October 24, 2005 | Backgrounder on Latin America
In the 1960s, the Soviet Union defied America's Monroe Doctrine by supporting Fidel Castro's military buildup in Cuba. Later, it supported insurgencies in Central America. This triggered a competition among existing right-wing dictatorships, Marxist authoritarianism, and the U.S. democratic model. In the end, democracy and open markets won. Promoted by the United States, these principles have generally made Latin American states more viable politically, economically, and commercially.
Today, another communist state-the People's Republic of China (PRC)-is seeking trade, diplomatic, and military ties in Latin America and the Caribbean. The region is rich in natural resources and developing markets for manufactured goods and even arms. China does not currently pose a direct military threat in Latin America and has steadily embraced market concepts, but it represents serious competition that could dilute U.S. influence. Washington could ignore this intrusion or attempt to contain it. Ignoring it leaves a vacuum for China to fill, while trying to contain it runs against America's own free market ideals. Instead, the United States can best look after its hemispheric interests and moderate China's presence by:
China's Interest in the Americas
China is the world's oldest continuous civilization with more than 3,500 years of written history. Its power has risen and declined, most notably in the mid-1800s, when the ruling Qing Dynasty crumbled, inviting rebellion and foreign intervention. At the end of World War II, the Nationalist government, weakened by a decade of war against Japan and wracked by corruption and incompetence, fought a civil war against the Chinese Communist Party and was defeated.
By 1950, communist leaders like Mao Zedong believed their authoritarianism would return China to glory, a belief that expired after 30 million people starved to death in state-induced famines in the early 1960s and another 10 million perished in fanatical ideological campaigns. In December 1978, after several "great leaps" backward, Communist Party leader Deng Xiaoping introduced economic reforms that have steadily transformed the PRC into a remarkable hybrid-a "socialist market economy"-in essence, a communist state that uses market-based pricing principles.
Feeding the Dragon. Twenty-five years into this experiment, China has the world's sixth-largest economy, the third-largest defense budget according to some estimates, and the largest national population (1.3 billion people). According to the World Bank, its gross domestic product of $1.6 trillion is growing about 9 percent per year. China needs resources to feed its rapidly expanding economy, but it does not have sufficient oil, natural gas, aluminum, copper, or iron to satisfy its energy and manufacturing needs. Furthermore, it needs trade partners to buy its electronics, apparel, toys, and footwear. While communist China is embracing market concepts, it still has a non-market economy in which a disciplined totalitarian party retains full authority (through the central government) over non-state investment, import, export, and financial decisions.
China's neighbors are competing for many of the same world markets, as are Europe and the United States. Latin America is a particularly promising prospect. It is relatively unindustrialized and has an abundance of raw materials. Moreover, authoritarian leaders and/or corrupt oligarchies control a number of governments. Signing purchase agreements with them is much easier than dealing with the panoply of private corporations found in more democratic countries.
Challenging the United States. China's main rival for global preeminence is the United States. China sees the United States as preventing Taiwan's reunification with the mainland and thwarting Beijing's rise as a power. Previously, China was isolated, but now plays key roles in Asian geopolitics and aspires to do so elsewhere. Besides status as a nuclear nation, it is a member of the U.N. Security Council, the World Trade Organization, the Group of 77 developing nations, and the Asia Pacific Economic Cooperation group. It also holds observer status in the Organization of American States.
While China has become the second-largest U.S. trade partner after Canada, it challenges U.S. influence wherever it can. In fact, it will soon have more attack submarines than the United States, with the addition of four Russian Kilo-class subs and new diesel-electric vessels equipped with technology that will allow them to run quieter than nuclear submarines.
According to former U.S. Ambassador to Beijing James Lilly, "[T]he facts are that [the Chinese] run massive intelligence operations against us, they make open statements against us, their high-level documents show that they are not friendly to us." Chinese military white papers promote power projection and describe U.S. policies as "hegemonism and power politics."
In the Western Hemisphere, the Chinese are taking advantage of failures of half-hearted market reforms and Washington's unwillingness to pursue neighborhood relations with much enthusiasm. National Defense University professor Cynthia A. Watson notes, "[T]he 1990s turned into a period of severe disappointment as free markets led to rampant corruption and unfulfilled expectations in Latin America while Washington became the world's superpower rather than a partner for the region."
