the relation between china and latin america - saiia

By Arturo Oropeza García

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THE RELATION BETWEEN CHINA AND LATIN AMERICA

I. THEORETICAL FRAME

�If you don�t know your enemy, you will succumb in every battle�.

Chinese Proverb

Distance has been the first characteristic that has defined the relationship

between China and Latin America throughout history. The Pacific Ocean as

frontier and the incipient communication as part of the approach that has only

been broken, according to the Chinese version, with the arrival of 200 boats

commanded by Zheng Hen, a Chinese navigator and ambassador, to the

American Continent in 1405.

In 1950, according to the statements of Mao Zedong, the political relations

between China and Latin America were uncertain, and commerce between

both of them, of hardly 30 million dollars, had nothing to do with the

important commercial growth that has occurred between both parts throughout

the last decade, which since 1990 until 2003 has increased more than ten

times, from 1 800 million dollars to 26, 800 million dollars, appearing in 2006

a commercial deviation in favor of commerce between China and the Region.


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Trade China-Latinoamérica

(1950-2006)*

$26,800

$1,800$30

0

5000

10000

15000

20000

25000

30000

1950 1993 2006

*Valor en millones de dólares

Source: China Consulting.

The discovery of both regions occurred, in a formal way, by the second half of

the last century, when some Latin-American leaders visit the Communist

China in the 50´s, just after the Republic was restored, after its Revolution. Of

this first encounter, it became important, because of its proximity, the Chinese

relation with Cuba, which was constructed to the light of its ideological

coincidences, and by the close contact that both maintained during the second

part of the XXI century. Cuba was the first country that broke relations with

Taiwan and establish them with China in 1960; Fidel Castro, on the other

hand, was the last president that received Jian Zemin as President of the

Popular Republic of China, and also the first to receive Hu Jintao in his

quality of new General Secretary of the PCC.

Salvador Allende (Chile)

Jacobo Arbenz(Guatemala)

Fidel Castro (Cuba)

General Lázaro Cárdenas (Mexico)

Mao Zedong

Relation Chinese-Latin America (50´s)

Xu Shicheng said that � Latin America is not, and it will not be, the first

priority of the Chinese foreign policy�, however, since 1978 it has been on his

international line of attention; first, like a convenient policy of balance with


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respect to the Unites States, and second, as a natural interest that has been

increased before the necessity of a greater amount of agricultural,

metallurgical and power materials that demands the expansion of the Chinese

economy.

�Latin America is not, and it will not be, the first priority of the Chinese foreign policy�

Xu Shicheng

Historically, China has visualized Latin America as a region, as an

homogenous zone, on the basis of its geographic and cultural characteristics.

From this perspective, it has had an integral policy of approach, that covers

almost all of the regional actors. In that sense, since 1991, it participates as an

observer of the Inter-American Development Bank ( IDB) ; in 1993 it joined,

also as an observer, to the Latin American Integration Association (LAIA).

Through the People�s Bank of China, it formally joined in 1998 to the

Caribbean Development Bank. Since 1990 it maintains formal relations with

the Rio Group; it has formed consultation and cooperation mechanisms with

the Andean Community (2000), and maintains formal contact with the Latin

American Economic System (LAES), as well as with the Economic

Commission for Latin America and the Caribbean (ECLAC), among others.


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China participates as an observer of these International Organisms since 1990

Relations China-Latin America

China at the moment maintains diplomatic relations with 19 of the 33 Latin

American countries, which represent approximately 90% of the GDP of the

region. From the 90´s and towards expansion of the economic and commercial

capacity of China, its policy of approach with the nations of the zone has been

intensified, not only in a country level but also by subregion, according to the

strengths and weaknesses of each one. The encounter of China with Latin

America does not represent the simple relation of a country with 33 nations

grouped in a common region. In spite of the numerical difference of countries,

the dimensions of China as a nation are so, that still after this first contact, the

Chinese population is 130% that Latin America population, their commerce is

10% superior; and its GDP, at the end of 2005 has surpassed the economic

value of all the countries of the region in 30 %.

