Revista Chakiñan de Ciencias Sociales y Humanidades ISSN: 2550-6722 Universidad Nacional de Chimborazo

Carranco, Santiago THE POST-NEOLIBERAL SOUTH AMERICAN DEVELOPMENT Revista Chakiñan de Ciencias Sociales y Humanidades, no. 5, 2018, pp. 18-39 Universidad Nacional de Chimborazo

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THE POST-NEOLIBERAL SOUTH AMERICAN DEVELOPMENT EL DESARROLLO POST-NEOLIBERAL DE AMÉRICA DEL SUR

ABSTRACT

This study addressed the triangular relations between Latin America, Beijing and Washington in the last 15 years using a process tracing technique on the economic and political models of the region. It specifically focused on the South American development during the post-Washin- gton Consensus era, as well as the expanding influence of China over this region. The aim of this paper was to transmit the idea that the failure of neoliberalism in the 90s together with the expansionism of China have shaped the contemporary political and economic arena among the countries of South America. This work could help to understand the historical process of the construction of develop paradigms on the region and its impact on the society.

Keywords: China, Development, Hegemonic Powers, Latin-America, United States.

RESUMEN

Este estudio analizó las relaciones triangulares entre América Latina, Pekín y Washington en los últimos 15 años por medio de un rastreo del proceso político y económico de los estados de la región. Se centró específicamente en el desarrollo de América del Sur durante la era post-neoliberal, y la creciente influencia de China sobre esta región. El objetivo de este trabajo fue promulgar la idea de que los medios por los cuales se ha formado la arena política y eco- nómica contemporánea de los países latinoamericanos han sido, el fracaso de las doctrinas del Consenso de Washington en los años noventa en conjunto el expansionismo chino. El aporte del presente trabajo va dirigido a la comprensión del proceso histórico de la construcción de paradigmas de desarrollo en la región y su impacto en la sociedad.

Palabras Clave: China, Desarrollo, Poderes Hegemónicos, América Latina, Estados Unidos.

Santiago Carranco Paredes

[email protected]

Universidad Internacional del Ecuador Flacso, Ecuador

Fecha recepción: 20/02/2018 18 Fecha aceptación: 30/03/2018 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722

of this millennium, those projects have de- INTRODUCTION monstrated a positive progress in economic terms. The GDP of the region has grown The new millennium embodied a breakpoint around 4.5% each year and the unemploy- in Latin American politics. After 20 years of ment rates have fallen from 11.2% in 2002 to adjustment, which was the subtle term used 6.4% in 2011. Furthermore, Latin America for referring to the neoliberal guidelines has lifted more than 64 million people from imposed by international financial institu- poverty and 60 million from the absolute po- tions (Williamson 1990:7), a wave of leftist verty line; and, except for Venezuela, the re- leaders that promoted anti-neoliberal ideo- gion has maintained constantly low inflation logies gained popularity among the public. levels (Cepal 2015). Some authors such as The socialist trend started in 1998 with the Do Alto (2008), Svampa (2008) and Paniz- triumph of Hugo Chavez in Venezuela, fo- za (2009) have suggested that the autonomy llowed by the victory of the Workers Party in in the Post-Washington Consensus policies Brazil led by Ignacio Lula da Silva in 2002. have been the key factor that led to South Then, a series of populist left-wing leaders American states to achieve such political and gained power as in the case of Rafael Correa economic stability. However, there are fur- in Ecuador in 2007, Evo Morales in Bolivia ther aspects such as Chinese expansionism in 2006 and the former guerrilla man Jose that has evidently influenced the progress of Mújica in Uruguay in 2010. the region during the last 15 years. Some of this left-winged leader have alig- The South American governments have en- ned with the ideas of the ‘21st Century So- joyed an economic bonanza in the last deca- cialism’, promulgated by Heinz Dieterich in de, primarily produced by two factors. First, 1996 and then restructured at the Sao Paulo a boom of the commodities market cau- forum by the socialist South American lea- sed by Chinese demand for raw materials; ders. Rafael Correa (2014) set that it is not and second, the increment of capital flows considered a model, but a series of princi- towards the region, from countries like Sou- ples that allows sovereign governments to th Korea, Canada, Australia, and expressly generate economic and political models that from China. Therefore, it is conceivable that are suitable for their own domestic reality. the stability of the mentioned leftist gover- The four main principles of this doctrine are: nments along with the success of their po- licies may perhaps be associated in a direct • Prevalence of human capital over finan- way with the expanding influence from the cial capital Asian power over the region. Authors as • Major use of direct democracy Manriquez & Alvarez (2014), Wu & De Wei • Special protection for minority groups (2014) and Philips (2011), have paid special • Self-determination and nationalization attention to the increasing expansion of Chi- (Dieterich 2003:121-129) nese influence over South America. Nowadays, China is the leading world expor- Such series of principles have shaped the ter and the 2nd major economy in the world economic and political models in some sta- (Francoise 2013:25-26). In terms of bilateral tes, for instance El Buen Vivir in Ecuador, trading with Latin America, the commerce a model that provides constitutional rights figures climbed sharply during the first deca- to the Earth and the environment, as well as de of the millennium; the Sino–Latin Ame- the Bolivariano model of Venezuela shaped rican trade skyrocketed from US$10 billion by Hugo Chavez, and the Sumac Kumaña in in 2000 to a pre-crisis peak of over US$143 Bolivia. Such models were aimed to convert billion in 2008. China became either the first Latin America into a region integrated under or second largest trading partner for most socialist patterns. Latin American countries. Meanwhile, La- In general terms, during the first decade tin America has become China’s fifth-largest