Isolating Taiwan. Since the 1949 civil war, Taiwan has been separate from the PRC, and the PRC views Taiwan as a "renegade province" that must be reunified with the rest of China. Part of Beijing's plan to bring it back into the fold has been to isolate Taiwan diplomatically. In the 1950s, most of Latin America had diplomatic relations with Taiwan. Then, Cuba's Fidel Castro regime established ties with China in 1960. In the 1970s, Chile led a major shift in favor of the PRC. Currently, only 25 countries accord Taiwan diplomatic status, and one-fourth of them are in Latin America: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama, and Paraguay. Taiwan pays dearly for this recognition, providing development aid and disaster assistance to these states.
Science, sports, and military exchanges characterized Chinese-Latin American relations in the 1980s. Economic relations did not develop significantly until after 1990. A year after China repressed dissidents in Tiananmen Square, President Yang Shangkun visited Latin America. His trip heralded the beginning of an increasing number of high-level missions to lay the foundation for what he described as "a new international political and economic order."
The pace picked up at the turn of the century. In April 2001, Chinese President Jiang Zemin presided over a 12-day mission to cement economic and trade ties, as well as attack what he called Washington's "unipolar" scheme. His itinerary included Argentina, Uruguay, Brazil, Cuba, and Venezuela. Li Peng, chairman of the Standing Committee of the People's National Congress, followed up with more visits in November 2001. In November 2004, President Hu Jintao flew to Argentina, Brazil, Chile, and Cuba, where he signed 39 bilateral agreements and announced $100 billion in investments over the next 10 years. In May of this year, Communist Party Chairman Jia Qinglin visited Colombia, Mexico, Uruguay, and Cuba.
Building on simple commercial agreements, China has advanced to economic assistance, direct investment, a few joint ventures, and military ties. When Argentina's financial collapse rippled through South America's Southern Cone, China quickly seized the chance to increase its stake in Argentina and Brazil, while U.S. investment declined by nearly half. Joint ventures include partnerships with Great Dragon Telecom in Cuba as well as Colombia. China is partnering with Brazil to improve that country's railways and establish a rail link to the Pacific to cut transportation costs of iron ore and soybeans. Chile's congested port at Antofagasta may get a facelift thanks to the PRC.
To meet domestic industrial needs and consumer demand, China has pursued investments and agreements with such oil producers as Venezuela, Ecuador, Colombia, Argentina, Brazil, and even Mexico. The best fit is with Venezuela's authoritarian leader Hugo Chávez, who directly controls the state oil industry. President Chávez has invited the Chinese National Petroleum Corporation (CNPC) to participate in exploring the rich Orinoco belt. Meanwhile, the CNPC has invested $300 million in technology to use Venezuela's Orimulsion fuel in Chinese power plants.
For now, Venezuela plans to increase exports to China by 300,000 barrels per day and recently signed an agreement with Colombia to build a pipeline to the port of Tribuga on the Pacific coast, since supertankers cannot pass through the Panama Canal. An additional proposal with Panama would modify a Panamanian oil pipeline to facilitate shipping oil to the Pacific coast. On his 2004 visit to Beijing, President Chávez said shifting exports to China will help end dependency on sales to the United States.
In 2003, China bid on concessions to Ecuador's major oil fields. The same year, the CNPC acquired a stake in the Argentine oil and gas firm Pluspetrol, which operates fields in northern Argentina and Peru. Although Mexico's constitution prohibits foreign investment in Pemex, a boost in petroleum exports is expected to address Mexico's trade gap with the PRC. While China has no current profile in Bolivia, a future populist president, such as Evo Morales, could find China's presence ideologically acceptable in lieu of Western private investment.
On the military front, China has expanded ties through exchanges. It reportedly has direct military-to-military relations with Venezuela, Argentina, Chile, Peru, and Uruguay. The PRC began collaborating with Brazil on spy satellite technology in 1999, providing rocket launch expertise in exchange for digital optical technology that would permit high resolution, real-time imaging. Moreover, access to Brazil's space tracking facilities could give China the ability to attack U.S. satellites with a variety of technologies currently under development.