Formal Relations

19 countries

FTA China-Chile

2005

� Barbados

� Belice

� Costa Rica

� Dominica

� El Salvador

� Guadalupe

� Hai ti

� Honduras

� Martinica

� Nicaragua

� Panama

� Paraguay

� Puerto Rico

Does not have formal relations:

13 countries

Relations China-Latin America

Nevertheless, the same Chinese perspective of analyzing Latin America,

considering its region concept, forces to study the bilateral contact in the same

way, that is, China as a whole with, at least, other seven nations of Asia


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(South Korea, Hong Kong, Indonesia, Macao, Thailand, Taiwan and

Singapore), with whom it grows constantly following different integration

schemes that turn this Asia zone into a successful region and most of all, in a

region with future. From this previous comparative analysis appears a greater

difference between this Asian group and Latin America.

II. ECONOMY AND COMMERCE China keeps growing. Through this last 25 years it has maintained an average

rate of 9 %, achieving what any other country had not achieved until now.

This represents a gradual, integral and align economic model, that place all the

Chinese strengths into China development.

Real GDP growth (%)

China-Latin America

-4

-2

0

2

4

6

8

10

12

14

16

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

9%

2.5%

China

Latin America

Source: World Bank and ECLAC.

Latin America, in the other hand, during the period that goes from 1980 to

2004, obtain a GDP average increase of 2%. The most important difference in

development subjects, even more than the numeric disparity, is the one that

refers to consistence and stability of the Asian country, with respect to the

region. While in China the economic development line is ascendant or

maintained, in Latin America we can visualize a line of longing and

deceptions, that in 30 years has not been able to consolidate itself.

In another sense, the GDP per capita of China in 2005 has situated in $1200

dollars, being below of the GDP per capita of Latin America, that rises into


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$3,800 dollars. In spite of this big important difference, in the last 25 years the

income per capita of China increases more than six times, while Latin

America only increased its income in 1.1 times.

0

1

2

3

4

5

6

7

8

9

10

1979

19811983

1985

198719

891991

199319

951997

199920

012003

2005

Latin America China

Per Capita GDP (%)

China-Latin America


US$1,200 Incrementó

6 veces

US$3,800

Incrementó1.1 veces

The difference that appears between this two numbers, not only represents the

success or failure that came of chosen between winning or insufficient

economic strategies, but also the success or failure of the men that were

behind the strategies, of the politicians that were able to be statesman, in the

case of China, and of the politicians that had made of Latin America one of

the regions with the worst rates of income distribution, with a 50% of

poverty.

RESULTS OF A WINNING OR INSUFFICIENT ECONOMIC STRATEGIES

POVERTY INDICATORS


67%

17%

54%

26%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1980 2005

CHINA MEXICO

Talking about commerce between both regions, China is located, actually,

among the first five nations that receive most of the Latin American exports

and it is situated also among the first ten origin countries of its imports.


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Commercial Encounter

China�s growing like destiny of latin americanproducts (% increase)

Source: OMEM

TIN

ZINC

SOYA

COPPER

NICKEL

SUGAR

OIL

ALUMINIUM

2727

5319

7929

18751330

1917

33412350

1224

1621

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2000

2001

2002

2003

2004

Exports Imports

Brazil-China: Bilateral trade

(mill. USD)

Source: World Trade Atlas, China.org, Aduana China.World Bank.

1129

2502

3098

725

164393

755

145

980

1250

500

1000

1500

2000

2500

3000

3500

2000

2001

2002

2003

2004

Exports Imports

Argentina-China: Bilateral trade

(mill. USD)


2245

3676

814998

1283

166615671338 1303

783

0

500

1000

1500

2000

2500

3000

3500

4000

2000

2001

2002

2003

2004

Exports Imports

Chile-China: Bilateral trade

(mill. USD)


In this commercial encounter, China has been able to sustain the growing of

the offer towards the region, and in the last eight years, it has maintained the

tendency of a balance of trade on its favor, the same that has generated for it a

surplus of more than 14 thousands million dollars.

The commercial deficit of the region is located mostly among Colombia,

Cuba, Mexico and Panama, seeing that countries as Argentina, Brazil, Chile or

Peru reflect surplus.

According to the tendencies of the past years, the commercial exchanges will

keep increasing between China and Latin America. Brazil, by example, has

triplicated its trade with the Asian nation form 2002 to 2004. The Argentinean

sales have also increased 24 % each year in average; Chile has China as its

third trade partner, even in front of the United States and Argentina; while

Mexico has China as its second trade partner.