19 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 trading partner (Leon-Manriquez & Hearn 2011:11-12). METHODOLOGY As well, for some South American adminis- trations, including the ones in Ecuador, Ve- nezuela and the Argentinean before Macri, This scientific paper is the result of a research the Chinese government has turned into the that aimed to investigate the connexion that new alternative for financial assistance, in exist between the failures of the Neoliberal some way setting aside the influence of the guidelines in the South American countries traditional international financial institutions during the 90s and the Chinese expansio- as the International Monetary Found (IMF). nism over the world. The connexion will be Agreeing to Chinese borrowing terms do not reflected on the change of the development include any type of policy reforms or fiscal paradigms that has shaped the contemporary adjustment. political-economy arena of the region. At Instead, the Asian state mostly requires the the end of this work paper, the reader will recognition of the One-China policy and the acquire an understanding about the way in signing of long-term commercial contracts, which the upsurge of the Chinese power has headed to supply China a daily fixed quan- influenced the policy-making of the South tity of commodities; in most of the cases, American states over the last 15 years. The oil, minerals and natural gas (Wu & De Wei argument will be developed over 3 parts. 2014:790). In this way, China does not only ensure a long-term supply of commodities, The first one will be dedicated to -discus but also gains recognition of its national line sing about the on-going power shifts in the of thought. In the same manner, South Ame- international-political arena. This part will rican governments, benefit from market di- include a narrative about the failure of the versification, as well as financial assistance Washington Consensus guidelines, as well without any requirements of policy adjust- as a clarification about the details of the ment. contemporary power struggle between the The expanding influence of China over de- main contemporary hegemonic powers, in veloping regions has brought debates about order to recuperate this data, the study used the geopolitical implications of China’s rise. a documentation of primary and secondary One standpoint perceives China as a threat sources. The aim of this section is to set the to the United States’ position as the sole su- actual scenery of the interrelations between perpower. This challenge to US hegemony Beijing, Washington and South America. could be a cause of instability and poten- tial conflict in the future. However, further The second part aims to define the connec- views have emphasised the peaceful rise of tion between the Chinese expansion and the China, and the benefits of its expansionism. rise of leftist governments in South Ameri- One example of it was mentioned before: It ca. This section will include a study about is how the commodity boom over the last 15 the uprising of the left over the region, par- years, along with the financial aid and spe- ticularly after the failure of the Washington cialised investment made by China has brou- Consensus. It also will include an illustra- ght an economic expansion for developing tion of the macroeconomic indicators of the economies, particularly to South America. performance of the region over the last 15 In this way, the Chinese economy could be years, with the intention of evaluating whe- complementary to those of other developing ther the domestic policies created in some countries that stand to gain from China’s countries of South America after the Was- growth (Rhys 2010:810-812). hington Consensus have created real deve- lopment in the region or if it was merely a fictitious growth.

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Finally, the third section will provide 3 par- the financial loans provided by the IMF not ticular case study using a process tracing only to correct macroeconomic imbalances, technique, in which by analysing the neoli- but also to finance the public industry defi- beral guidelines that led Argentina, Bolivia cit. By 1980, most Latin America economies and Ecuador to a financial or an economic became immersed in economic stagflation, crisis, along with a study about expansion in mainly triggered by the collapse of the raw economic and diplomatic bilateral relations materials markets and the US Dollar appre- with China, I aim to offer a narrowed and ac- ciation (Rangel & Soto Reyes 2012:42). curate perspective of the way in which these In 1982 the Mexican state, which was unable factors have been an essential foundation for to borrow, ran out of financial reserves and the construction of the current economic and this situation ultimately led to default on its public policies of those countries, as well as foreign debt. The Mexican default triggered the real impacts these policies have had du- a series of complications for all Latin Ameri- ring this period of time. can states. The US authorities alleged that to avoid a contagious inflation, it was necessary to restrict the quantity of money circulating RESULTS AND DISCUSSION: in the economy. Thus, the North-American The Decalogue for Development state increased their interest rates producing a rise in the price of their currency. The La- During the 60s and the 70s, Latin American tin American states, which were indebted in states acquired substantial sums of foreign US Dollars, attained a foreign debt capable debt, particularly with the IMF for adjusting to reach record levels. Consequently, much the disproportion on its balance of payments. of states in the region fell into a situation that Such imbalances were mainly caused by the made them unable repay their foreign debt. inefficiency of import substitution policies that those states maintained after World War To avoid a massive default, the internatio- II. nal institutional creditors came into the res- An example of such practices was using fo- cue. However, they also viewed a perfect reign loans to protect the state enterprises, opportunity to extend the neoliberal system compensating its inefficacy and making them to South America (Rangel & Soto Reyes able to compete at domestic level. In this 2012:40-45). After the failure of the Cepa- way, the South American states were using list model of import substitution, the Latin

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American states were required an open, sta- several arguments concerned with debates ble and liberalized economic model. about the triumph or failure of liberalism At least this was the prescription that neo- and the way in which globalization is percei- liberal economists of the time suggested, ved. However, it is undeniable that the libe- including Williamson (1990) and Richard ral guidelines were unsatisfactory for Latin (1990). This is how the neoliberal guidelines America since they did not accomplish their were crystallized with the formulation of the main objective. Washington Consensus. A Decalogue of po- As a matter of fact, after a decade of its im- licy reforms which fundamentally proposed plementation, states such as Argentina, Bo- that economic reforms should be based on livia, Brazil, Ecuador, Paraguay, Venezuela the logic of the markets, besides from being and Uruguay were hit by a series of econo- characterized by openness and macroecono- mic, financial and political issues that could mic principles. The Washington Consensus most certainly be linked to the unsatisfactory could, therefore, be summarized by ten main reaction of the public towards the neolibe- guidelines: ral policies implemented during the 90s. In addition, the implementation and the main- • Fiscal Discipline tenance of the neoliberal policies caused the • Redirection of public expenditure towards South American countries to acquire an even education, healthcare and infrastructure larger amount of foreign debt. • Tax reforms to extend the tax base Such a situation produced a vicious cycle, in • Interest rate liberalization which the states needed money to maintain • A competitive exchange rates the neoliberal policies, but then again, the • Trade liberalization International Financial Institutions only pro- • Liberalization of foreign investment in- vided them conditionally loans, upon the im- flows plementation of further neoliberal policies. • Privatization Such a situation made it impossible for the • Deregulation to commerce South American states to redirect the money • Property Rights (Williamson 1990) of their loans to matters that would enhance their development like education, infrastruc- The effects of the Washington Consensus ture and technology. Instead it was used to over Latin America raised, and still raises, pay the cost of policy implementations, and

