinese capital and the corresponding indebtedness. However, an analysis of the international outlook for the region indicates that, for at the present, there is no other world-class power capable of replacing the growing role that China has in the international economic insertion of Latin America. The degree of specialization accelerated and became even greater just as the new century began, at a time when commercial relationships with China were favorable for primary exporters. Hence, paradoxically, the primarization and reprimarization of the Latin American economies under popular-progressive governments converged, with a new external dependence, but this time on the Chinese economy. Thanks to this situation, China was able to develop a core-periphery structure with Latin America that has been sustained by three factors. The first of these relates to the harmony of interests between Latin American exports and imports from China (manufactures, capital goods, equipment, foreign investment, loans). Each party was able to export what the other party produced and required. The second factor is that the economic complementarity (commercial, investment, and financial) between China and Latin America is based on an economic, commercial, and asymmetric power interdependence. Finally, the third factor is that South America has become a function of Chinese economic and socio-political development. The reason of the last point is that the bilateral trade relationship strengthens Chinese industrial progress and weakens that of South America. Thus, China has become an essential country for South America’s international insertion and economic growth and, increasingly, also for the development of Central America. As was pointed out in the Introduction, Ferrando maintains that free trade agreements correspond to the third stage of the evolution of relations between China and Latin America. The role of investment and financing are also part of the interests that Latin American countries seek to satisfy in their relationship with China, as several chapters of the book have pointed out. Since 2005, Chinese banks have granted more than US$ 141,000 million in loans to countries and state companies in the region, a figure that exceeds the combined loans of the World Bank and the Inter-American Development Bank (Liss, 2018: 11). However, the actual amount of Chinese foreign direct investment in the region is difficult to assess and it is difficult to tell whether the figure corresponds to

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reality, not only because some of it circulates in Caribbean tax havens, but also because several Latin American countries do not present the relevant information (Sevares, 2016: 252). The fact that Brazil and Venezuela have received approximately half of China’s OFDI outflows (49%) but neither has an investment agreement with China demonstrates that none of the analysis models that have been applied to the study of the behavior of Chinese investment in Latin America allows us to argue that there is a relationship between Chinese investment agreements and OFDI exits from that country. On the other hand, the interest rates charged by Chinese banks are in some cases higher and in others relatively lower than those charged by the international financial institutions, but the requirements are lower and this makes them more accessible, compared to the requirements of other credit providers to finance projects that would not comply with the conditionalities of international institutions. While the conditionalities decrease, since the loans are in Yuan, they can only be used in the purchase of Chinese goods, however. The Argentine case (financing, availability of swaps) is a clear example of this procedure.

The Sino-Latin American Partnership: South-South Cooperation or Business Is Business? This book concludes that the trends of bilateral relations were and are homogeneously favorable to China, despite the fact that countries such as Brazil and Chile have maintained permanent favorable trade balances. Seven arguments have been developed throughout the chapters of this book that allow us to draw some conclusions about the character of the bilateral relationship. In the first place, there seems to be no reason to say that politically China represents for South America—and in general for Latin America—an alternative for political and economic autonomy vis-à-vis the United States. Second, China’s political relations with Latin America follow a pattern of pragmatism and are played out according to Chinese economic interests. Third, both trade and Chinese investments correspond to Chinese national interests, in the sense that they provide food security, basic inputs and strategic communication, and transport access. Fourth, Latin America plays a role in China’s global capitalist strategy, through productive specialization and inter-industry trade.