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-2000

0

2000

4000

6000

8000

10000

12000

14000

16000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Exports Imports Trade Balance

Trade Balance China -Latin America

(US$ millon)

Commercial Superavit of more than 14 thousands million dollars.

Source: W orld Bank and Eclac.

Main Latin-American Exporters to China

Brasil, 42%

Chile, 18%

Peru, 6%

Mexico, 5%

CACM*, 3%

Others, 2%

Source: America Economic, november, 2004

* Central American Common Market

Main Importers from China- by regions

Africa, 3%

Oceania, 2%

E.U.&Canadá, 16%

Europa, 18%

Asia, 58%

Latin American, 4%

Source: America Economic, november, 2004* Central American Common Market

China represents a real competition for Latin American countries, above all,

for the industrial and manufacturing sectors. In the same way, it represents a

great competitor respecting its European clients and its natural market, which

is the United States.

But in the other hand, Latin America offered a big selection of goods that

nowadays are necessary for the Chinese economy. Inside its frontiers we can

find, soya, copper, oil, gold, nickel, and a great number of raw materials that

day by day China buys from the region. It is also searching for new

investments in Latin American companies, in order to lower the costs of its

final invoice, reason why in the present time it participates in iron mines in

Peru, petroleum deposits in Ecuador, copper in Chile and gold extraction in

Venezuela, among others.

Main Products from Latin America to China

Brazil

Argentina

Chile

Venezuela

Peru

Ecuador

SOJA

SOJA

LEATHER

IRON

COPPER

NICKEL

OIL

IRON MINES

OIL

In the Latin American region, around 50 Chinese companies have invested

directly in different industries of Brazil (light, forest, nutritional, transport,

etcetera), and many others have done the same thing in Mexico. In Peru and


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Chile, China has made important investments in the mining industry. Other

important destinies of the Chinese investments are Cuba and Venezuela. At

the end of the 2002 there were in Latin America approximately 362 companies

or corporations officially approved and registered with exclusively Chinese

capital or share capital. Only in 2002, 46 new Chinese companies settled down

in the region.

Chinese Businesses in Latin America

In the Latin American region, around fifty Chinese companies have invested directly in different industries

In the same way, there are diverse Brazilian, Chilean and Mexican companies

that are already investing in China, and they have became partners of Asian

companies. Nevertheless, in the balance of this new commercial approach, the

result turns into an important flow of Chinese investments in the region and

into an incipient presence and movement of the Latin American investors in

China. Because of the unfolding and dynamism of the Asian economy, this is

one of the challenges that Latin America is facing in order to balance the

terms of its interchange.

Latin America Businesses in China

MAVHISA

Latin American companies that are already investing in China


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III. General Frame The encounter between China and Latin America establishes a great number

of challenges and opportunities for a region that in spite of its geography and

culture, do not want to recognize itself as a commercial and economic unit,

that could deal better with globalization, by maximizing its complementary

sectors. On the contrary, since 1960 until today, the Latin American region,

throughout different and imperfect schemes of integration, had lived a

commercial simulation that have not offered it a better world position.

Globalization is an historical and inexorable phenomenon that demands the

best strategies and disciplines of each nation. It is also an omnipresent and

plurinational phenomenon that punish those that confront it alone, and

maximize the opportunities of those that join forces to create chains of values,

as is the case of the European Union.

The relation of China with Latin America

1960Plans of integration (3)

17 countries

2006Plans of integration (21)

Europe (3)

Latin America (6)Africa (5)

Asia (5)

Oceania (2)

+ de 120 countries

Notwithstanding the dimensions of its geographical, population and economic

force, China, since 1978, has understood the rules that had been imposed by a

new economic stage, that in spite of its great development it is not so far

totally defined. Because of that, as we have been saying, China keeps

constructing a regional fortress, which has leaded the country to became part

of the ASEAN, the APEC, and other regional Asian schemes in process


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(ASEAN + 2), that even had motivated Ogura Kazuo to speak about the

creation of a New Asia.

In its contact with Latin America, China has found a divided region, that does

not have a voice of its own, that through its division make possible the

economic and commercial approach of a potency who is constantly rising, that

has as speakers Latin American nations with insufficient economies and

mostly separated.

