Argentina and China: an asymmetric relationship

Relations between China and Argentina raise questions about environmental standards, labour rights, and debt sustainability

China’s ambassador to Argentina has called for better communications with Argentine business as the trade imbalance and increasing dependence on natural resources which underpin China’s trade relationship with Argentina continue to cause concern in the business community and among environmentalists.

Over the past year, Presidents Xi Jinping and Cristina Kirchner have reciprocated official visits and have signed a ‘macro’ strategic alliance agreement and more than 20 accords for joint development projects on cultural, technological and economic matters. But while China has secured funding for key energy and transport works, Argentina has facilitated the awarding of contracts without competitive tendering and has welcomed the arrival of Chinese labour, which is creating tension.

“It is an asymmetrical relationship,” said Enrique Viale, President of the Argentine Association of Environmental Lawyers, “we supply them with raw materials and they supply manufactured goods. It is something that occurs throughout Latin America, not only in Argentina,” Vale added, warning that such a model can lead to conflict.

But these arguments have been downplayed by government officials from both sides, including the Chinese Ambassador in Argentina, Yan Wanming, who at a recent event at the Chinese embassy in Buenos Aires called for dialogue with concerned parties.

“We want to hold discussions with them [business] so that they will be made aware of China’s economic policy, which can afford them greater opportunities,” Wanming said, speaking for the first time on the agreements.

The trade imbalance between China and Argentina is recognised by both governments. Last year, there was a bilateral trade deficit of US$ 5bn. Argentina’s exports to China were valued at nearly US$ 5bn compared to the US$ 10bn moving in the opposite direction.

“The bilateral relationship is one of a structural deficit for Argentina, the trade link having started from a surplus position. This matter is of concern to Argentina, as well as China. The deficit must be reduced,” said Carlos Bianco, Secretary of International Economic Relations at Argentina’s Foreign Ministry.

But environmentalists maintain that in addition to the existence of a trade deficit, China’s main interest lies in Argentine primary products rather than its manufactured goods, which is placing greater pressure on the country’s natural resources.

Between 2003 and 2013, almost 85% of the trade balance was accounted for by three products: soybeans (55.46%), soybean oil (19.27%) and crude petroleum (10.04%).

Presently, 96% of Argentina’s exports to China are primary products or products manufactured from natural resources, while in contrast, imports from China are spread across low, medium and high-technology manufactured products.

“China’s investments in Latin America are primarily established in extractive industries.  These involve payments for the acquisition of, or licenses to exploit natural resources. Infrastructure works fall under the responsibility of Chinese companies,” maintained Maristella Svampa, sociologist and author of Maldevelopment. The Argentina of Extractivism and Dispossession.

The practice of  Chinese contractors bringing Chinese workers to Latin America has been a contentious one in Argentina and elsewhere in Latin America.

Ariel Slipak, an economic specialist on China-Latin American relations, agrees that the relationship is asymmetrical and expects that China’s expansion in the region will bring about a “productive reprimarisation” of the economy, whereby Argentina will be compelled to focus on the extractive sector, with lower value-added.

The increased interest in primary products also results in an increase in price, making extractive projects more profitable and putting more pressure on natural resources and the environment.

Industrial claims

At the request of the Argentine Industrial Union (UIA in Spanish), Argentine business has joined with environmental groups to express their opposition to deepening relations with China. Topping the list of UIA’s complaints are the entry of Chinese labour, the direct award of projects and the importation of Chinese manufactured goods instead of goods produced in Argentina.

But Ambassador Wanming said that he understood “that a part of the industrial sector” still oppose the deals and urged business to embrace “higher levels of communication,” issuing an invitation to representatives to enter into a dialogue so that they may, like the Argentine people, he says, be more rational and look at the potential benefits of the deals.

“The majority of Argentina’s population supports the agreements as demonstrated by the positive vote of the senators and members of parliament,” Wanming said.

The Ambassador also highlighted projects such as the new Atucha II nuclear power plant, the modernisation of the Belgrano Cargas railway, the installation of a space station in Patagonia and irrigation projects in Entre Ríos. While all projects have generated controversy, the most contentious is the construction of the Néstor Kirchner and Jorge Cepernic dams, aimed at increasing Argentina’s energy capacity.

While experts and environmental groups have been critical of the potential risks to glaciers in the area, especially the iconic Perito Moreno, the Ambassador denied that the project would have any environmental impact.

“There is nothing hidden in the agreements, which you can read for yourselves,” Wanming said, “None of the projects compromises the environment.”

Like Bianco, the Ambassador welcomed the strengthening of cooperation between the two countries recalling that last year China started purchasing Argentine wines and meat on the bone and is currently negotiating the importation of Argentine chilled meats.

Wanming also expressed China’s interest in diverse Argentine products, suggesting that this could lead to a fully-fledged free trade agreement.

“We are particularly interested in the equipment, vehicles, telecommunications and livestock technology areas,” said Wanming, “The Chinese market is an open one, we have already signed free trade agreements with over 20 countries and we are prepared to sign one with Argentina.”