China is now Cuba’s second-largest trading partner behind Venezuela, and second after the United States in Latin America.
All but invisible in Latin America a decade ago, China now is building cars in Uruguay, donating a soccer stadium to Costa Rica, and lending US billion to Brazil's biggest oil company. In fact, this year, China has replaced the United States as main trading partner of the continent’s major economy, Brazil.
Silently but aggressively, Beijing has been filling the vacuum left by the United States, as Washington focused on wars in Afghanistan and Iraq and the global economic crisis sapped its economy. Beijing is beefing up its embassies throughout Latin America, opening Confucian centres to expand Chinese culture, and sending high-level trade delegations throughout the region.
Quest for raw materials
Cooperation between China and Latin America is based on trade. One side, Latin America, ships raw materials, essential for the mainland’s continued economic growth, and provides new markets for Chinese manufactured products.
Between 2000 and 2008, trade between Latin America and China soared from US$ 10 billion to US$ 140 billion. This year, the figure is expected to top 150 billion despite the worldwide economic and financial crisis.
China is buying zinc from Peru, copper from Chile, and iron ore from Brazil. It has signed deals with large mining companies and is pouring huge amounts of dollars into the region, especially in Chavez’s Venezuela and Lula’s Brazil.
A deal worth US$ 4 billion was signed with Venezuela’s national oil company, PDVSA, to supply China with 500,000 barrels a day this year, and triple that number by 2012.
Brazil’s oil shipments to China are smaller, about 50,000 barrels a day to the China National Petroleum Corporation and another 60-120,000 to Sinopec, China’s main oil company.
To develop Brazil’s newly discovered offshore reserves vast investments are need. China and Brazil’s Petrobras signed a deal worth US$ 10 billion for such purpose.
New markets
Unlike Africa, Latin America represents an important market for Chinese goods. The mainland ships electronic equipment to Brazil, buses to Cuba, clothes to Mexico and cars to Peru.
Whilst Latin American nations have increased their exports towards China, China has begun flooding their markets with its own manufactured goods, displacing local production.
This has led to protest in Mexico and Argentina over the past year. Local manufacturers have been hard hit by low-cost Chinese imports. In Brazil, the garment industry is up in arms against Chinese companies for taking their place as the biggest exporter of clothing and textiles to Argentina.
Chinese direct investments in the region have also come under criticism because Chinese companies tend to bring Chinese labour, creating very few jobs for local.
Containing Taiwan
In Latin America, China’s objectives are not only economic but also strategic, namely isolating Taiwan.
Out of 23 nations with diplomatic ties with Taipei, 12 are in Latin America and the Caribbean.
Taiwan’s foreign policy has focused on providing material incentives, financial aid and economic assistance, to these countries in exchange of official recognition.
Beijing’s expansionist approach to the region is instead designed to provide an alternative to its long-standing rival. (MarAl)