Photo: Xinhua

By Wang Xiaoxia (王曉夏)
April 27, 2013
Economic Observer Online
Translated by Laura Lin
Original article: [Chinese]

China is busy in America's backyard.

Over the past five years, Chinese businesses have been expanding their footprint in Latin America in a number of ways, beginning with enhanced trade to ensure a steady supply of bulk commodities such as oil, copper and soybeans. At this year's Boao Forum for Asia, for the first time a Latin American sub-forum was created that included the participation of several heads of state from the region.

Since 2011, China has overtaken the Netherlands to become Latin America’s second biggest investor behind the United States. China has signed a series of large cooperation agreements with Latin American countries in such fields as finance, resources and energy.

According to the latest statistics of the General Administration of Customs of China, Sino-Latin American trade grew in 2012 to a total of $261.2 billion, a year-on-year increase of 8.18 percent.

This trend risks undermining the position of the United States as Latin America’s single dominant trading partner. In 2011, the U.S.-Latin American trade volume was $351 billion.

Some prominent Chinese have condemned the United States' high-profile “Return to Asia” strategy, with its intention of “containing China's front door.” Shouldn’t the United States, which put forward the Monroe Doctrine two centuries ago, also question how China is quietly arriving in America’s backyard?

An American Blind Spot?

In their book America's Blind Spot: Chavez, Oil, and U.S. Security, Andres Cala and Michael J. Economides avoid the usual patter of linking South America’s "China factor" with some sordid conspiracy theory. Instead, they investigate Latin America’s subtle choice between China and the United States, attributing Washington's weakened influence in the region to its failure in foreign policy and economic development, while China rises on the back of globalization.

Since 1823, when America put forward the Monroe Doctrine and declared its sphere of influence to Europeans, it has maintained the unique position of the United States in the Americas.

Military intervention has always served as the most important tool for the United States. Especially after the start of the Cold War, in order to curb Communism from taking root in Latin America, the U.S. used military means largely without restraint.

After the collapse of the Soviet Union, the United States faced new external challenges such as the threat of global terrorism. Latin America’s strategic significance has quickly slipped to a secondary and more local ranking. The United States has shifted its focus in Latin America to specific issues such as illegal immigration and drug smuggling.

The “realism” that ran through America’s foreign policy during the Cold War has gradually transformed towards “idealism,” which in consequence weakens its influence in Latin America.

Under the doctrine of realism, America broke any illusion of moral constraint in its foreign interventions; the protection of American interests was its pragmatic principle. Washington didn’t care that some Latin American countries were dictatorial or that they violated human rights, as long as their leaders firmly stood on the side of the anti-Communist camp.

Since adopting idealism, America considers that whatever is best for itself is also best for the rest of the world. Its foreign policy is aimed at maintaining democracy, human rights and a free market economy around the world. America began to demand that its former dictatorial allies quit their attachment to power and carry out a transition to democracy. Since 1989, the U.S. has pushed Latin American countries - many facing a severe debt crisis - to accept the “Washington Consensus” oriented by market economy theory.

The ultimate goal set by this theory may not be a problem. However, it did not pull Latin America out of the quagmire of its “lost decade” of the 1980s. In the 1990s, Latin America suffered another severe economic downturn, which exacerbated the division between the rich and the poor, leading to serious social problems. The idealism exported by the United States intensified the existing contradictions in Latin American society, and eventually led to the downfall of most of the brutal totalitarian military governments.

China as a New Favorite

Initially, China’s activities in Latin America were limited to the diplomatic level. By providing funds and assisting in infrastructure constructions, China managed to interrupt diplomatic ties between poor Latin countries and Taiwan. Since then, with China's economic boom, the supply of energy and resources has gradually become a problem that plagues China; and its exchanges with Latin America thus are endowed with real substantive purpose.

Among the numerous needs of China, the demand for oil has always been the most powerful driving force. In the past 30 years, China has consumed one-third of the world's new oil production and become the world's second-largest oil importer. More than half of China's oil demand depends on imports, which increases the instability of its energy security. Diversification is inevitable. In this context, Latin America and its huge reserves and production capacity naturally became a destination for China.

China must better protect its energy supply, and can't just play the simple role of consumer. It must also help solidify the important links of the petroleum industry supply chain. Indeed, the China National Petroleum Corporation frequently appears in Latin American countries, and China’s investment and trade in the Latin American countries are also focused on its energy sector.

In the opinion of many European and American scholars, China's current practice isn’t much different from that of Western colonizers of the last century. These scholars believe that China doesn’t care about local human rights or the state of democracy when dealing with countries. All China is interested in is establishing long-term, stable economic relations. This realistic path is exactly opposite to that of America's newfound idealism. Thus China has become a close collaborator of certain Latin American countries, such as Venezuela, that are in sharp conflict with the United States.

The global financial crisis of 2008 was a chance for China to become an increasingly important player in Latin American. As Europe and the United States were caught in a financial quagmire, China, with nearly $3 trillion of foreign exchange reserves as backing, embarked on "funds-for-assets" transactions with Latin American countries.

So what does China want exactly in entering Latin American? Is it to obtain a stable supply of energy and resources, and thus inadvertently acquire political influence? Or the other way round?

Presumably most U.S. foreign policy-makers are well aware of the answer.

China's involvement in Latin America doesn’t constitute a threat to the United States, but brings benefits. It is precisely because China has reached "loans-for-oil" swap agreements with Venezuela, Brazil, Ecuador and other countries that it brings much-needed funds to these oil-producing countries in South America. Not only have these funds been used in the field of oil production, but they have also safeguarded the energy supply of the United States, as well as stabilized these countries' livelihood; and to a certain extent reduced the impact of illegal immigration and the drug trade on the U.S.

For South America, China and the United States, this is not a zero-sum game, but a multiple choice of mutual benefits and synergies. Even if China has become the Latin American economy’s new upstart, it is still not in a position to challenge the strong and diverse influence that the United States has accumulated over two centuries in the region.

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