22 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 the repayment of their debts with higher in- ports and 12.9% of US imports. By 2009, terest rates. Consequently, these states were the respective shares increased to 22.1% and not able to industrialize their production and 18.1% respectively (Cepal 2015). However, were condemned to be indebted raw material 58% of US trade with Latin America took exporters (Rangel & Soto Reyes 2012:46- place with Mexico, and the commercial flow 57). of the nineteen other states accounted for just US$ 340 billion. Furthermore, while the The Chinese expansion and the US hege- United States is still the major commercial monic decline partner of almost all the countries in Cen- While Latin America entered a decade of tral America and in the Caribbean, China economic stagnation in the 80s, China on has displaced the United States as the major the other hand was starting a period of rapid commercial partner in many South American economic growth. Since the 80s, the Chine- states (Manriquez & Alvarez 2014:8-14). se economy not only has grown at almost There are several factors that are contribu- 10 per cent per annum, which resulted in a ting to the capacity of China to overstep the sevenfold increase in the income per capi- United States’ economic and political in- ta. But it has also become the second-largest fluence in the region. For Manriquez & Al- economy in the world. Furthermore, its suc- varez (2014:11-12) the list includes first, the cessful reintegration to the global economy geographical conditions, in which the Uni- had situated the Asian power as the world’s ted States is still able to influence states with largest exporter ahead of Germany and Ja- geographical contiguity, but is inefficient pan. In addition, Chinese companies such as to maintain its control over all the states in Sinopec and China National Petroleum have the region. Second, the US neglect for Latin become key players in the commodities mar- America due to its focus on the Middle East. ket, particularly in the extraction and energy And third, a lack of trust in the orthodox industries. Since 2000, the Asian power has neoliberal guidelines. been expanding its influence in the world On the other hand, China has emerged in La- beyond commerce. China started having a tin America as the new financial alternative. major impact on the political, financial and China has disbursed since 2010, more than diplomatic affairs. US$110 billion in high-level investment to Latin America and nowadays has become Manriquez & Alvarez (2014), demostrated the 3rd highest investor in this region. Fur- how Latin America is still a highly econo- thermore, China has become a donor-mem- mic-dependent region, and also they out- ber for the Inter-American Development lined the ideological, political and mostly Bank (IDB), providing China a seat on the economic fissures of the relations between Board of Governors, allowing China the ca- United States and Latin America. They went pacity to influence decision-making in terms on to explain how China is taking advan- of financial policies and investment of the tage of this situation in order to gain more 26 Latin American countries part of the IDB influence over the Latin Amercian region. (Wu & De Wei 2014). Even though the general perspective of the The financial power of China is becoming US-Latin American relations shows a solid its most efficient weapon to expand its- in compromise, the reality is revealed when the fluence. Nowadays, China has accumulated studies are geographically separated. As it US$3.4 trillion of official foreign exchan- could be seen in table 2, the total trade be- ge reserves. Furthermore, it is the second tween the two parties rose from US$ 339 biggest creditor of the US foreign debt billion in 2000, to US$ 586 billion in 2012. (US$1164 billons [7.5% of the total United In addition, Latin America has gained rele- States foreign debt]). Although the United vance in US foreign trade figures. In 1990, States still maintains privileges due the po- the region accounted for 13.3% of US ex- sition of the US dollar as the key currency of

23 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 the world, the massive accumulation of Chi- to include openness to Chinese markets as nese financial assets has situated the United key goals in their foreign and commercial States in a very sensitive position, as the Chi- policies (Oliva 2010:113). nese expansion of financial influence over Attempting to generate a different scheme the United States is affecting its hegemonic of cooperation comprising the non-Western political capabilities. Thus, the United States Southern regions of the globe, China has is watching carefully how China continues chosen a softer pattern of influence, which to expand its influence over the South Ame- has given the impression to be solely concer- rican region, and considering how best to act ned with commercial matters at first glance, to not affect its own financial stability. but later pursuing political and diplomatic The former Australian Prime Minister, Ke- acknowledgment. For instance, China has vin Rudd (2015), now president of the Asia changed its policy and now can expand its Society Policy Institute, declared that: commercial flow and direct its investment towards developing countries that still main- If China does become the world’s tains good relations with Taiwan, such as largest economy, it will be the Honduras, Guatemala and Paraguay. This first time in 200 years that in the has been done deliberately with the aim of world we will have as the largest opening further diplomatic channels later economy a non-English speaking country, a non-Western country, down the line, such as happened in 2004 and a non-liberal democratic coun- and 2007, with the Dominican Republic and try…It will affect so many things Costa Rica respectively, both Caribbean sta- at so many levels. It will go to tes which have maintained a historical sche- the absolute core. It’s happening me of cooperation with Taiwan but switched quietly. It is happening persistent- rapidly their diplomatic recognition of the ly. It is happening in some senses under the radar’. (Rudd 2015:1) People’s Republic of China when they per- ceived that doing so would be beneficial Such description perfectly captures how (Manriquez & Álvarez 2014:22) (Wu & De China has expanded its influence over - de Wei 2014:795-797). veloping regions, particularly in North Afri- China is also pursuing a recognition as a ca and Latin America. Being a great power market economy state, regardless of its mer- has never been solely about the possession cantilist practices, which include an artificial of large amounts of crude material power. It depreciated currency exchange rate, dum- has been closely related to notions of legiti- ping, copyright infringements, various cases macy and authority, in this way, the Chinese of child labour and extreme working condi- power has been combined with a long-term tions. In South America, states as Argentina, sense of where it would like to be and that, as Peru, Venezuela Brazil and Chile, without a state, it must date maintained a significant regard of the counter effects that such condi- degree of strength and coherence (Hurrell tions have on their own commercial sectors, 2006). Since 2001, the presence of China in have granted China the condition of a market South America has intensified, and this it is economy state, since Chinese officials have not a coincidence. imposed this condition to continue a com- The affiliation of China to the World Trade mercial and financial scheme of cooperation Organization (WTO) changed commercial (Urdinez 2014). rules all over the globe. The leftist gover- nments saw an opportunity to expand their The Sino diplomacy and its influence for markets to Southeast Asian states and parti- the upsurge of the leftist policies in the cularly to China, which had already started South to increase its commerce over the region du- Wu & De Wei (2014:789-799), have recog- ring the late 90s. The commercial guidelines nized two main areas of Chinese foreign po- of all the South American states have started licy influence over Latin American states.

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The first is concerned with finances and the for the model that they have proposed and economy. It includes oil negotiations, com- therefore showing the populist and self-in- mercial reliance, borrowing and investment. terested characteristics of such models. And The second area is about diplomatic recog- secondly, due to the lack of empathy of the nition and political expansionism, including professionals and middle classes towards the the global recognition of the ‘One China’ social policies, probably because they have Policy. been educated under neoliberal bases. In Ve- One of the bases of the success of the Chine- nezuela for instance, the professional class is se expansion in South America had been re- so ideologically capitalist that even doctors lated to the platforms that China used since must be imported from Cuba to work in the 2000 for engaging with these nations in eco- public sector as, so few Venezuelan doctors nomic affairs, leaving the pursuit of - diplo are willing to treat the poor if their personal matic recognition as a secondary priority. By income is affected. (Quincy 2011) doing so, China has been welcomed by the South American states as an option to diver- The Argentinean Case sify its markets and for obtaining financial In Argentina, six of the ten neoliberal poli- aid and investments. China has focused on cies were applied for the economic restruc- creating solid relations based on economic turing of the state including a fixed nominal and financial matters first and, after securing exchange rate, trade liberalization, an inten- these, branching out into the diplomatic and sive privatization scheme, and deregulation ideological arena. It is evident that China has of the labour conditions, allowing outsour- learned the lesson of the failure of the neo- cing and non-contractual ways of employ- liberal scheme managed during the 80s and ment. Silva (2015), studied the reformation the 90s. (Wu & De Wei 2014:800) into two sub-periods. The leftist projects in Latin America de- The first period of boom, started in 1991 and monstrated decent outcomes, which could extended up until the third quarter of 1998 be validated by both the popular acceptan- and the second one of crisis, which begins ce of the leftist leaders during their admi- in the fourth quarter of 1998 and lasts up to nistrations as well as the good results given the end of 2001. It is true that during the first by macroeconomic indicators, which shown period the neoliberal policies had an accep- a consistent expansion on the GDP growth table performance, not only by facilitating rates per year and a decrease in inflation and the expansion of the Argentinean markets, unemployment rates; in comparison to the but also by pressuring companies to become numbers during the Washington Consensus more productive. reforms in the 90s. However, since 2014, the However, the flipside of this process was the popularity of the leaders has started to decli- accumulation of financial and fiscal - imba ne, because of two important factors. First, lances caused by the cost of implementing criticism about the increasing levels of ac- and maintaining these neoliberal policies, cumulation in both public and foreign debt, especially the cost of maintaining the pari- particularly with China. And second, the rec- ty of the Argentina Peso to the US Dollar. kless allocation of public funds, especially In addition, there was a deterioration in sta- in the Andean region administrations, inclu- te power due to the austerity measures im- ding Bolivia, Ecuador, Argentina but, most posed, which was clearly expressed in the expressly, Venezuela. breakup of the alliances in parliament, and a Saul Quincy (2011) determined that these general loss of legitimacy among their elec- are common problems with socialist models, toral base, producing apart from the econo- which denote the unsustainability of such mic unproductivity, a profound political ins- projects for two reasons. Firstly, because tability. leftist leaders have only focused on winning The Argentinean crisis best known as the Co- socialist goals, preventing any alternative rralito was triggered in 2001 when the IMF

