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China and Latin America: strategic relations in times of change

Anxiety over economic and political crises and changes in Latin America is palpable in China. Español Português

From left, President Xi (China) , Solis (Costa Rica), Correa (Ecuador) and Gladstone (Bahamas) at a meeting between China and Latin American and Caribbean countries held in Beijing, China, January 2015. AP Photo/Ng Han Guan.

 “Venezuela will not drag on its debt” was the title of a recent editorial in the People’s Daily, the official mouthpiece of the Communist Party. The piece makes a bold claim and a display of realpolitik: “Any country, whatever the political ideology of its ruling party, prioritises economic development and the betterment of the livelihood of its people. Which country in the world would not want to ride on China’s express train to economic development?”

This official editorial was published in response to a wave of speculation about the solvency of the Venezuelan government, against the backdrop of a failing economy, that could precipitate the end of the Chavista government which, for over a decade, has been friendly towards Beijing.

The People’s Daily editorial states that “up to now, Venezuela has not missed any [debt repayment] deadline and has not breached any terms of agreement”. It then goes on to say that the South American country sits on 300 billion barrels of crude oil, roughly 18% of the world reserves, “which could last at least another 300 years” and has a “high potential for monetisation”. The editorial ends by stating that a future change of government in Caracas will not sour bilateral relations. The opposition and Chavistas may be “indulging themselves in political dispute”, but Venezuelan society as a whole believes that Chinese funds and technology are very important and that “it is necessary to continue cooperation with China”.

The decline of the left

These debt woes are set against the backdrop of wider political changes in Latin America: after over a decade of predominance of left-leaning governments on the continent, centre-right political parties are taking over. In Argentina, Mauricio Macri’s Cambiemos (let’s change) alliance ended over a decade of Kircherismo (a branch of the traditional Peronista movement). In Brazil, embattled president Dilma Rousseff of the Workers Party has been temporarily suspended and replaced by liberal Michel Temer. In Venezuela, Hugo Chávez’s appointed successor Nicolás Maduro faces an unprecedented economic crisis and increasing pressure to step down after the opposition won an overwhelming majority in the National Assembly last year. And in Cuba, Raúl Castro’s government has re-established diplomatic ties with the United States and ended decades of economic embargo.

The leftist governments that swept to power around the turn of the century, led by Chávez in Venezuela and Lula da Silva in Brazil, rode a tide of sky-high commodity prices, pressured upwards by Chinese demand. Countries rich in resources prioritised their extraction and export, with little concern about a future price downturn or the environmental costs. Western media were quick to chastise the Latin American left’s management of resources and dependence on China.

Diplomatic pragmatism

Chinese foreign minister Wang Yi has acknowledged changes in Latin America’s political landscape, but has stressed that “China’s policy of enhancing cooperation with Latin American countries remains unchanged”.

In an official press release after a meeting with his Argentine counterpart Susana Malcorra in Beijing on May 19, Wang said that although the volume of the commodities trade between China and Latin America has “dropped slightly”, the difficulties facing Latin American countries are “temporary”, and that cooperation in investment, finance, production capacity and infrastructure building will continue.

Malcorra, on behalf of Macri’s young administration, was in Beijing to ratify infrastructure agreements signed by the previous administration. Despite the wish to “revise” certain aspects of the agreements, the new government emphasised its strong desire to “ratify the strategic alliance with China”.

Venezuela woes

In June, the Financial Times reported that Chinese officials had met with Venezuelan opposition members to gain assurances that the country will honour its debts even in the event of a recall referendum that would cut short president Nicolás Maduro’s tenure. The Chinese government denied the report the next day. The Financial Times also reported that Venezuela had requested a moratorium on its debt equivalent to US$ 65 billion.

There are no official data on the exact amount or the terms of the debt from the Chinese side, and media outlets — commercial and official — quote foreign news sources while at the same time denying their credibility. The People’s Daily editorial blamed “Western media” for playing up the issue, and stated that when financial and energy security are at stake, “it is common practice to keep details of the agreements secret”.

“The current crisis in Venezuela makes Beijing uneasy,” says A. Hsiang, director of the Centre for Latin American Economic and Trade Studies of the Chihlee University of Technology. Although South-South cooperation is not necessarily based on ideology, if a poster child like Venezuela defaults, the failure of the “money for oil” model will deal a huge blow to Chinese diplomacy in Latin America, Hsiang says. He also believes that “leftist governments have a tendency towards anti-American rhetoric,” adding that the current political shift in Latin America implies a loss of ground for Beijing in the Western hemisphere: “We are losing comrades on the diplomatic arena,” he concludes.

Adapting to change

“In the next 5 to 10 years, right-wing governments will play a leading role in Latin American politics,” a 2015 yearbook published by the Latin America Institute of the Chinese Academy of Social Sciences predicts. The yearbook (not available online) highlights two major trends: “Great political changes in the making” and an “Overall economic downturn”. The yearbook notes the left-to-right transition, but stresses it is a “steady” shift within constitutional legal frames, hence overall political stability is being maintained. “The Latin American left is facing its most challenging time in a decade, right wing parties are gaining ground, the left in Argentina, Venezuela and Brazil have all been dealt a blow”, the research says, and insists on the idea that “deep changes in the political landscape in the region are taking place”.

Zhang Fan, international relations researcher at the Latin America Institute of the Academy of Social Sciences, believes that diplomatic divisions are deepening in the region. In the press release for the yearbook, Zhang is quoted saying that “Cuba-US re-establishing diplomatic ties and US policy adjustments towards Latin America’s left-leaning governments are strong signs of the continuing influence of extra-regional factors in the region”. The paper also points out that the priority of Latin American countries is to maintain close ties with countries in the Western hemisphere.

In the face of these changes, the 2015 yearbook suggests China should carry out “policy readjustments” and “strategic redeployment” in Latin America. With a clear emphasis on pragmatism, it further suggests pushing for greater cooperation on infrastructure projects to expand bilateral trade and commercial ties.

End of a cycle

“The left-turn cycle in Latin America is coming to an end”, acknowledges He Shuangrong, another researcher at the Academy of Social Sciences in an article on the website of the International Department of the Central Committee of the Communist Party of China. “The pillars of the Latin American left” – namely, Venezuela and Brazil - “are facing great crises from within, hence the left in the region is now headless,” he is quoted as saying.

The piece, entitled Will the Latin American left rise again?, does not address the debt solvency concerns nor does it reaffirm the need for apolitical pragmatism: it looks at the rise and fall of the alleged ideological allies of China in the Western hemisphere. The centre-right has won in consecutive elections in the region following policy mistakes during the left’s tenure and a global economic downturn, the article says.

Wu Baiyi, head of the Latin America Institute of the Academy of Social Sciences takes a longer view of these ‘inherently cyclical’ electoral processes and says that “the popular base of the left in Latin America is essentially intact”.

“If the right-wing governments cannot find a path out of the economic downturn, the Latin American left will very possibly rise again,” Wu says.

This article was previously published by Diálogo Chino.

About the author

Pablo Wang es un periodista basado en Hong Kong, particularmente interesado en la transición de China y en la evolución de América Latina y sus interacciones con China. Wang escribe en chino, inglés y español para distintos medios de comunicación, entre ellos Caixin (Beijing), Quartz (Nueva York) y El País (Madrid).

Pablo Wang is a Hong Kong-based journalist particularly interested in China's transition and who simultaneously follows developments in Latin America and its interactions with China. Wang writes in Chinese, English and Spanish for media including Caixin (Beijing), Quartz (New York) and El País (Madrid).


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