That is why, the result of this first contact between Latin America and China

has been characterized for being anarchic. During the last decade its result has

been more the result of the vitalism of each country or sub-region, than the

result of the strategic posing of a complementary zone. In the beginnings of

this new century the economic situation of both parts became contrasting.

After been fighting for its own economic development the last twenty years,

the decision of choosing different free market models, made Latin America

fall behind, with an insufficient economic model that struggles to maintain an

average increase of 3 %. In the other hand, we saw how it appears an Asian

Zone, that in the last decade has reached an average increase of 7 %, that has

chosen the gradual models, instead of shock therapies, and that has privileged

privatization proceedings with a productive orientation against inventory rush

sale. In the same way, China and is region differ from Latin America and

apply the macroeconomic controls as a tool for development, and not as a

strength jacket against employment and growth. This are some of the

differences that explain the discordant numbers that nowadays reflect this two

regions that in the early 80�s presented a favorable balance towards the 33

Latin American nations.


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The relation of China with Latin America-Growth by region

Source: WTO

The relation of China with Latin America displays an endless number of

challenges on whose solution will depend an important part of the economic

future of the Latin American countries. First of them is to understand that this

encounter is historical and, in consequence, of long term, reason why the

construction of a regional agenda would be a first step to solve the common

matters to be treated with the country that, on the next years, will be the main

exporting nation of the world. For it, it will be necessary to differentiate the

individual subjects from the common ones; but more important will be that

Latin America matures on the strategies that it applies as a region, and also

that it will abandon the simulation of five complementary schemes that does

not give extra value to their negotiations and that, on the contrary, pulverize

and diminish them.

The construction of a regional agenda would be a first step to solve the common matters to be treated with the country that, on the next years, will be the main exporting nation of the world.

The hegemony of China is a process that by its magnitude, little by little has

been winning the attention of the reluctant observers, whom forced by the

exports have had to turn towards the East. Most of the Latin American

countries belong to this group, that resists itself to validate this importance


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(fourteen countries of the region still keep officially unrecognizing China), or

that even though they identify it, they can�t handle the challenge. The bilateral

relation will have the result of the dynamism and the effectiveness that each

country prints to it; nevertheless, in the regional aspect, a correlation of less

disproportioned forces in the treatment of common subjects, will be a strategic

factor for a good relation between China and Latin American countries.

Commerce trade China-Latin America 1991/2004 (usd. Mill)

Chineseexportations toLatin America

Chineseimportations from

Latin America

Chinese Stat ist ics

By constructing a relation of balance and respect with the new Asian giant, the

opportunities of a joint involvement are multiplied, as it is the case of the

defense of common interests before the different international forums like the

UN or the WTO, where from its 5ª Ministerial Meeting held in Cancun,

resulted a great number of coincident positions between China and twelve

Latin American countries; or the possibility of work together in scientific and

technological subjects, in headings of the interest of both parts like food,

energy, infrastructure or education.

The challenge for the Latin American countries in its relation with China, will

be maximize its opportunities with the Asian country, and dissolve, through a

common agenda and a permanent dialogue, the multiple differences that

constantly will be arising from the duality of the same Chinese model: of its

successful or developed part, where an approximated number of 300 million

of Chinese take part, and of their developing regions, where almost 1000


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million inhabitants are still waiting for a better distribution of the incomes. Of

this duality, of these two differential fields of its economic model, it will

appeared a source of coincidences and divergences that will required a good

Latin American agenda, to obtain a greater balance and a better bond with

China.

The challenge that has Latin America, and also Africa, in front of China, is

just like globalization: real and inevitable. For that reason, the possibility of a

closer and balanced commercial relation is not only possible, but necessary.

The advantage to attract investments, companies in expansion and Chinese

technology, is part of the new challenges that presents a new geopolitical and

commercial era, that invites to participate and to take advantage with more

imagination of a new reality in which all our countries will have to coexist, at

least the first half of the XXI century. The best way to compete with China is

knowing it deeply, to defend better the competition point; the approach is

necessary for discovering it, learn of its good commercial practices; and in the

complementary subjects, join to it.

�The best time to plant a tree was twenty years ago. The second best time is today�.

Chinese Proverb

I hope that some of these reflections are of the opportunity and interest of the

African countries.

THANK YOU VERY MUCH.

the relation between china and latin america - saiia

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