Latin lack of focus

For quite some time, foreign policy in Latin American countries towards China has been driven by a certain degree of clumsiness and lack of focus.

While Beijing is making enormous energy-oriented investments in the region and offering constant gestures of further commercial and economic cooperation, most capitals in the Americas are failing to read the signs.

An excellent example of this situation is the recent fiasco surrounding the Trans-Andean Railway, an infrastructure project fundamental to the development of important areas of Chile and Argentina in which China has major interests.

For some time, Santiago and Buenos Aires – two traditionally unfriendly neighbors – have tried to find a way of boosting two of their resource-rich regions.

On the Argentinean side, the northern province of Mendoza produces uranium, cement, soybeans and even petroleum. Meanwhile Chile’s Valparaiso region, whose port is already one of the most important in South America, has ambitions to become a major gateway to the rest of the sub-continent.

Valparaiso is Mendoza’s natural sea exit, which is why both nations have tried to improve the infrastructure that connects the two areas – the only existing rail link was built almost a century ago and has been closed since 1984.

In 2004, Argentina and Chile set out to find funding to build a new one. Despite the importance of the project, they did not seem to find the cash. Enter China.

Shuttle diplomacy

In the past few years, China has deposited half of its overall global investments in Latin America and backed up the cash with some aggressive resource diplomacy.

President Hu Jintao, Vice President Zeng Qinghong and Premier Wen Jiabao have spent more time on the continent than US President George W. Bush, who seems to have forgotten how important Latin America could be to the United States. In September, China’s top legislator Wu Bangguo traveled to the region and signed agreements in several countries.

Therefore it’s not surprising that last year a seldom-formed joint delegation from Mendoza and Valparaiso traveled to Hong Kong to try to attract the US$500 million in capital required to start building the railway.

They came expecting to have to convince Chinese businesspeople of the benefits they would draw from it so were surprised to find no hard sell was necessary, one source close to the project explained.

"It was amazing to hear what a detailed knowledge some tycoons have of our logistical needs in Valparaiso," he said.

The truth is that Chinese companies already have stakes there. In Chile they have found a close commercial ally – Beijing’s first bilateral free trade agreement was signed with Chile last December – and a reliable source for copper.

A few months ago, Chile′s CODELCO, the largest copper company in the world, and China-owned Minmetals closed a deal that guarantees China 57,000 million tons of copper a year.

For China, the development of first-class infrastructure is vital for its projects in the region. Beijing has sealed large investments in extraction industries in Brazil, Chile and Argentina and is becoming ever more dependent on the soybeans, iron ore or steel these nations produce. As a result, China has a long term plan to protect its economic interests in the region. The rail link – which could stretch as far as southern Brazil – is part of this.

Willing backer

Shortly after the South American delegation visited Hong Kong, a large Hong Kong-listed blue chip contacted the provincial government of Mendoza offering to put up enough money to give the project a decent start.

But one year and a considerable amount of effort later, the Hong Kong company has still to receive a response from Mendoza. This has only served to undermine the province’s standing in the eyes of Chinese investors and be a source of embarrassment for Latin American officials.

Argentina, in particular, seems to have lost all focus in terms of managing relations with China.

According to Sergio Cesar?n, a top Foreign Office expert in Buenos Aires, a closer relationship with China would see Beijing use its UN Security Council platform to back Argentina’s claim to sovereignty over the Falkland Islands. But this would only be a bargaining chip in a bid to gain greater access to resources.

China, as it has explained to Venezuelan leader Hugo Ch?vez, is not interested in domestic politics or in acting as a counterweight to any Western power.

Meanwhile, goods from Mendoza are still transported to Valparaiso by truck.