25 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 refused to release US$1.3 billion, alleging ner administration pursued an autonomous the failure of the Argentinean government to economic policy that was contrary to the reach a previously agreed-upon budget de- guidelines imposed by the IMF in the 90s. ficit target, while it also demanded further The main objective of the Argentinean go- budget cuts. This episode not only caused a vernment became the repayment of the debt, national demonization of the neoliberal ins- with the intention to disassociate the country titutions but also the spreading of a sense of from neoliberal prescriptions imposed by the discomfort to the whole population, espe- multilaterals. Since its first day in the admi- cially to the most affected working classes. nistration, Kirchner implemented a series of The situation led to a prolonged crisis, which social programs to reconsolidate the Argen- ended in financial bankruptcy and a severe tinean people’s trust in the government and decline on real economy. Argentina ended in such measures boosted his popularity among a situation where the bank accounts of the the public and provided political stability to people were frozen for weeks, and 50% of Argentina (Panizza 2009:245). In 2006, Ar- the population officially became poor while gentina achieved its national goal by paying another 25% was below the absolute line of its debt with a single payment of US$ 9.2 poverty (Silva 2015). billion (Navarro 2015). It could be said that The Argentinian financial is one example somehow, the autonomous policies reco- of a vast range of events that demonstrated vered the Argentinean economy and made not only the unpopularity of the neoliberal the state able to repay its debt obligations. policy among Latin Americans, but also the However, there is an essential factor which means in which the reckless implementation facilitated the Argentinean recovery, and of these policies was never able to adjust to such factor indeed is China. the South American reality, resulting in a Since 2003 the strategic foreign policy goals fiasco that cost all the countries of the region of Argentina started to include guidelines various decades of unproductivity and large which encouraged openness and enhance- sums of financial obligations. ment of diplomatic and commercial relations Although there is still a divergence of opi- towards the Asiatic power. In fact, China nions about the outcomes of the Washing- was considered one of the seven great pivo- ton Consensus in South America, a general tal points of Argentinean commercial policy perception among the authors, regardless of which aimed to create permanent, balanced whether they are supporters or opponents of and mutual bilateral ties. In 2004, Kirchner neoliberal dogmas and including the pers- visited Beijing and Shanghai accompanied pectives of Cavallo (2004), Silva (2015) by his ministers and his wife, Cristina Fer- and Rangel & Soto Reyes (2012), is that nandez, who in 2007 would be elected as the Washington Consensus left a sense of President of Argentina. This was the first of economic openness in Latin America and many future encounters between Argenti- helped to rationalize the concept of globali- nean and Chinese leaders. Because of such zation for Latin Americans. Nevertheless, it visits, a series of bilateral agreements were also left an unpopular notion about neolibe- signed, mostly to promote mutual invest- ral institutions and the scheme in which they ment and to encourage the creation of Si- were regulated. no-Argentine companies. The new-born Sino-Argentinean relations For China, the recognition as a market eco- during the Kirchner administration were a nomy by the government of Argentina was good example to demonstrate the influence a key issue. However, the Argentinean sta- that Chinese diplomacy has over the econo- te was applying 79 anti-dumping measures mic and political decisions taken during this per year to Chinese products to protect its period. In 2003, after several interim presi- industry and workers. Nonetheless, China dents, the left-wing leader, Nestor Kirchner was offering a considerable increase -in became Argentinean president. The Kirch- vestment towards Argentina’s productive

26 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 sectors and infrastructure, besides it provi- have cooperated in taking small steps to set ded Argentina the status of tourist destina- aside dependency on the US dollar for inter- tion and, most important, accepted to provi- national transactions (Oliva 2010:104-105). de the financial aid that Argentina needed to By the analyses of the present Sino-Argenti- fulfil its national prime objective, which was nean relations, it is possible to observe that to pay back the debt. What’s more, Hu Jin- the interrelations of both countries go be- tao had already gained the recognition from yond the economic and commercial matters. Brazilian’s president, Luiz Ignacio Lula da Nowadays, it is clear to observe a demar- Silva, which would have conditioned the cated scheme of cooperation between these bargaining power of Argentinean officials nations that include diplomatic, political and who knew that granting China the condition ideological bonds. China was a crucial pla- of ‘market economy’ could produce dange- yer in the Argentinean recovery and nowa- rous effects on their national industry. Yet, days plays a fundamental role as commercial before Jintao left South America, the nego- partner and investor for the maintenance of tiations concluded with the signing of a ‘me- its policies. On the other hand, Argentina has morandum of mutual understanding’ which become largely dependent on China, which recognized China as a market economy state has demonstrated the power to influence Ar- (Urdinez 2014:70-73). This exposed the vul- gentinean executive decisions. nerable sectors of the Argentinean economy and demonstrated the capabilities of the Chi- Bolivia, Morales and China nese officials who, by including financial After 20 years of neoliberal guidelines, the and commercial matters into the bargain, can Bolivian state was immersed into a profound influence a country’s diplomacy and ideolo- economic and social crisis. The Washington gy. Consensus policies brought to this country, In addition, since 2005, Chinese injections of an increment in poverty rates while wealth capital started to be introduced into Argenti- was accumulated by a few sectors and taken na’s economy through direct investment and outside the country. Furthermore, the gap lending. The same year, China purchased between rich and poor widened, the infor- Argentinean debt bonds, which were mainly mal economy numbers skyrocketed, and the issued with the purpose of meeting its finan- high levels of unemployment caused people cial obligations with the IMF. So, because to work for less than US $ 1 per day (Rowan of this, further Chinese investment was used 2003:2-3). for improving the public infrastructure such Such precarious conditions resulted into a as highways and railways. In return, Argen- natural response in which Bolivian taxpa- tina agreed to take a common stance against yers redirected their frustration to oppose US and European agriculture subsidies in any neoliberal policy. For Do Alto (2008) the WTO (Urdinez 2014). and Panizza (2009), the failure of the Was- Since 2006, there has been a series of bila- hington Consensus guidelines triggered the teral agreements signed by both parties with popularity of the left anti-elitist leader, Evo the aim of boosting cooperation in areas that Morales, which appeared with a demagogi- include natural gas, tobacco and pharmaceu- cally-social discourse that not only attacked tical commercialization, as well as tourism, aggressively the neoliberalist line of thou- educational services, and biotechnology ght, but also induced a feeling of nationalism transfers, and the consolidation of the Chi- within the Bolivian collective mind. Since na-MERCOSUR agreement. Furthermore, Bolivian policies took a shift against neoli- in 2009, a fund of US$ 11 billion in Pesos and beralism (Rowan 2003:2). Renminbi was created between the Argenti- A brief valuation of social and economic in- nean Central Bank and the People’s Bank of dicators of Morales` administration shown China to set commercial transactions in both that the GDP has been constantly growing national currencies. Hence, both countries around 4.1% and 6.1% each year. In addi-

