China and Latin America: strategic relations in times of change

Chinese experts predict new pragmatism as Venezuela crumbles but the right also faces challenges

Anxiety over economic and political crises in Latin America is palpable in China. “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 betterment of the livelihood of its people. Which country in this world would not want to ride on China’s express train to economic development?”

This official editorial was 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 first states that “up to now, Venezuela has not missed any [debt repayment] deadline and nor has it breached any agreement terms”. It then estimates that the South American country sits on 300 billion barrels of crude oil, roughly 18% of worldwide 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 “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 the predominance of left-leaning governments on the continent, more 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 Peronismo movement). In Brazil, embattled president Dilma Rousseff of the Workers Party has been suspended in an impeachment process 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 Chavez and Lula in Brazil, rode a tide of sky-high commodity prices, elevated by Chinese demand. Countries rich in resources prioritised their extraction and export, with little concern about a price crash or the environmental costs. Western media have been 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 stressed that “China’s policy of enhancing cooperation with Latin American countries remains unchanged”.

In an official press release after a meeting with Argentine counterpart Susana Malcorra in Beijing on May 19, Wang said that although the volume of China-Latin America commodities trade has “slightly dropped”, the difficulties facing Latin American countries are “temporary” and cooperation in investment, finance, production capacity and infrastructure 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 a 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 will cut short president Nicolás Maduro’s term. 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 is no official data on the exact amount or terms of the debt from the Chinese side, and media outlets — commercial or official — quote foreign news sources while denying their credibility at the same time. The People’s Daily editorial blamed “Western media” for playing up the issue, asserting 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 Antonio 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 tells Diálogo Chino. 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: “They 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) published on June 1 highlights two major trends: “Great political changes in the making” and an “Overall economic downturn”. The yearbook notices the left-to-right transition, but stresses it’s a “steady” shift within constitutional legal frames, hence overall political stability has been 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 stresses 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 have started to deepen in the region. In the press release for the yearbook, Zhang is quoted saying that “Cuba-US re-establishing diplomatic ties and US policy adjustment towards Latin America’s left-leaning governments are strong signs of extra-regional factors continued influence in the region”. The paper also points out that Latin American countries’ diplomatic priorities are to maintain close ties with countries in the Western hemisphere. Zhang Fan turned down both telephone and email interview requests by Diálogo Chino.

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, the yearbook 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 Latin America 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? – instead of addressing debt solvency concerns or reaffirming a new apolitical pragmatism – looks at the rise and fall of the presupposed ideological allies 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.