China's Investments in Latin America

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LATIN AMERICA China’s Investments in Latin America OE Watch Commentary: The accompanying passages discuss China’s economic expansion in some of the world’s poorest countries. They consider the factors behind this expansion, particularly in underdeveloped Latin American countries. The first passage, from the Russian source Sputnik News points out that China began investing in third world countries around 2000. By 2014, the Asian giant had reportedly funded more than 4,400 projects in 138 countries around the world. According to Georgui Kocheshkov, a China expert, these projects have three principal objectives: guarantee’s China access to natural resources; promote new markets where China can sell products and service; and gain first access to any new and/or emerging technology produced in Latin America. Dmitri Karasev, another China expert from Russia, asserts that the rationale behind China’s work in developing countries is simple: to increase Chinese exports by investing in countries that have large populations. A research project conducted by America Latino in Movimento is more focused on why China invests in Latin America. This source asserts that China currently has strong ties with Brazil, Chile, Peru, Venezuela, Argentina and Mexico where it can obtain key resources such as soy, copper, minerals and a multitude of other items needed to sustain itself. However, the passage also warns that “Latin American countries purchase more from China than they export in many cases.” This has reportedly produced trade deficits in many Latin American countries. News source Miami Diario points out that China is looking to enhance its diplomatic ties in the region to facilitate projects or investments that China is willing to make in Latin America. Mexican news source Mazatlán Daily expounds on this idea and provides a detailed plan that China has proposed to Mexico. As the passage discusses, this entails Chinese financing to revitalize a rail corridor across the Isthmus of Tehuantepec, where the Atlantic and Pacific oceans are just 200 kilometers apart. This would open up a shortcut to the Atlantic for China. End OE Watch Commentary (Fiegel)

Hydrology of Isthmus of Tehuantepec, Mexico. Source: Yavidaxiu via Wikimedia, https://commons.wikimedia.org/wiki/Category:Isthmus_of_ Tehuantepec#/media/File:Istmo_de_Tehuantepec_hidro.png, Public Domain

“China has proposed financing to revitalize a rail corridor across the Isthmus of Tehuantepec, where the Atlantic and Pacific oceans are just 200 kilometers apart. The rail corridor of the Isthmus of Tehuantepec will be the backbone of the Special Economic Zones (ZEEs) established in the southeast of the country and will make the region competitive with the Panama Canal.”

Source: “¿Por qué China invierte en los países más pobres del mundo? (Why is China Investing in Some of the Poorest Countries)?” Sputniknews, 28 November 2018. https://mundo.sputniknews.com/asia/-por-que-china-invierte-en-paises-en-desarrollo/

Georgui Kocheshkov asserts that China spends vast amounts of money in third world countries for three reasons. First, it guarantee’s China access to natural resources that it needs. Second, it promotes new markets where China can sell products and services. Third, China wants first access to any new and/or emerging technology produced in Latin America that could possibly bolster its economy. Conversely, Chinese expert Dmitri Karasev asserts that the rationale behind China’s investments in third world countries is more simplistic. His theory is that the Asian giant invests in countries with large populations with the hope that in a decade or maybe longer, the consumer base in those same countries will purchase Chinese goods; hence increasing Chinese exports. He further adds that what China is doing is no different than what the United States has done in the past. By this he means that China is working to open doors in third world countries where they can first invest and then reap the benefits. One of these benefits could potentially be gaining enough status to be the primary exporter of Chinese goods and services to third world countries’ the Asian giant assisted.

OE Watch | November 2019 76 LATIN AMERICA Continued: China’s Investments in Latin America

Source: “El ascenso de China y su impacto en América Latina (China’s Growing Impact in Latin America),” America Latino in Movimento, 20 March 2019. https://www.alainet.org/es/articulo/198832

This source garnered multiple conclusions from their research, but three are listed in this excerpt. The first is that Latin America has become one of China’s principal commercial partners. The second is that Latin America has helped China grow as Latin American countries purchase more from China than they export in many cases. This has produced trade deficits in many Latin American countries. The third is that China could play a role in depleting Latin American natural resources. This source also points out that increased exports to China from Latin America countries from the 90’s to present day have benefited the region. However, it has made some countries vulnerable in the sense that they depend on China to buy their products. The most extreme case in South America is Chile where 25% of all their exports go to China. Peru, Brazil and Venezuela are not far behind as they also export 15- 20% of their goods to China.

Source: “El ascenso de China y su impacto en América Latina (China’s Growing Impact in Latin America),” America Latino in Movimento, 20 March 2019. https://www.alainet.org/es/articulo/198832

Source: “China Hoy: Latinoamérica, foco de la Ruta de la Seda (China Today: Latin America Focuses on the Silk Route),” Miami Diario, 8 May 2019. https://miamidiario.com/china-hoy-latinoamerica-foco-de-la-ruta-de-la-seda-ii/

China continuously works to maintain strong diplomatic ties with Latin American countries. One way in which they achieve this is by providing third-world countries’ infrastructure, loans or other support they may need. For example, China has discussed the idea of creating a corridor between the Isthmus of Tehuantepec in Mexico. If the plan is successful, it would create a new trade corridor for both Mexico and China (this idea is further discussed in excerpt 4). A second proposed project is to build a railway that would connect Peru and Brazil. China’s rationale behind financing products of this nature is that they would potentially improve and facilitate both exports/imports to and from these countries and China.

Source: “The Isthmus of Tehuantepec Rail Line; Interest from China and Backbone of the Special Economic Zones,” Mazatlán Post, 18 May 2018. https://themazatlanpost.com/2018/07/11/the-isthmus-of-tehuantepec-rail-line-interest-from-china-and-backbone-of-the-special- economic-zones-zees/ China has proposed financing to revitalize a rail corridor across the Isthmus of Tehuantepec, where the Atlantic and Pacific oceans are just 200 kilometers apart. In theory, this would serve as a Panama Canal-lite, opening up a shortcut to the Atlantic. The rail corridor of the Isthmus of Tehuantepec will be the backbone of the Special Economic Zones (ZEEs) established in the southeast of the country and will make the region competitive with the Panama Canal.

OE Watch | November 2019 77