27 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 tion, the minimum wage escalated from US$ ment has been able to benefit directly from 57 in 2003 to US$ 238 in 2015, furthermore, the boom in the commodities market of the the infant mortality rate was reduced by 60% last decades. The Bolivian government has and most importantly, 3 million people have already gained control of 19% of the Boli- been lifted out of poverty and 1.7 million vian GDP, and the national objectives expect from extreme poverty (Cepal 2015). Al- that they can get control of 30% of its GDP. though the Bolivian economy is still fragile The second factor is related to an increase of and dependant, the left policies of the multi- exports, mainly attributed to the diversifica- cultural state have demonstrated remarkably tion of its markets, predominantly towards better outcomes than the results produced China. by the policies applied during the neoliberal In the last decades, the Chinese industrial period; however, again China, was an impor- production has diversified from its tradi- tant player that aimed for such development. tional industries such as toys and textiles There are two important factors in the production to further segments such as ma- Evo-Bolivian model. The first one stands for chinery and chemical production. The rapid the nationalisation of public goods, such as development of China’s productivity base water and electricity, as well as the ones con- has increased its demand of raw materials. cerned with extraction of hydrocarbons and Since 2001, China has become the greatest mining, which are constitutional recognized importer of minerals and metallic commodi- as strategic resources. Do Alto (2008:177- ties such as tin, zinc, steel, lead and copper. 183) studied the effects of the nationaliza- Which produced that the global raw mate- tion of companies in Bolivia, so he remar- rial supply was insufficient to go together ked that in addition to the new Constitution, with the world’s growing demand for such there are two key legal reforms that helped products. Consequently, the prices started to the Bolivian government to succeed in the rise rapidly and created a boom in the com- nationalization process without using the fi- modities market (Poveda 2010:153-154). gure of expropriation. The boom in the new Sino industries caused The first was the supreme decree N. 29701 Bolivia to flourish during the last decades. and the second the Hydrocarbons’ law. The The Bolivian economy is limited to the su- first established that 82% of the profit of pply of natural resources, and as an exporter big companies in the extractive industries of only a few commodities, it is highly sen- should go to the state and 50% of the profit sitive to any matters that occur in the glo- for the minor ones. The second one dictates bal markets. Consequently, the multicultural that all the hydrocarbon resources belong to state benefited greatly from the commodity the state. As a result, the Bolivian govern- boom caused by the Chinese demand.

28 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722

Compared to the 90s, in the XXI century, llion in the elaboration of 70% of Bolivia’s Bolivian exports have increased from US$ geological map. Consequently, Bolivia will 1307 million in 1996, to US$ 4245 million be able to vastly improve their hydrocarbon in 2006 (INE 2007). Such increment is the and mining industries, while China would result of a market diversification, as can be then have a preference in the extraction bu- seen in the Figure 3. Export growth to Asia siness (Poveda 2010:160-165). and China was especially remarkable with an increase from 0.32% of Bolivian exports Populism in the bonanza share in 1996 to 9.87% in 2006. Thus, Asia China played an important part in the main- has become Bolivia’s second most impor- tenance of the populist practices of some ad- tant trade partner in the region. On the other ministrations. The direct investment, finan- hand, it is possible to observe that the trade cial aid, and the increasing commercial flow share of the US and the EU has plummeted. have brought extraordinary revenues for the This situation could be a result of Evo Mora- Latin American governments. Such incomes les’s resolution to refuse to sign a free trade have been redirected in some states to popu- agreement with the US as well as the natio- list practices to boost the popularity of the nalization of European and North-American leaders. companies. For example, in 2007, Costa Rica followed Chinese investment has also played a key the road of the Dominican Republic that in role in Bolivian economic expansion. The- 2004 cut relations with Taiwan, due to an en- re are two recent projects of cooperation couraging offer from The People’s Republic between China and Bolivia that prove this. of China that could boost their popularity The first is an agreement for a joint venture among the public. China offered that, in ex- between the Chinese company Shengli and change of the recognition of the ‘One-China the Bolivian Ministry of Hydrocarbons, in policy’ Costa Rica and the Dominican Repu- which Shengli will invest almost $2 billion blic will receive US$ 100 million and US$ in the assessment, extraction and processing 122 million respectively for the construction of petroleum and natural gas in the north of of national stadiums. Both countries found the La Paz region. that this offer was more beneficial than Tai- And the second is a cooperation project in wan’s offer, that included US$70 million in which both governments will invest in the aid for Costa Rica and 6.8 US$ million in elaboration of a geological map of Bolivia. assistance for the Dominican Republic (Wu For these projects China will invest $60 mi- & De Wei 2014:789).

