Beijing seeks Latin trade ties
Visits coincide with U.S. calls for attention in the region

By Chris O'Brien
February 16, 2009

BEIJING

As Secretary of State Hillary Rodham Clinton headed to Asia on Sunday, China was embarking on a double-pronged diplomatic mission in Latin America, seeking more robust trade ties to temper the impact of the financial crisis and demonstrate its swelling influence in the U.S. backyard.

Visits by two top Chinese officials coincide with calls from U.S. policy specialists for the Obama administration to devote more attention to Latin America - a region where they warn China, Russia and Iran are building alliances as U.S. influence wanes.

Vice President Xi Jinping is visiting Brazil and Mexico, China´s two largest trading partners in the region, Venezuela, which is set to export 1 million barrels of oil a day to China by 2012, Colombia and Jamaica. Vice Premier Hui Liangyu is touring Argentina, Ecuador, Barbados and the Bahamas.

The twin charm offensive is driven by urgent trade needs. As demand for Chinese exports in the U.S. and Europe slumps, China is looking for new markets to prop up its economic growth. It is also eager to secure long-term access to Latin American commodities, notably oil, copper and soybeans.

Even before the global economic downturn, China began courting Latin America.

In November, President Hu Jintao visited Costa Rica, Cuba and Peru. Last month, China became a member of the Inter-American Development Bank, pouring $350 million into the bank´s coffers for infrastructure spending in the region.

Bilateral trade has surged in the past decade, rising tenfold to $103 billion in 2007. China is Latin America´s third largest trading partner, although trade figures still lag significantly behind the U.S. ($560 billion) and the European Union ($250 billion). The explosive rate of growth has been bolstered by free-trade agreements with Chile and Peru, and a pact with Costa Rica is in the pipeline.

The diplomatic tours of Mr. Xi and Mr. Hui are also vital components of a deeper geopolitical strategy, particularly when viewed alongside Mr. Hu´s four-nation tour of Africa, which concludes Tuesday.

"China is attempting to turn lemons into lemonade, converting the financial crisis into an opportunity to improve its long-term economic advantage and energy and food security," global intelligence firm Stratfor said in a recent report.

The report also outlined China´s reasons for visiting comparatively minor nations such as Barbados and the Bahamas.

"China needs to show that it will not abandon even its smallest friends during tough times, and that it is not just another colonial power looking to exploit them," it said.

China´s growing presence in Latin America is not without benefits for the U.S. but also presents major challenges, said Dan Erikson, senior associate for U.S. policy and director of Caribbean programs at the Inter-American Dialogue, a Washington organization that promotes closer U.S.-Latin American ties.

"The advantage for the U.S. is that China can contribute to Latin America´s economic development and help the region to develop a more global outlook.

"The downside is that Chinese involvement is hastening the rise of the multipolar Americas, whereby regional powers seal alliances with influential extra-hemispheric actors - such as China, Russia and Iran - which inevitably reduces U.S. power in the Americas," he said.

Waning American influence in Latin America was a central theme at a hearing earlier this month of a House Foreign Affairs subcommittee on the Western Hemisphere.

Lawmakers and analysts urged President Obama to focus on checking the spread of Venezuela's influence in the region, and to put a greater emphasis on relations with Brazil, Mexico and Colombia.

It is China´s relationship with Venezuelan President Hugo Chavez, one of the most vociferous critics of U.S. policies, that is most likely to stir unease in Washington.

In 2005, China sold Venezuela three JVL-1 mobile air defense radar systems. A command and control system, technical assistance and the lease of a communications satellite were included.

Analysts say China´s hunger for Venezuelan oil trumps any military ambitions and that Beijing is wary of irritating the U.S. through extensive arms sales to Mr. Chavez.

But Chinese military exchanges with Latin America in general have expanded in recent years. David Shambaugh, director of the China Policy Program at George Washington University, said military ties are "extensive but quiet."

"These exchanges are mainly in the form of [military] 'delegation diplomacy´ - not weapons sales, establishment of bases or other nefarious activities," he said.

Numerous Latin American military officers undergo training in People´s Liberation Army academies every year. In November, Xu Caihou, vice chairman of the Central Military Commission, just one rank below Mr. Hu, visited Venezuela, Chile and Brazil.

"The military exchanges and cooperation are an important component of China´s overall relationship with Latin America, and play a positive role in promoting its development," a Chinese defense official had said on the eve of Mr. Xu´s visit.

Although China looks set to capitalize on Latin America's low approval rating of the U.S., it will need to tread carefully.

Mr. Shambaugh warns of rising anti-China sentiment in the region, mainly in Mexico, Argentina, Brazil and Peru. "This is primarily because of the dumping of Chinese-made goods on those markets and direct competition in certain low-end manufacturing industries," he said.

Mexico, in particular, has suffered, and in 2007 it ran a $28 billion trade deficit with China.

Other potential sources of friction stem from China´s lack of investment in its trade partners, which pales in comparison with current levels of foreign investment from the U.S. and Europe.

"Chinese investment in Latin America has flowed much more slowly than anticipated and often Chinese companies import workers from the mainland, thus doing little to improve employment prospects for Latin Americans. Moreover, there remain questions about how rigorously China will abide by labor and environmental laws," Mr. Erikson said.