I recently taught a course in China based on my soon-to-be released book, Chinese Companies on the Ground in Latin America. While there, I interacted with Chinese research colleagues and students who hope to be the next Chinese diplomats and managers relocated to Latin America. Their perspectives differ from President Xi’s exuberant declarations and provide a glimpse of the challenges that lie ahead.

My visit and conversations in the P.R.C. on Latin America were colored by the scheduled visit by China’s President Xi Jinping to the region, as well a wave of other China-Latin America business and political events in the coming months. President Xi begins his Latin America tour this week in Brazil, where the former Chinese youth soccer player will try to overlook Dilma Roussef’s non-response to his interest in watching the final game of the world cup with her.

He will begin his trip with the BRICS summit in Fortaleza, where lingering resentment over the activities of the U.S. National Security Agency, and Russia’s deepening conflict over the Ukraine, will likely give the summit a particularly anti-U.S. flavor. He will then travel to Venezuela, Cuba, and Argentina. In each country, Xi’s team will likely be working hard to get important stalled projects back on track, from oil projects with Venezuelan partner PdVSA, to Cuba’s Cienfuegos refinery, to the Belgrano-Cargas railroad modernization in Argentina, yet even if Xi does not speak the words “United States,” China’s indirect contribution to the anti-U.S. projects of these partners will be the subtext of the visit.

In the weeks or months that follow, Nicaragua will release an environmental impact report regarding the canal that Hong Kong businessman Wang Jing proposes to build through the country. If attention to the report is not buried by the coverage of Xi’s trip, it will reinforce international attention to the project that has already been generated from the announcement in early July regarding the selection of the route for the canal, and the declaration that it would be completed within five years.

Then, in November, China will host the APEC summit in Beijing, attended by a number of Latin American leaders, including Mexican President Enrique Peña Nieto, who will likely have a bilateral meeting with Xi while in China, closing a previously-leaked deal for a $2 billion Chinese loan to the Mexican oil company PEMEX, with the promise of expanded Chinese participation in the newly liberalized Mexican oil sector. By contrast to Mexico’s difficult relations with the P.R.C. during the sexenio of President of Felipe Calderon, Mexico’s political embrace and deepening economic relationship with the P.R.C. under President Peña Nieto will likely generate nervousness in Washington.

Less than a month after the APEC summit, the P.R.C. will likely host the first China-CELAC summit, also in Beijing, highlighting the willingness of President Xi’s government to pursue a relationship with Latin America and the Caribbean that explicitly excludes the United States.

It is difficult to say whether there is a sincere desire within the Chinese government to arrive at an understanding with the United States.

With such an extensive array of Chinese activities in Latin America scheduled for the coming months, one of the most frequent questions that I received from my Chinese colleagues was how the U.S. government views the expanding Chinese presence in the hemisphere, and how it might respond.

While the P.R.C. has long maintained one eye on the reaction of the United States as it expands its activities in Latin America and the Caribbean, it is difficult to say whether there is a sincere desire within the Chinese government to arrive at an understanding with the United States regarding mutually acceptable behavior in world affairs, or merely manage China’s pursuit of strategic objectives in a way that does not prompt a reaction in the United States.

Several of my Chinese colleagues told me, for example, that President Xi, in his June 2013 California summit with Barack Obama in California, had hoped for a “special relationship” with the United States, and was thus later disappointed by U.S. support for Japan and strengthening alliances in Asia (viewed from Beijing as a strategy to “encircle” China).

Yet Xi’s own “goodwill” trip to California was preceded by 11 bilateral presidential summits in three countries all in close proximity to the United States: Costa Rica, Trinidad and Tobago, and Mexico. In the months that followed, the P.R.C. government not only announced its intention to conduct the summit with CELAC, explicitly shutting out the United States, but conducted a minor combat exercise with the Chilean navy, and proceeded forward with a significant new wave of arms sales to the region. This included L-15 combat aircraft, Z-9 naval helicopters, mobile radars, SM-4 self-propelled grenade launchers, SR-5 multiple launch rocket (MLRS) vehicles, and armored amphibious vehicles for Venezuela, 6 new Z-9 helicopters for Bolivia, 40 type 90B MLRS vehicles and a possible air defense system for Peru, and negotiations for patrol boats for Trinidad and Tobago and Uruguay.

My Chinese colleagues tried to downplay such deals, saying, for example, that Peru doesn’t have the money to buy the Chinese MLRS vehicles. Yet, I doubt that they would be reassured by the parallel argument that Japan may not have the money to buy US F-35 fighters.

Beyond Sino-US interactions over Latin America, I also found a disconnect between China’s expanding loans to and investment and technical support for Argentina and Latin America’s Bolivarian Alliance (ALBA) regimes, versus the enormous frustrations that my Chinese colleagues expressed about doing business there.

On one hand, the P.R.C. has provided over $50 billion in financing to Venezuela when soft loans to PdVSA are included, plus more than $12 billion in loans to Ecuador, playing a key role in the continuing financial viability of those regimes as they continue to defy Western institutions and investors. Billions more are in the works, including Chinese funding of Ecuador’s $12 billion refinery of the Pacific, Bolivia’s $1.3 billion Multiple Rositas hydroelectric project, $10 billion in possible Argentine railroad modernization work, and $20 billion for two hydroelectric projects on the Santa Cruz river. Also pending, of course, is the previously-mentioned $80 billion “black swan” project — the Nicaragua canal.