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A further case of social polices includes adding a US$ 5 billion loan to save its eco- countries as Ecuador, Bolivia and Venezuela nomy (Ellsworth 2015). which have been able to expand the public sector, and to reduce unemployment rates by The Case of Ecuador: from the Neoliberal using Chinese foreign investment to create Financial Crisis to Revolution of Correa unproductive public entities to provide jobs. Sobered by the debt crisis from the 80s, For example, when Hugo Chavez got elec- Ecuador started a series of restructuring pro- ted, Venezuela had 16 ministries. By 2013, grams during the 90s, in accordance with the number of ministries doubled to 32 and international financial institutions to imple- employed 19.6% of the Venezuelan labour ment the neoliberal guidelines of the Was- force; while in Colombia, which maintained hington Consensus. Nazmi (2001:727) has a pro-market system, there were 16 minis- claimed that the reckless implementation of tries which employed 3.5% of the Colom- such reforms caused dangerous macroecono- bian labour force (Torres 2015). mic imbalances to the Ecuadorian economy, Venezuela has received US$ 42.5 billion in leading to a profound crisis which resulted loans from the Chinese Development Bank in the loss of its national currency. for improving public infrastructure. None- There are 3 fundamental policies which led theless, in lending terms, the infrastructure the Ecuadorian state to its economic collap- includes the construction, renovation and se. First, a reckless scheme of privatization expansion of public buildings which were that did not match the national reality of the used to house new public entities with the state. Second, the artificial imposition of a aim of producing artificial jobs (Wu & De pegged exchange rate that produced a lack Wei 2014:92). of liquidity and speculation resulting from The expansion of the Venezuelan public sec- dangerous liberal prescriptions. And third, tor which meant an extensive increase in the the lack of autonomy of the state administra- public spending has only been possible as it tion to produce regulatory policies to prohi- was financed by the extraordinary revenues bit irresponsible practices from a weakened that Venezuela has received during the last and corrupt private banking sector. decades as product of the high prices of oil In 1992 the American-born Sixto Duran during this period. Venezuela’s oil revenues, Ballen was elected as the 37th president of according to the Opec (2015), accounts for Ecuador. Duran Ballen, who was conside- about 95% of export earnings and the oil and red a pro-neoliberal republican, implemen- gas sector represents around 25 % of the Ve- ted an innovation model in Ecuador. Such nezuelan GDP. a model included provisions to reduce the In 2014, when the commodity boom ended, Ecuadorian public deficit through austerity and the prices of fossil fuels dropped, Vene- measures and a privatization scheme of the zuela’s president, Nicolas Maduro, imple- national companies. In 1993, the Ecuadorian mented an emergency readjustment program congress approved the plan through two le- to cut public spending, reducing its number gislations. First, the Budgetary Law of the of ministries to 28. The Venezuelan oil barre- Public Sector, and second, the ‘Privatization ls went from a price of around US$ 100 per and Modernization Law’. barrel, to US$ 55 per barrel in 2015, causing Both regulations were aimed to downsize an economic recession and a deficit in the the government spending, privatize public balance of payments and resulting in uncon- companies and enhance international com- trollable inflation of 52.7%, and an expan- petition. The first regulation delivered rapid sion in the numbers of Venezuelans who live results. The state reduced its public-sector in poverty and extreme poverty conditions expenditure from 31.4% of total GDP in (32.5% and 9.8% correspondingly). Conse- 1987 to 24% in 1994, producing a surplus quently, Nicolas Maduro travelled last April of 0.6% of the GDP in the Ecuadorian balan- to China to renegotiate its existing debt by ce of payments at the end of that year. Such

30 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 an outstanding short-term result generated a neoliberal guidelines were clearly providing compensation coming from the IMF, which a list of benefits to the private entities, whi- reduced the interest rates for the Ecuadorean le the rates of poverty and unemployment loans by up to 5% (Nazmi 2001:728-729). were critical in the state, demonstrating that In 1995, because of the budget cuts that cau- the foreign investment prescriptions mean sed a reduction of labour places in the pu- neither economic growth nor social develo- blic sector, the unemployment rates started pment. to increase rapidly. Furthermore, the privati- The collateral effects of the new financial -le zation scheme was still lacking results. The gislation were inevitable. Since it permitted Ecuadorian state had achieved privatization the banking sector to generate offshore and of only 11 enterprises while Argentina and US$ Dollar accounts, the Ecuadorian finan- Bolivia, which were following the same po- cial institutions of that time restructured their licy guidelines, had accomplished privatisa- balance sheets to reposition their portfolios tion of 131 and 57 companies respectively away from Sucres and into US$ Dollars. In (Nazmi 2001:730). The Ecuadorian eco- this process, the banks, which were poor- nomy, therefore, was not able to expand as ly regulated, expanded their balance sheets was expected. Furthermore, the private sec- recklessly. Imprudent practices included a tor lacked the efficiency to produce enough relaxed credit risk analysis and resulted in employment to compensate for jobs lost in a credit rise of 48% per year during 1994 to the public sector during the adjustment pe- 1996. riod. Such unhedged exposure to dollar liabili- To attract foreign investment, the Ecuado- ties conditioned the Ecuadorian monetary rian government followed neoliberal pres- policy, which prevented the Central Bank criptions that were applied by the rest of the from devaluating its currency. Such a situa- administrations in the region which dictated tion not only undermined the Ecuadorian the liberalization of capital movements to exporting sectors, but also created a moral provide further financial security to foreign hazard for the banks, which continued with investors. Owing to this, the Ecuadorian ad- their careless operations, which triggered a ministration decided to reform its financial rapid expansion in the Ecuadorian internal legislation. The reforms included the possi- debt figures, as well as a massive increase bility of the creation of US$ Dollar accounts in its percentage of debt in foreign curren- in local banks, the establishment of offshore cies which by 1998 were about US$ 987.03 accounts, and a pegged exchange rate for the million, from which 91% was in foreign cu- national currency. rrencies (Banco Central del Ecuador 2003). For several scholars including Nazmi (2001), Nazmi (2001:733-734) argued that such ar- this was the beginning of what would beco- tificially pegged exchange rate turned all the me the financial crisis of 1999. After a while, previous economic difficulties into a full-fle- the results delivered by the new legislation dged financial crisis which was made worse diverged from what the government was ex- by external factors such as a belic conflict pecting. In the first place the freedom of ca- with Peru as well as a series of governamen- pital movements along with the constitutio- tal corruption scandals. These caused the fai- nal reforms repealing the state ownership of lure of the programs that aimed to stabilize strategic resources as oil and energy, instead the Sucre exchange rate. of bringing real and long-term investors, at- As a consequence, the Central Bank was for- tracted short-term capital investments, better ced to increase the real interest rates from known as swallow capitals. 1.9% in 1992 to 36.2% in 1999 to encourage The major part of the oil revenues was trans- investors to keep their holdings in Sucres. ferred outside of the state, due the absence of Because of such desperate policies in con- capital movement regulations (Berriosa Ma- junction with public speculation, investors rakb & Morgensternc 2011:675-681). The started to send their money overseas causing