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Fifth, China has a negative impact on Latin American integration processes, particularly on Mercosur, by substituting trade flows and stimulating specialization. This phenomenon disaggregates the international economic relationship of the South American countries and distances them from each other, due to the absence of complementarity and increased productive competition: Peru and Chile export copper; Argentina, Brazil, and Paraguay export soy; Venezuela and Argentina provide oil, etc. Sixth, the trade complementarity and harmony of exchange developed between China and the Latin American countries do not contribute to the development of a productive and industrial modernization of the countries of the region, because they both are produced in relation to an actor external to the region that strengthens its productive specialization. Finally, through trade, investments, and loans, there are risks that the governments of some Latin American countries will suffer pressure from the Chinese State, as has been pointed out in the cases of the two most industrialized economies in South America. In the case of Brazil, Chinese investments in the strategic electric power sector, given the importance it has for the industry and services, give rise for concern. In the case of Argentina, pressure has been applied through the negotiation of agreements via cross default. Despite the impact that the structure of China-Latin America economic relations have on the development of the South American region in particular, and the greater and predictable influence that China will have on the international economic order of the future, there is no common strategy in the Latin American countries for facing the challenges posed by the emergence of China as a world power and for the consolidation of its structure of international economic relations (Bernal-Meza, 2015). The diversity of positions and perceptions about China and the challenge it represents, in the short and medium term, do not constitute a reason for political convergence in Latin America. The chapter by Legler, Turzi, and Tzili-Apango, helps to better understand this statement. The authors point out that China does not seem to have an ideological or political preference in terms of its partners in Latin America. Multilaterally, it maintains relations with both Inter-American and Latin American organizations. Bilaterally, it counts liberal as well as anti-liberal governments among its strategic partners. Accordingly, there seems to be little evidence that China actively supports regional political autonomist efforts. These characteristics of Chinese multilateralism with respect to Latin America are

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in line with what the PRC does in the rest of the world, participating in many new initiatives and promoting links with newly-created organizations, such as CELAC. The CELAC-China forum is a reality of Latin American international political economy, the organization having held summits both in China and Latin America. Reyes Matta (2017) affirms that up to now the evolution of the Sino-Latin American dialogue has been sustained much more by the efforts made from Beijing than those arising from Latin America. Beyond formal and diplomatic formalities, it has been China that has developed proposals and strategies to advance the relationship. However, as Michael Wesley has asked in September 24, 2018, some concerns are emerging about whether China’s initiatives in different regions of the world are truly beneficial for all. As Cesarín (2016) points out, China’s relationship with Latin America, in its different manifestions, allows the world to see China as a powerful nation. Thanks to this relationship, Latin America is stepping onto the stage of the great world politics, as a semi-­ periphery and periphery of the new rising economic power. For its part, Latin America serves China as an instrument of a neo-containment strategy, as opposed to the one that the United States extends to China in the Indo-Pacific space. There are certainly hopes of intra-South American convergence, as Bizzozero and Raggio point out in their chapter, since, in the two most industrialized economies, the Brazilian National Confederation of Industries and the Argentinean Industrial Union signed an agreement on the advocacy of both countries’ business interests. This new initiative, termed Brazil-Argentina Business Council, provides a channel for dialogue with the Presidents of both countries, which emphasizes the role and the involvement of some important business actors in relations with China. However, the path to successful modernization in those Latin American countries that are in a position to achieve it (such as Brazil, Argentina, and Chile) will imply abandoning economic beginnings and specialization and opting for technological modernization and industrial productive diversification. This process will inevitably lead to the loss of the current economic-commercial complementarity between China and Latin America and the growth of tensions between both parties. Latin America has tied its process of economic growth to the rates of expansion of the Chinese economy and to the specialization that the ­commercial pattern dominated by China produces on the structure of the

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respective bilateral trade. The huge labor productivity gap between China and Latin America favors the processes of economic reprimarization of Latin American exports based on the existence of a technological gap that tends to increase (Moneta, 2016). A retrospective reading of the situation, as represented in the chapters of this book, reaffirms that Latin America suffers from two major weaknesses in comparison with China. In the first place, the enormous differences between the scientific-technological development that China is accumulating and that of the countries that now constitute its periphery— Latin America, Africa, some members of ASEAN, and some members of the Beijing Consensus—is the main cause of the center-periphery commercial structure that has China as the center in the current world economic system. Second, there is a great gap in terms of productivity: it is very high in China and low in the region. This is more evident in countries that have been industrialized since the 1930s, as in the case of Argentina and Brazil. Likewise, China has made the failure of Latin American modernization of its economic structures and of international insertion via the industrial road (import substitution industrialization), as well as the failure of socio-economic modernization through democracy, irrelevant for the countries of the Latin American region. Most countries’ levels of inequality in wealth distribution have grown, and their democracies are seen as fragile, with high degrees of corruption. Additionally, the governments in power during the period of the commodities boom, between 2000 and 2008, with the exceptions of Chile and Bolivia, failed to take advantage of the benefits of export specialization, and turned their resources toward populist policies, squandering the opportunity to invest in the reform of their economic and productive structures. Governments, popular, populist, or progressive, emerged at the beginning of the twenty-first century that offered challenges or responses to neoliberalism, but did not identify their international political praxis as anti-globalization actors. On the contrary, they accepted the benefits of the global price of commodities and natural resources and, in the orientation of their economies and the expansion of state power, tried to capture some of the benefits produced by the exploitation of oil, mining, and cereals, through regulatory dynamics (De Gori et al., 2017: 18). None of them followed a path toward the transformation of the productive structure of international insertion and they specialized more and more in the export of primary goods. Particularly—and this is still the trend—they adopted the primary specialization that ­characterizes the economies of southern Mexico, leading to a new cycle of

