China and Latin America face major challenges in 2019

After a turbulent year, experts identify the main challenges for China and Latin America in 2019
<p>image: <a href="">Alessandro Dias</a></p>

image: Alessandro Dias

Latin America witnessed profound social and political changes in 2018, casting doubt on newly established international relationships and global action on issues ranging from climate change to human rights. Here, experts tell Diálogo Chino the main challenges for China, Latin America and the environment in 2019.

Ariel Slipak, professor of economics, National University of Moreno, Argentina

China will continue with its Latin America policy based on advancing three geo-economic aims: to expand extractive projects, which help China meet its need for food and energy security; to boost big infrastructure projects, especially the bioceanic corridors that reduce the costs of transporting goods towards the Asia-Pacific; and to continue to expand its market share of manufactures, particularly those in industries in which the US, Europe and China compete and will continue to do so. These include robotics and technologies associated with post-fossil fuel energies.

Latin American governments across the political spectrum see in China a market and a source of funding and pursue policies that link foreign exchange revenues with well-being and prosperity. If we talk about challenges, we have to identify who faces them. I don’t think Latin American governments take into account the interests of popular majorities when discussing the relationship with China. Based on a common agenda, we have to take into consideration that the type of extractive projects that represent most of China’s foreign direct investment (FDI) in Latin America are large-scale and in many cases involve the displacement of indigenous groups and labour conditions in decline compared to previous eras. Infrastructure projects facilitate the extraction of resources so it’s not necessarily an infrastructure that integrates the Latin American people. Chinese investment and finance in most cases lack technology transfer and the trade flows weaken the region’s biocapacity, since exports require a large amount of water and energy. The challenge seems to be to build an agenda for international relationships from the bottom up, not the other way around.

Zhang Jingjing, adjunct professor, Carey Law Environmental Law Program, University of Maryland

For different stakeholders intentionally or unintentionally shaping the China-Latin America partnership, the challenges are varied. In June 2018, I gave an oral testimony to judges in Cuenca, Ecuador, in support of indigenous communities’ fight to protect the constitutional rights of nature and their right to consultation on the Chinese-owned Rio Blanco gold mine. But I first worked with NGOs in Latin America in 2015, fighting to stop a Beijing-based company’s real estate project near the Los Cabos marine protection area in Baja California, Mexico. During this time, I have seen Chinese companies become the most active players in shaping China-Latin America relations and China’s image in the region. Their challenge is whether they are willing to adjust to a democratic setting in Latin America and follow international norms regarding environmental protection and human rights.

In China, companies have been used to the one-party regime and many have enjoyed close ties with various levels of government. The largest Chinese companies operating overseas – especially in key strategic sectors such as natural resource extraction and infrastructure – are state-owned enterprises (SOEs) and are accustomed to the relatively lax Chinese regulatory environment. They have rarely had to deal with strict environmental or labour regulations, or with laws or norms on transparency. Many Chinese companies have never had to build relationships with grassroots civil society organisations representing affected communities. But in Latin America, they face a very different political environment: active civil society organisations, indigenous people who resist extractive industries, independent journalists, and tougher environmental and human rights laws. It is time for Chinese companies investing, or which will invest in Latin America to face the challenge, learn from global good practices, listen sincerely and respond to affected communities’ calls. Only then can they play a positive role in shaping China’s image in the region. If it is to become a truly global leader building a community of common destiny, my country, China, must take care of the planet.

Zhang Jingjing with members of a community that oppose a Chinese gold mine in Ecuador

Enrique Dussel Peters, coordinator of Cechimex (Mexico-China Research Center), National Autonomous University of Mexico

Everything seems to indicate that the relationship between Latin America and China will continue to grow. However, since there are not enough instruments to evaluate impacts, it will continue to grow with great contradictions. For example, it is estimated that over the next year China will generate 2 million jobs in Latin America, which is positive, but this will bring enormous challenges because more employment in greater quantity implies more problems. At Cechimex, we published a report analysing 20 infrastructure projects in Latin America. Some went very well and others very badly. What did we learn? If we have twice as many projects but with the same failure rates, it is because we have not learned. In 2019, investment, trade and infrastructure projects will increase, but with serious limitations and with regional and local social movements opposing China.