31 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 a lack of liquidity in the financial sector and banks, towards public financial entities and resulting in the insolvency of seven banks national banks. The use of national savings including Filanbanco. has been condemned as fiscally irresponsi- The government monetized their bank losses ble, but the new constitution established that causing the collapse of the exchange rate an- fiscal policy cannot be divergent from gene- chor. In 1999, the Sucre depreciated around rating incentives for productive investment. 200% and inflation was about 90%. Facing Between 2007 and 2011, public investment social disintegration and economic catas- as a percentage of GDP grew at an average trophe, the government took the decision to rate of 11.7%. Correspondingly, social in- freeze all bank accounts for one year and in vestment reached 26% of public spending in 2000 announced the intention to dollarize 2011 (Banco Central del Ecuador 2014). It the economy (Nazmi 2001:733-734). has, therefore, been possible for the admi- During a ten-year period (1996-2006), Ecua- nistration to provide absolute coverage for dorians observed seven different leaders oc- enrolment in primary, middle schools and cupying the position of president. However, high schools and to eliminate costs for medi- none of the leaders can provide any type of cal consultation. In addition, the left-winged improvement to the Ecuadorian economy or agenda proposed a network of social inclu- to the standards of living of their citizens. sion, the continuation of subsidies in basic Nonetheless, in 2007, Ecuadorians elected services, and as well a series of programs to Rafael Correa as their head of state. Correa enhance the reduction of poverty and wage was a populist university lecturer, with an inequality (Ramírez Gallegos 2011:11-12). academic background in economics who Ecuador was not receiving the maximum did not have links to the traditional politi- utility from such industry; a situation attri- cal parties. This fact caused his popularity to butable to the fact that 53.7% of oil produc- spread rapidly among the electorate, which tion of that time belonged to private compa- was tired of the traditional representatives nies. Furthermore, as was mentioned before, (Jaramillo-Jassir 2012:151-152). In 2007, the type of contract that the state maintained once elected, the new administration started with the corporations was not profitable at its revolutionary process which substituted all due to the major income was coming the neoliberal regime policies established from renting the land rather than from pro- in Ecuador since the 80s with policies fo- duction. This is the reason why, in 2010, the llowing a model of endogenous growth pri- project of nationalization and renegotiation marily favouring the working class. of contracts started, following the constitu- To legitimate their actions in the political tional guidelines which dictate that strategic and in the legal field, a referendum, mainly resources belong to Ecuadorians. intended to produce a new constitution that By 2012, the private production of oil was included all these reforms, was proposed. reduced to 25.6%., the activities of compa- The result was approved by an overwhel- nies like Texaco-Chevron and OXY were ming majority of 80% of the electorate. passed to the national oil company of Ecua- Furthermore, the new constitution project dor, Petro Ecuador. This re-nationalization which proposed a more egalitarian system, of strategic resources allowed the Ecua- was accepted the following year by 65% of dorian state to maximize benefits from the the electorate (Becker 2011:49-51). commodity boom of the last decade (Berrio- Following the constitutional prescriptions sa Marakb & Morgensternc 2011:675-681). based on the Sumac Kawsay, an ancient These series of reforms and the repossession indigenous belief that proposes an austere, of strategic resources has provided Correa’s socialist and ‘good’ way of living, the Ecua- administration with a considerable increase dorian administration repatriated and mo- in public revenues. As a matter of fact, Ecua- bilized the international monetary reserves dorian exportation revenue soared from US$ which were previously deposited in foreign 14,556.2 million in 2007 to US$ 26,067.1

32 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 million in 2014 of which the oil revenue ties. Since 2007, six national ministries in share represents 47% of total exportations addition to a considerable number of regio- and 66% of the raw materials exportations. nal secretaries and regulatory entities, were Hence the nationalization scheme has been created. a crucial factor for the maintenance of the This generated 110,000 new jobs between social policies that Correa’s administration 2008 and 2014. Furthermore, in the last se- has implemented. ven years, the minimum wage has grown On the other hand, the new constitution of 100%, from US$ 170 in 2007 to US$ 340 Ecuador prohibited any type of outsourcing in 2014. In the following graphs, it is pos- and hourly-paid activities. Forcing priva- sible to notice that not only has the unem- te companies to provide full-time contracts ployment rate fallen, employment in formal with fully remunerated salaries as well as sectors has grown too. This could show that social healthcare and a 15% share of profits more workers are nowadays able to receive to workers. By 2006, 800,000 workers were better work conditions, fully-paid salaries part of outsourcing companies. This repre- and social benefits. However, most employ- sented 17% of the labour force. Thus, thou- ment generated in Ecuador has been the pro- sands of workers were introduced into the duct of the creation of public sector entities. formal sector, which grew from 38% from In 2013, 20.68% of all formal employment 2009 to 45% in 2010 (Banco Central del were bureaucrats who do not necessary ge- Ecuador 2014). nerate revenue for the state. In fact, it repre- The working class, as was expected, de- sents an enormous fiscal cost for the state to monstrated satisfaction with these measu- maintain such jobs. res. However, the private sector experienced considerable downsizing. It was alleged that The key role of China on the Ecuadorian it was unmanageable to maintain the same Buen Vivir number of workers with this new package of The Buen Vivir could be perceived as a so- benefits. This was reflected in the unemplo- cialist model, which pursues to improve the yment figures that grew from 7.9% in 2009 standards of living of the Ecuadorians by re- to 9.1% in 2010 (Banco Central del Ecuador ducing poverty and redistributing the wealth 2014), (Uquillas 2007:37). To fight against by creating pro-environmental and sustai- the rise of unemployment, the government nable policies (SENPLADES 2009). The generated jobs by creating new state enti- results of the Buen Vivir model, until 2014,

