China and Latin America: a new phase of engagement?

China aims to upgrade and diversify the region’s economy but environment is a crucial challenge

Until recently, China’s investments in Latin America had focused solely on the region’s abundant natural resources such as soya, copper and oil. But now the world’s most populous nation wants to include creative industries, technology, and deeper cultural ties in its plans.

Through what Li termed as the “four pillars” of the China-Latin America relationship, which include increasing and deepening cultural exchanges and investing in infrastructure and technology, China aims to “upgrade” economic activity between the regions. The principal mechanism for this being China-CELAC, which this week held its inaugural science, technology and innovation forum in Quito, Ecuador, in a bid to redress the partnership’s current knowledge transfer deficit.

René Ramirez, Ecuador’s Minister for Higher Education, Science and Technology, said the two-day forum held at the headquarters of the Union of South American Nations (UNASUR) indicated the start of a “great relationship”.

Since premier Li Keqiang’s visit to Brazil, Colombia, Peru and Chile earlier this year, China has identified co-operation in higher value-added industries as central to its bid to contribute to the development of a region where social and environmental conflicts over natural resources have strained relations.

Green groups from Argentina have told Diálogo Chino that the existing model based on China importing raw materials from Latin America and exporting manufactured goods has been a cause of conflict. But Beijing hopes that an emphasis on diversifying engagement will usher in a “new era” different from that characterised by trade imbalances and tensions with Latin American civil society.

Dependency on Chinese demand for primary resources has made Latin America’s economies especially sensitive to the recent devaluation of the yuan. Prices of copper and oil dropped to six-year lows on “Black Monday”, adversely affecting the Chilean, Colombian and Mexican economies in particular.

Before and after China-CELAC

“The relationship has taken a new phase indeed,” says Kevin Gallagher of Boston University’s Global Economic Governance Initiative, describing the first China-CELAC forum in January this year as “very significant” in allowing both parties to discuss broader hemispheric issues beyond bilateral trade relationships.

The five year China-CELAC cooperation plan which resulted from the first forum pledged to promote the industrialisation of CELAC countries to produce value-added goods.

And Gallagher also points out that the plan also contains several provisions such as collective action to combat climate change and provide aid to landlocked and poorer nations.

A “win-win” situation?

As China enhances its global reach through initiatives such as the new silk road, it is simultaneously attempting to address the perception that its sole intention is to funnel resources out of regions like Latin America. Premier Li emphasised the importance of improved cultural understanding as vehicle to “strengthen practical cooperation” whilst in Colombia in May, suggesting that it could help both partners to achieve “win-win” outcomes.

And Xi Jinping and Li Keqiang’s respective 1+3+6 and 3×3 frameworks (policy initiatives that identify strategic sectors for development in partner regions) likewise want to achieve “ambitious” economic and political goals, says Margaret Myers, director of the China-Latin America program at the Inter-American Dialogue.

“In response to years of criticism for a rather singular focus on commodities, they signal China’s commitment to increasingly diversified economic engagement in Latin America by indicating a range of sectors in which Chinese companies will invest in the coming years,” Myers says.