China has launched a forceful economic and subtle diplomatic and political offensive in Latin America and the Caribbean, urgently seeking oil from Venezuela (especially vexing to Washington), Brazil, Colombia, Ecuador and Peru. It also seeks raw materials to fuel its voracious economy. And it seeks political good will, and influence-right in the US' own neglected traditional sphere of influence.
This is emerging as a multiparty fiesta from Beijing to Buenos Aires, with Washington on the sidelines, mired in Iraq, consumed with the war on terrorism, and dismissive of its own neighbors, some of them very needy and disgruntled in its own backyard. At this party, China gives out the goodies.
Chinese President Hu Jintao spent more time in Latin America last year than President George W. Bush-a clear sign of China's prodigious-and for the US-troubling economic and diplomatic ambitions. When Hu attended the Asia Pacific Economic Cooperation meeting last November in Chile, he pledged to invest US$100bn in the region in the next 10 years, including US$20bn in Argentina alone.
What does this say about American and Chinese commitments and priorities?
"China's relatively recent expansion into Latin America is part of its broader 'peaceful rising' strategy. Beijing seeks to undermine US warnings of the 'China threat' by presenting a more benign image and concentrating its foreign policy on economic and cooperative diplomatic initiatives," said Bruce Klingner, Asia analyst at Eurasia Group, one of the world's top risk consultancy firms, in Washington, D.C.
Moreover, Klingner said ?the perceived US neglect of Latin America due to a myopic focus on the global war on terrorism has provided Beijing an opportunity to improve its political and economic standing in the Western Hemisphere at Washington's expense."
Latin America is an increasingly important component of China's ?energy diplomacy" Klingner said. China's interests include both short-term acquisition of crude oil deliveries and long-term investment in Latin American oilfields to diversify its oil supplies away from the volatile Persian Gulf region. By 2007, China is expected to import 50% of its fuel, and some of that will certainly come from Venezuela, which now ships 60% of its oil output to the US (Venezuela contributes to 15% of US' oil supplies), as well as supplies from other Latin American countries.
Enter the Dragon
Economics and geopolitics are swiftly evolving fast: China's economic offensive in terms of investment and purchases in Latin America is soaring. Imports from Latin America increased from US$3bn in 1999 to US$21bn in 2004, while Chinese exports rose from US$5bn in 1999 to $18.3bn in 2004.
Over the past several months alone, China and Latin American countries have signed more than 400 trade deals and projects in the Southern Hemisphere; China's cumulative capital outlay over the last few years has exceeded US$4bn.
The most recent – and troubling to the US Congress – development has been China's purchase of 30,000 barrels per day of fuel oil – a US$410m deal signed in January. The first shipment of 1.8m barrels of oil from Venezuela has already reached China, after departing on June 17.
China is also investing in energy infrastructure in Latin America, working with Brazil on oil development and exploration operations. There also are plans to upgrade 15 under-developed oilfields in Sumano in eastern Venezuela, and to build a boiler fuel plant for Chinese and Brazilian power stations. The US Senate Foreign Relations Committee has urged the Government Accounting Office to explore contingency plans if Venezuela reduces or stops supplying oil to the US.
There's more than oil involved: Chinese auto-assembly, electronics, computer plants and manufacturing plants are being built on the continent-and joint satellite projects have been undertaken with Brazil, so investment is not earthbound.
In Cuba, the US? overblown mini-nemesis, China has pledged a massive expansion of a vast but rusting nickel operation, with potential proceeds yielding millions, if not billions, for both Cuba and China. China needs nickel and is forging ahead, even as the US has boycotted Cuban sales and tried to punish countries that do business with Havana. China, the world's factory, could care less.
Beijing's charm and checkbook offensive to win deals and influence governments is likely to be mutually beneficial and complementary for both China and Latin America. There have been pangs and manufacturing readjustments in Latin America, but the situation is improving, as Mexico, for example, has decided to complement, not compete.
For a while, doom-sayers were bidding farewell to manufacturing in Latin America; the maquiladoras couldn't compete with China, and the US shut some of those export factories on the Mexican border and moved to China. Mexico's China strategy now is to export what Beijing needs: agricultural products, food stuffs, iron, mining expertise and other raw materials.
Apart from oil, China's trade, investment and cooperation include copper from Chile and soybeans and beef from Brazil and Argentina. And since the US returned the strategic Panama Canal, China has acquired concessions there, building ports and infrastructure. The canal-zone is perfect for low or no-cost transshipment of Chinese goods to the US.
In late June, however, the US Senate and a key House subcommittee adopted the contentious Central American Free Trade Agreement (CAFTA), removing or lowering US tariffs on key imported produce and products. Even that was linked to China, as conservative supporters of the bill claimed a "No" vote on CAFTA would be a menacing "Yes" vote for China, letting it flood the US market and eclipse hard-pressed Central America.
But for China, it's all good news. Venezuela, Brazil and Argentina have given Beijing another-of full market status, a designation that makes it tough to press dumping charges against Beijing. So, Latin America has undertaken an open-door policy to China, and it's clear the Chinese fiesta has just begun.