A recent article in the Miami Herald quoted Arturo Valenzuela, outgoing head of the US State Department’s Latin American Affairs bureau, saying he is unconcerned about the inroads China has made, political and economic, in Latin America. Much of his argument rests on the undeniable fact that Chinese investment in the region is, per SOP, raw natural resource-focused, generates little employment, and therefore engenders scant soft power.
China has unquestionably made friends with America’s staunchest enemies in the region, namely Venezuela, Bolivia, and Ecuador. China’s semi-alliance with Venezuela’s Hugo Chavez appears to be relatively wide, and involves more than oil exports: China sold Chavez a nice satellite last year. (Although China is now at risk of making the same mistake with Chavez as it did when it overinvested in Sudan’s al Bashir: If pop-star Shakira denies you in public, your political career in Latin America is starting, however slowly, to wind down.)
But Ecuador, which is now run by Rafael Correa, is already giving China a headache, and might serve as a template for how Chavez and Bolivia’s Morales will likely start treating China should their domestic support bases continue to wane.
First, it is important to note that whatever their attitude toward Maoism as an ideology, not even Latin American socialists have particularly warm feelings toward China as a country: It was Russia, not China, that supported the leftist revolutions in Latin America, for the most part. And now Chinese labor is competing with Hispanic labor for market share in the US, which is not appreciated by the Latino working class. Bars in Mexico now feature games where one can shoot or throw bricks at a Chinese effigy. In Ecuador, the Chinese residents are subject to the same libel as they are in the US: “They use rats for their meat,” my Spanish teacher informed me.
China originally went into Ecuador on the expectation that as a resolute counterweight to the US, it would be excepted from the risk of nationalization. Clearly it miscalculated. Andes Petroleum and PetroOriental, both of which are controlled by China, were effectively nationalized last year, and now must be satisfied with flat-fee service fees and guaranteed supply contracts – but maybe not at a guaranteed price. In fact, even after accepting a brace of loans from China, the Ecuadorian government specifically thanked China for its willingness to pay full market price for oil. The CNPC has been reduced to complaining about Ecuador’s “lack of transparency” in contracting processes. Heartbreaking.
Correa likes China because Chinese money can be used to deliver social programs to his indigenous supporters – CONAE, the indigenous movement in Ecuador, is powerful and very active, and has put the capital under effective siege in the past by tearing up roads and robbing food trucks. It has overthrown presidents; it nearly overthrew one while I lived there, and succeeded shortly after I left. But there is no deeper basis for cooperation.
This puts China in the uncomfortable position of being forced to take a very gritty version of its own medicine. This month Correa won the right to impose restrictions on media content and to overhaul the judicial branch, and looks to have entrenched himself in power (assuming he isn’t overthrown by a coup.) This is very much the China model of political control, but it Correa has no equivalent to Beijing’s stable of pragmatic economic eggheads to manage his economy. So he is going to be asking for more money sooner rather than later, and that means an even worse deal for Chinese oil companies. Worse, China risks sacrificing its relationships with less radical governments in Brazil, Colombia and Chile if the cash it pays Correa ends up indirectly exporting revolution – and Correa, like Chavez, shows signs of being a dabbler in Colombia’s affairs. But as its reaction to the Arab Spring shows, Beijing is no longer in the revolution exporting business. It’s in the oil importing business.