33 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 had been remarkable. 2015, the Ecuadorian economy was shrin- Based on socioeconomic macro indicators, king because of the fall of oil prices. This Ecuador not only expanded its economy by situation encouraged Rafael Correa to visit maintaining a consistent GDP annual grow- China to negotiate further lines of credit th, which grew from 3.5% to 7.9%, but has with Chinese officials. also lifted 10% of its total population from After Correa attended the ministerial mee- poverty and, as was mentioned before, redu- ting of the Forum of China and the Com- ced its unemployment rates. munity of Latin American and Caribbean Furthermore, the socialist policies have im- States (CELAC), Correa reunited on various proved the rate of secondary school enrol- occasions with his counterpart Xi Jinping, ment up to 87% in 2013 from 46% in 2007 resulting in the signing of a series of con- and reduced infant mortality rate. Ecuador tracts which included new lines of Chinese also has seen an expansion of its industrial credits that reached US$ 7500 million, from sectors and in general terms, living con- which 26.6% has been designated merely to ditions of the Ecuadorians have been im- compensate fiscal imbalances produced by proved (Cepal 2015). This brief overview the downfall of the oil prices, while the rest demonstrates how socialist policies have in- will be used to finance the construction of deed demonstrated real development in the what will be the biggest refinery in Ecuador. Ecuadorian state. Nevertheless, the efficacy of such endogenous plan development, as it Villavicencio (2013), who has analysed the has been described in the Ecuadorian natio- nature of Chinese oil contracts, exposed the nal policy plan, has gone along with a series downsides of the Chinese cooperation sche- of exogenous factors, including the general me. He demonstrated that although the ori- expansion in the global commodity markets ginal aim of the Asian power was to secure and alternatives for financial assistance that energy supplies to meet burgeoning demand, China has provided to the Ecuadorian gover- nowadays, Chinese companies can freely nment. trade a significant amount of Ecuador’s cru- Until 2013, Ecuador had signed 4 agree- de oil exports. In 2013 only 46.5% of Chine- ments with the Chinese government. The se-controlled Ecuadorian oil exports went to contracts prescribed and anticipated the sale China, with the balance resold to other coun- of a fixed number of oil barrels, so that the tries, primarily the United States. Ecuadorian government could receive fi- He concluded in 2013 that Ecuador will be a nancial assistance from the China Develop- victim of a debt trap again compromising the ment Bank at floating interest of around 7%. sovereignty policies of the country. By 2015, Consequently, the Ecuadorian foreign debt such predictions seemed to have been ma- rose from US$ 7392 million in 2009 to US$ king sense. With the continuing decline of 16913 million in 2014, from which 37.6% oil prices, Ecuadorian officials have found is owed to China, (Banco Central del Ecua- themselves in a tricky position. If they want dor 2014). Furthermore, at the beginning of to perpetuate the ‘Good Living’ model, they

34 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 have to increase the taxation base, apply type of extraction of natural resources in austerity measures or acquire more debt. All protected areas. However, from 2016 over alternatives are expected to generate critical 846 million barrels of oil will be drilled outcomes. from the ITT block (Ishpingo, Tambococha The rise in taxes and the measures taken du- and Tiputini), located in the Yasuní National ring 2015 have generated a series of protests Park. The Yasuni, which is in the Ecuado- and rioting in the main cities of Ecuador. rian Amazon region, was designated by the Such a situation not only has destabilized UNESCO as biosphere reserve in 1989 and the political order, but also slowed produc- is claimed to hold more than 100 000 of di- tivity. Furthermore, the low prices of oil, fferent species of flora and fauna, besides which translates in a reduction of revenue being the home of two uncontacted indige- for the state, will affect its ability to make nous tribes. repayment of debts, generating a situation in The Yasuni contains around 20% of Ecua- which a share of the future loans that Ecua- dor’s fossil fuel reserves, which is the rea- dor acquire will have to be used for the re- son why many energy companies have been payment of interest and fiscal imbalances, as operating in the peripheral areas of the natio- has happened in the first period of 2015. nal park since the 1970s. However, the core Hence the contraction of the prices of com- areas, including the ITT blocks, have never modities in the global markets has expo- been touched. Nonetheless, due to external sed the pitfalls of socialist models in Latin pressures and fiscal deficits, this situation America, which have evidently demonstra- has changed. In 2014, the Ecuadorian Natio- ted to be maintainable only due to a market nal Assembly, declared the area as a “natio- boom, rather than to real expansion within nal interest”, taking away its condition as a the productivity sectors. Furthermore, rec- protected area and therefore allowing extrac- kless social expenditure has been upheld by tion of natural resources in such areas. carelessly expanding foreign debt and com- On February of 2015, it was revealed that the promising the allocation of strategic resour- Ecuadorian government had for some years ces for various years, currently around 80% been negotiating a further 1-billion-dollar of Ecuador’s exported oil is handled by Chi- loan with China, giving Chinese oil compa- nese firms, limiting the state ability to secure nies the right to explore and exploit the Ya- the best market price for its crude (Villavi- suni-ITT oil reserves. Nowadays, Block 14, cencio 2013 ). part of the ITT, is operated by Petro Oriental, The Yasuni case is a clear demonstration of which is owned by the China National Petro- Chinese power. It demonstrates that they leum Corporation (CNPC) and which owns have great influence on Ecuadorian -poli 55%, and Sinopec, which owns the other cy-making, especially in energy and com- 45% (Ortiz 2015). mercial matters. China has leveraged its in- fluential power not only by generating large sums of debt, but also by controlling the fu- CONCLUSIONS ture oil production of Ecuador. Chinese oil companies have displaced Western compa- This paper has outlined the way in which nies from Ecuadorian territory and have gai- China has established a demarcated global ned enough resources to influence govern- scheme of cooperation that has proven to mental decisions in favour of their interests. be attractive to many non-western states. On the other hand, Ecuadorian officials have During the last decades, the development of entered a situation of dependency in which China has been remarkable and its influen- the sovereignty of its policies is reliant upon ce over developing regions has shown that ensuring the interests of a hegemonic power it is not merely a commercial and economic are fulfilled. power. The massive accumulation of foreign The Ecuadorian constitution prohibits any exchange reserves, the vast quantity of finan-

35 REVISTA CHAKIÑAN, 2018, Nº.5, AGOSTO, (18-39) ISSN 2550-6722 cial assistance provided, the increasing share acquired large sums of debt, especially with of participation in natural resource markets China, to compensate such imbalances. This as well as an extensive agenda of bilateral situation has demonstrated the unsustainabi- cooperation are factors that demonstrate the lity of such models and the large dependency capabilities of China’s vast global influence. that they had on endogenous factors. The Chinese economic expansion has brou- ght to developing economies a series of opportunities and pitfalls. China’s appetite for commodities has opened a great door for commercial sectors of the developing eco- nomies around the globe. Furthermore, the lending programs of the Chinese Develop- ment Bank have demonstrated to be a remar- kable alternative for the IMF or the World Bank, without regarding the political model or the ideological line of thought, China has become since 2001, a sine qua non-for the contemporary construction of commercial and foreign policies of the developing and developed states around the globe. For Latin American states, which have not been capable to accomplishing a real deve- lopment under the regulations of a Western economic agenda for 30 years, the Chinese cooperation scheme, which includes finan- cial assistance and commercialization of strategic resources has provided them with the opportunity to generate more autono- mous and socialist policies, which have de- monstrated better outcomes than under the neoliberal guidelines. However, as was de- monstrated in Chapters 2 and 3, the sustaina- bility and success of these models are clearly reliant on Chinese loans and high prices in commodity markets. By 2015, the pitfalls of the Chinese coope- ration system and problems with the Latin American socialist models have become evi- dent. The expansion of the economy in Latin American states has been a direct result of a boom in the commodity market. Such ex- traordinary incomes have allowed the states to recklessly expand their fiscal expenditure and to artificially develop their economies and generate several social policies that have produced political stability. However, since 2014, the global price of commodities has fallen causing profound deficits in the balan- ce of payments of the states which maintain such socialist models. Therefore, they have

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