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core-­periphery relations. The contributors to this book make reference to several authors in this regard: Bernal-Meza (2012a, 2012b, 2016, 2017); Pastrana and Gehring (2017); Ortiz Velázquez and Dussel Peters (2016); Sevares (2015); CEPAL (2015); Oviedo (2012a, 2012b, 2014); Guelar (2013); Ellis (2009). Within the framework of an analysis of international political economy, Wallerstein’s world system theory allows us to explain and understand the functioning of the components of the systemic structure represented by the world economy and the place occupied by the South American region. As Li Xing points out in his chapter, “the world system theory developed by Wallerstein (1974, 1979, 1997, 2004) provides a broad theoretical perspective allowing us to understand the historical evolutions and changes involved in the rise of the modern capitalist world system. This system expanded over a long historical spectrum, bringing different parts of the world into its division of labor, leading to a perpetual condition of economic core—semi-periphery—periphery relations”. The region urgently needs to overcome its present limitations in terms of industrial transformation, economic integration, and political coordination. The world system consists of a core, a semi-periphery, and a periphery. While some countries in the periphery and others in the semi-periphery struggle to move toward the position of central countries, these last struggle, in turn, to stay in that position. China today is closer to the core than to the semi-periphery. The future of China presents Latin America with challenges and opportunities. An adequate knowledge of these processes could help Latin American governments to build up a better Sino-Latin America cooperative future. The hierarchy of positions is a potential source of conflicts (Li, 2012a, 2012b). The challenge for the Latin American countries, as China increasingly becomes an essential partner and investor in regional economic development, is to transform the dependency relationship of the core-periphery structure into a driving force for industrial, scientific, and technological development. If China advances along this path, giving a different meaning to the South-South cooperation it has pursued up to now, it could transform the South American region into a strategic ally in the Western Hemisphere. The opposing path will lead, inevitably, to the questioning of Chinese policies and the emergence of conflicts. In the latter case, China will be unable to distance itself from the historical label of neo-colonialism that has characterized the relations of the great industrial powers with the rest of the world in the last two centuries.

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China’s Rise and China-Latin American Relations: Lessons for the Region1 When China started its open-door reform program at the end of 1970s, China was one of the poorest nations in the world—a periphery nation according to world system theory. Forty years on, China is on the way to becoming a global political, economic, and military superpower. Despite the fact that China-Latin American relations repeat many of the features of historical colonialism and imperialism, as we have noted—dependency, commodity-supplier, political rhetoric, asymmetrical power relations, and so on—the Chinese success story contains many worthy lessons on policy, strategy, consistency, innovation, education, stability, state-market relations, and so on (Li, 2016; McNally, 2014). What we have attempted to emphasize in this study is the fact that China’s accumulated strength over the past 40 years has translated into an “unintended consequence” for other countries, such as Latin America. McNally (2014) has also warned about the general impact that China-­ capitalism and other emerging political economies, like the BRICS in general, could have on the international system. While it may not have been China’s “original plan” (or its deliberate strategy or plan) to turn Latin America into its periphery, it is its chosen “intended industrial strategy” that has created an unintended consequence for other countries, both north and south, who are driven by capitalism’s law of value and economic logic. There does not seem to be a colonial planned process between China and Latin America despite the fact that some historical characteristics of this process are repeating themselves. It should be emphasized that some of the strength factors underlying China’s economic boom are also an expression of the weaknesses of the countries in the region. Latin America’s focus in its relations with China should not be just investment, trade, and technology, but the “political economy” generated by the rise of China. China had a plan that is has followed for 40 years to become what it is. We do not see a similar plan in any Latin American country. Therefore, the nature of the China-Latin America relationship should be considered as a consequence of this failure.

Note 1. Some of these reflections were suggested to me by Li Xing.

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