We need to improve the quality of research centres, public, private and academic on both sides – in China and Latin America. We need to work to understand the impact of the Belt and Road Initiativeover the past 5 years. At Cechimex we have been carrying out very specific projects on infrastructure, trade and foreign direct investment projects, and we believe it is important to structure the relationship with China in order to understand the complexity of this growing bond.

My impression is that with President Trump’s immigration policies and his insults against Latin American countries, spaces are opening up for China in Latin America. This allows for the relationship in Central America, in Mexico, in Brazil, to develop. It is not about displacing the US, which will not disappear. Yet China will increase its presence in the face of contradictions resulting from the tensions Trump is generating in Latin America. The relationship from the China-side is much more constructive at the moment, but I would suggest proceeding with caution. The relationship is not rosy and has its unique characteristics in Argentina, Brazil, Mexico and in other Latin American countries.

Ernesto Fernández Taboada, executive director, China-Argentina Chamber of Commerce

From Mexico to the South, we are all countries that China is interested in. Either because we are providers or potential providers of natural resources, commodities, food and minerals – goods that China lacks – or because we are importers of high value-added good that China exports to us. There are things that we can’t produce because we are not competitive enough, such as manufacturing hardware.

China still hopes to have a larger presence in Latin America. We’ll see what happens with the new administration in Brazil but as China’s main partner in Latin America, the relationship should grow. We hope the same happens in Argentina. But small and medium-sized companies in the country face difficulties. Business leaders should create export alliances and partnerships. We could sell 200 or 300% more to China than we currently do. There’s a lot of potential and that was clear at the recent China Import and Export Fair.

Looking forward, there will be interesting opportunities to increase business ties with China. The Chinese middle class is eager to buy new products and widen the type of products they currently purchase. The Chinese government is also still seeking to urbanise more rural workers and increase levels of consumption whilst providing more machinery to the agricultural sector and growing it. China will demand larger quantities of soy and beef every year but we have to be careful as China is also increasing its own production. We shouldn’t lose sight of that.

Fabiano Escher, researcher, Agricultural University of China

The growing relationship between China and Brazil opens space for the countries to coordinate closer on the environmental agenda. There are a series of negative effects, or ‘externalities’, associated with the China-Brazil soy-beef complex. In Brazil, these include deforestation, degrading working conditions, high levels of pollution from agrochemical use, among many others. Meanwhile China faces the pollution and degradation of water, soil and air.

Since 2005, the Chinese and Brazilian governments have environmental cooperation agreements in place. For 2019, it’s hoped they will inaugurate a jointly operated deforestation satellite monitoring system. What’s more, China seems to be advancing in its climate change adaptation plan, in renewable energies and other areas. Meanwhile Brazil, which had pursued sound environmental policies, chose a government which seems to be going in the other direction. This has been shown in denialist discourses and the transferral of environmental governance and the demarcation of indigenous territories to the ministry of agriculture, among other barbarities.

This historic time, marked by blind declarations by Brazil of alignment with the interests of the US and Israel and gratuitous hostility towards countries of great commercial importance, such as Arabic and Eastern countries, mainly China, is immensely worrying. We’ll see if the government can rise to the economic, geopolitical and environmental challenges that the current era demands. If before in Brazil there were only a few wide-ranging cooperation projects and some intelligent measures seeking to deal with China, albeit without a clear strategy, there is little hope we will see anything positive to come in that regard. That is, unless China’s prudent and pragmatic leaders manage to approach the relationship in a rational and reasonable way until we can rebuild a serious and responsible foreign policy.