Perhaps the most fruitful collaboration has been with dictator Fidel Castro. In 1999, China was reportedly intercepting satellite signals from facilities in eastern Cuba. In 2000, it obtained access to a base outside of Havana to intercept U.S. telephony. In 2001, Russia announced that it would abandon its extensive electronic espionage center at Lourdes. PRC personnel reportedly now occupy it. A February 2004 agreement cloaks such operations under the pretext of technical communications cooperation. In fact, Radio China Inter-national signals originate from Cuba, as does interference with U.S. East Coast radio communications and air traffic control, according to Federal Communications Commission complaints.
Closer Ties: Boon or Bane?
From Latin America's perspective, expanding relations with China might seem like a good idea. It offers the following advantages:
However, closer ties to China also have significant disadvantages for both Latin America and the United States:
What the U.S. Should Do
The United States and China have competing interests in Latin America. Washington would like to see its hemispheric neighbors develop into stable, democratic, prosperous trade partners that embrace the rule of law. Beijing sees the region as a source of raw materials, a market for manufactured goods, and a platform for power projection. U.S. interests probably coincide more with Latin American needs. In contrast, China represents an opportunity to temper American dominance with broader alliances.
Regrettably, Chinese aid and commodity imports may buy time for state industries, powerful presidents, and influential oligarchs. Most of all, such commerce could delay needed reforms and industrialization that might lift Latin America's near majority underclass out of poverty.
America's strength is competition, and it should influence the rules of the game in that direction. As a good neighbor and in its own and Latin America's interests, the United States should:
The United States has become the greatest power in the world based on its tradition of free choice. Choice goes hand-in-hand with competition, because these keep markets vibrant and governments accountable. In a globalized world, democracies have relations with whom they wish and nation-competitors such as China cannot be blocked from visiting the Western Hemisphere. However, the United States can best look after its regional interests by cultivating closer political and security ties with neighbors, advancing free trade, and encouraging respect for the rule of law and liberal economic principles among all players- including China.
Stephen Johnson is Senior Policy Analyst for Latin America in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation.
See Michael Kilian, "U.S. report warns of China sub threat," Chicago Tribune, August 11, 2005, p. 4.
Jane Bussey and Glenn Garvin, "China Exerting Regional Influence, Analysts Warn of Political, Strategic Challenges to U.S. in Latin America," The Miami Herald, April 15, 2001, p. A1, at www.latinamericanstudies.org/cuba/china-influence.htm (October 13, 2005).
Cynthia A. Watson, Ph.D., testimony to the Subcommittee on the Western Hemisphere, Committee on International Relations, U.S. House of Representatives, April 6, 2005, at wwwc.house.gov/international_relations/109/wat040605.pdf (October 7, 2005).
Xinhua News Agency, "Beijing Liaowang Number 15," April 9, 2001, pp. 3-4, cited in "Chinese Infrastructure Projects in Latin America," Intellibridge, July 19, 2004, p. 2.
Bussey and Garvin, "China Exerting Regional Influence."
Albert Santoli, "China's Strategic Reach into Latin America," testimony before the U.S.-China Economic and Security Review Commission, Washington, D.C., July 21, 2005, at www.uscc.gov/hearings/2005hearings/written_testimonies/05_07_21_22wrts/ santoli_albert_wrts.htm (September 18, 2005).
Kerry Dumbaugh and Mark P. Sullivan, "China's Growing Interest in Latin America," Congressional Research Service, April 20, 2005, p. 2, at www.milnet.com/archives/China-Latin-America-7B6C19.pdf (October 18, 2005).
See U.S. International Trade Administration, "U.S. Aggregate Foreign Trade Data," Table 6 and Table 7, at www.ita.doc.gov/ td/industry/otea/usfth/tabcon.html (September 18, 2005).
James C. McKinley, Jr., "Mexico Builds Trade Ties with China," The New York Times, September 13, 2005, p. A3.
Signing an Article 98 agreement-named after a section of the Rome Statute of the International Criminal Court- with the U.S. exempts U.S. service personnel from jurisdiction under the ICC. America's reservations are justifiable since the court is accountable to no one and uses legal procedures incompatible with U.S. law. Congress and the White House approved a law that would bar security assistance if governments refused to sign.
See Stephen Johnson, "Helping Colombia Sustain Progress Toward Peace," Heritage Foundation Backgrounder No. 1887, October 19, 2005, at www.heritage.org/Research/LatinAmerica/bg1887.cfm.