P.R.C.-ALBA technology cooperation is also reshaping the strategic environment of the region. China has launched both a communications and surveillance satellite for Venezuela and a communications satellite for Bolivia, with a further Bolivian surveillance satellite and a Nicaraguan communications satellite on the launch schedule for 2016.

Behind the scenes in this P.R.C.-ALBA-Argentina partnership, ironically, businesspeople with whom I spoke in Beijing are exasperated in dealing with these regimes. In the words of a Chinese colleague who had managed Chinese projects around the world, “In Africa, things are hard, but we do what makes sense, and things work out. In Latin America, we do what makes sense, but things don’t work out.”

Regarding Venezuela, my colleagues complained of continual difficulties in getting that nation’s government to decide on which projects it wants them to do. They spoke of Venezuelan government officials consuming countless hours of the Chinese company’s time, soliciting proposals, then delaying decisions or eternally changing their minds. Similarly, they complained of long delays in getting Venezuelan officials to process the paperwork so that their companies could get paid from the nation’s China loan funds.

They suggested that Bolivia’s government is even more difficult to work with than Venezuela.

Physical security in Venezuela and elsewhere in the region was also mentioned as a challenge, even greater than that which the Chinese faced in war-torn Africa. As one person I spoke to put it, “We Chinese like safe.”

I found my Chinese colleagues almost universally worried about political stability. When I asked them why China Development Bank had loaned so much money to Venezuela when their technical people could see the problems, they responded with nervous laughter. Yet one offered a useful insight: CDB’s previous director, Chen Yuan, was a capable leader who had recognized an opportunity in Venezuela’s pro-China political alignment and ostracism from Western investors, and with the Chinese state’s blessing, took full advantage of the opportunity to build up the bank’s portfolio abroad.

With respect to Venezuelan politics, my conversations gave me a perspective not found in the West. One Chinese scholar, for example, compared Venezuelan President Nicolas Maduro to former Chinese leader Hua Guofeng, who played an important role in the transition from the radical socialism of Mao Zedong, to the reformist era of Deng Xioping. Hua’s famous mantra was that the policies of Mao must be continued.

The implication was that neither Hua then, nor Maduro now, has the intellectual weight or leadership ability to take their countries in a necessary new direction. Indeed, many in the P.R.C. today hope for a Venezuelan reformer, similar to China’s “Deng Xioping” (Many Chinese hoped that this might be Henry Capriles).

Beyond Venezuela, those who I spoke to also offered interesting insights on Nicaragua, almost universally agreeing that the Nicaraguan canal is a “crazy” project that will never be built. One suggested that the businessman leading the project, Wang Jing, is simply playing to Nicaraguan dreams. Yet over $100 million of someone’s money has already been spent on the project, and as noted previously, the Nicaraguan government declared in early July that it had selected the route and would begin construction in December. For many in the U.S. and Latin America, how Wang Jing expects to make money from the deal is among the great mysteries of the orient.

With respect to the Caribbean, thinking of major Chinese investments like the Freeport Container Port, the $3.5 billion Baha Mar resort in the Bahamas, and the $3 billion Caribbean investment fund, I asked my colleagues why China has invested so much money and political capital in the region when its potential as a market and source of primary products is relatively limited (particularly while the PRC and Taiwan have suspended their battle for the countries of the region over diplomatic recognition). One Chinese friend suggested that wealthy Chinese want to buy properties there — yet I suspect that the bigger lure is loan-backed construction contracts in countries where the Chinese face little competition, as well as the region’s strategic location near the United States are also part of the explanation.

In The Spotlight

Beyond better understanding how Chinese see the politics of Latin America and their projects there, I also gained interesting perspective on Latin American efforts to grow business in China. When I surveyed my class of undergraduate business students, not a single one had heard of ProExport, Procomer, ProChile, ProMexico, or APEX. Nor could they identify beef as an export of Uruguay, although several knew that the country existed, because it had just lost to Colombia in the World Cup.

I also was moved by how much work Latin American governments have to do to give Chinese a basic understanding of the region and the products that it offers. In a survey that I did of my 36 students on the first day of class, 9 believed Machu Picchu was the father of Bolivian independence, 11 thought Suriname was an island in the Caribbean, 7 identified Pancho Villa as the current President of Mexico, and 19 identified either La Paz or Santa Cruz as Bolivia’s principal Pacific-coast seaport.

Despite many differences in our perspectives, I found hope in my conversations with Chinese colleagues that there is at least some common ground for the U.S. and the P.R.C. to collaborate on Latin American issues in the future, including a shared “positive orientation” toward the Pacific Alliance, and interest in working together on issues that adversely affect the region, such as transpacific criminal activity.

I left China with more and stronger friendships, but also with many unanswered questions. No one, for example, could explain to my satisfaction the difference between the “Comprehensive strategic partnership” that China has with Brazil, Mexico and Peru, versus the Mutual Development Strategic partnership” that China has with Venezuela. At least no one during my trip referred to China’s activities in Latin America or the Caribbean as a “win-win” relationship.

Perhaps it is yet possible for the U.S., the PRC and the region to find a common path to “a more harmonious world.”

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Evan Ellis
About The Author Evan Ellis [Full Bio]
Dr. R. Evan Ellis is Research Professor with the U.S. Army War College Strategic Studies Institute and author of over 80 works on Latin American security issues, including his new book, "China on the Ground in Latin America.”




China on the Ground in Latin America


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