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Affluent Investor | June 26, 2017

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China Makes its Move in Latin America

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China’s rapidly growing influence is not confined to the far reaches of the Orient.  Beijing’s presence is increasingly being felt within the U.S.A.’s own hemisphere.

A decade of escalating interaction in Latin America and the Caribbean has risen to a crescendo into 2017. President Xi Jingping, during a visit to Ecuador, Peru and Chile, set up a series of trade deals. It’s part of China’s goal of becoming a major influence in the area. Beijing has issued plans setting out its methodical goal to begin a “new era” in China-Latin American relations, according to a report by the Wall Street Journal.

According to The Economist  “China’s aims in the region are expansive. In 2015 it signed a slew of agreements with Latin American countries promising to double bilateral trade to $500bn within ten years and to increase the total stock of investment between them from $85bn-100bn to $250bn. China also wants good relations in order to diversify its sources of energy, to find new markets for its infrastructure companies and to project power, both soft and military, in the western hemisphere.”

The long-term benefits of the deals to the region are in doubt. The Economist notes that “the impact on employment is slight. A study by Boston University found that trade with China generated 17% fewer jobs per dollar’s-worth of exports than did trade with other countries…Almost all imports from China are cheap manufactures. Some Latin American economists argue that Chinese subsidies to their producers undermine domestic industries. A new study published by the Atlantic Council…concludes that Chinese exports ‘have had an effect on the region’s de-industrialization”.

Should Americans be worried? Paul Coyer, writing for Forbes noted that the Obama Administration didn’t consider Beijing’s growing influence as a problem. However, Coyer writes, “Beijing’s investments globally are rarely undertaken with solely business goals in mind – the Chinese, unlike Americans, are practiced strategic thinkers, with a rich history, thousands of years old, of strategic thinkers to inform their approach to geopolitics. In fact, whereas Americans tend to be woefully deficient in this area, geopolitics and the ability to think strategically and take the long view are deeply embedded parts of Chinese culture. Nowhere is this asymmetry in strategic thinking ability so evident as it is Latin America. Whether the US think this is the case or not, it is certainly Beijing’s goal to grow its influence at Washington’s expense… Chinese investment is driven much of the time by strategic considerations directed by the Chinese state rather than being driven purely by market forces. Chinese…state-owned enterprises…are by far the most important source of outward foreign direct investment…with one study showing that nearly two thirds of Chinese [investments] came from [state enterprises], illustrating the prominent role played by the Chinese state in Chinese foreign investment decisions. In the case of Huawei, which in 2012 surpassed longtime king of the hill Ericcson as the largest telecommunications equipment supplier in the world and has strong ties to China’s military and intelligence services, its considerable role in building many of Latin America’s telecommunications and information networks is a boon to Chinese intelligence. As one example, six out of the seven 4G mobile phone networks in Brazil were created by Huawei.

An Official Chinese document notes that “Since 2013, the Chinese leadership has set forth a series of major initiatives and measures on strengthening China’s relations and cooperation with Latin America and the Caribbean in a wide range of areas.”  It is of concern that trade is seen as a means to further other goals, and military cooperation plays a significant role. The document notes:

“China will actively carry out military exchanges and cooperation with Latin American and Caribbean countries, increase friendly exchanges between defense and military leaders from the two sides, strengthen policy dialogue and set up working meeting mechanisms, conduct exchanges of visits between delegations and vessels, deepen professional exchanges in such fields as military training, personnel training and UN peacekeeping, expand pragmatic cooperation in humanitarian relief, counter-terrorism and other non-traditional security fields, and enhance cooperation in military trade and military technology.”

Russia (and the former USSR’s) attempts to influence the region were more obvious and heavy handed, heavily centered on overt military ties.  China’s approach is more multi-faceted, and therefore presents a greater long-term danger.

 

Originally published on the New York Analysis of Policy and Government.

Frank Vernuccio serves as editor-in-chief of the New York Analysis of Policy & Government (website usagovpolicy.com). He is the co-host of the syndicated radio program, Vernuccio/Novak Report, and is also a contributor to Fox News. His columns appear in many newspapers. After graduating Hofstra Law School, he was a legislative editor for a major publishing company, then served in both Republican and Democrat Administrations. Following the 9/11 attack, he was appointed to run the hard-hit Manhattan branch of the New York State Workers Compensation Board.

 

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