Dynamics and Strategic Implications for the US and the ... · PDF file$15 billion loan to...

China and Latin America: Dynamics and Strategic Implications for the

US and the Hemisphere

Presentation to theNorwegian Institute of International Affairs

Oslo, Norway16 March 2011

PH: Pre-2004 invisible growth | 2004-2008 Emergence | 2008- Post-RecessionFor more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

• $118.8b in bilateral trade in 2009 (IMF)• From $10b in 2000 (PRC MOFCOM)• But ↓ from $143b in 2008• Balanced, but winners and losers

• $63.2b to LATAM to PRC• $55.6b PRC to LATAM

• ↑ Attention from leaders on both sides• Rousseff - Apr 2011• Piñera – Nov 2010• Fernandez - Jul 2010• Hu to Brazil – Apr 2010• Golding – Feb 2010• Lula - May 09• Chávez Apr 09 9PH: Pre-2004 invisible growth | 2004-2008 Emergence | 2008- Post-Recession

Dramatic Trade ExpansionInspiring Political Attention

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

• Securing access to reliable sources of primary products

• Assuring ability to feed the population

• Establishing and protecting markets for Chinese goods

• Securing access to technology and global information flows

• Maintaining a presence in institutions key to China’s global economic transactions

• Avoiding an international coalition opposing the “rise” of the PRC

Strategic Imperatives for the PRCAssociated with its (Re)Emergence


Trade Pattern – China

PRC Exports

to LA

PRC

Imports

From LA


1.↑ Role as investor: mining, petroleum, manufacturing, retail

� Junin-4, Repsol Brazil, Statoil, Wuhan-MMX JV, Itaminas, State Grid, PanAmerican, Bridas, Oxy, Rio Blanco, Toromocho, Galeno, Pampa de Pongo, Marcona, Cobriza, Tongling, Bahamas resort, 2 x $1b Urea plants: Tierra del Fuego, Cochabamba, $700m Chery plant in Jacarei, Chana, Sany, Jialing

2.Seller of ↑ more sophisticated goods

3.↑ Role as banker – Finally getting it right• $110b: More in past 2 years than World Bank• $28b to Ven., $10b to Petrobras, $10b Ar. Rail equipment,

$1+$1+$2.3 billion to Ecuador + $400m Jamaica road project • $2.85T currency surplus / $250b CIC sov. wealth fund• High rates of interest (Ec) – Lender of last resort

Dynamics and Effects – China (1)


4. ↑ Role in Regional Institutions

� IADB, OAS, ECLAC� UN – Latin America

5. ↑ Role in on the Ground (eg. Services)

� Telecommunications: Huawei, ZTE� Logistics: COSCO, China Shipping, HPH� Construction:

� Argentine, Venezuela railway projects � Colombia dry canal proposals� $6B Cuban refinery expansion� Hydroelectric, thermoelectric projects: Ecuador,

Venezuela� Pto. Cabello conainer terminal� Jamaica highway modernization



6. ↑ Military Relationships

� Sales – ↑ value-added chain / Venezuela as a launching point�Venezuela: K-8s, Y-8s, L-15s, UAVs, Radars C2 facilities�Ecuador: MA-60s, Radars�Bolivia: K-8s, MA-60s, gifts (comm equipment, Hinger buses, Nisan & Toyota SUVs, outboard motors, gunboats, FAW truck, NV equipment, non-lethal goods, 10,000 assault rifles (1987-1996)

�Argentina: WMZ-551 APCs�Peru: Interest in MBT-2000�Colombia: Interest in armored vehicles�Jamaica – 3.5M donation of non-lethal goods to JDF

� High-Level Visits – 6 DM-level visits In last half of 2010 alone� Officer interchanges: Military students from 18 LATAM countries

� Defense Studies Institute of NDU (Chanping)� Chinese Navy Command School (Nanjing)� Army Command College (Outside Nanjing)

� MINUSTAH (since Sep 04)� Angel de la Paz joint exercise with Peru (Nov 10)


• Hopes for future access to Chinese markets

• Hopes for future Chinese investment

• Influence of Chinese entities and infrastructure in Latin America

• Increasing business presence “in country”

• China as “the wave of the future.”

• China as a development model

• PRC as a counterweight to US and Western institutions


Position of PRC

as Export Partner *

Country 2000 2008

Argentina 6 2

Brazil 12 1

Chile 5 1

Peru 4 2

Venezuela 37 3

Costa Rica 26 2

Cuba 5 2

Different from sources of US leverage (eg. Culture)

Sources of PRC Soft Power

* Data from CEPAL


• Lack of understanding of each side by the other

• Difficulty in learning each other’s culture and language

• Pervasive sense of mistrust of the Chinese within Latin America generally

Significant gap between the two cultures

Limits of PRC Influence

1. Access to Markets / Struggle x Protectionism

2. Protection of Investments and Contracts

3. Preservation of Resource Flows

4. Enforcement of Loan Payments

5. Protection of Nationals and Operations

6. Taiwan “end game”


Coming PRC Strugglesin Latin America

Like dilemmas US has faced in LATAM9But different international constraints + different style

/more use of soft power, indirect pressure?

•Infrastructure

•Pacific Ports•Roads, Rail links (IIRSA projects)

•Survival of Populist Regimes

•↑ of Brazil as Key Actor

•LATAM Organized Crime Shakeup

•↑ Commercial Competition by

External Powers

• Increasing Multipolarity

Strategic Implications forthe US and the Region


Questions &

Coments?


� $20 billion loan (1/2 in yuan + to be repaid in oil – 200,000 b/d)� $12 billion Heavy Investment Fund, incl. Railroad� Petroleum: CNPC in Orinoco: $16.3 billion investment

commitment + 2 refineries in PRC + 6 tankers� 364,000 b/d->1 mil b/d by 2012� Chinese drills being assembled in Venezuela

� Commercial cooperation for market position� $300 million LABS airline9to buy Y-12 A/C from CAIC� ZTE factory in Tuiy (Mar 08), Haier factory

� Mining: � $1 bil loan to CVG from CDB, export contract w. Wuhan with

“China Price”� Las Cristinas Gold Mine� $365m pellet production line by CSMC

� Infrastructure Work: $7.5b railway (CRR), $1.1 bil CAMCE projects, CAMCE and Sinohydro powerplant projects, others, Container terminal at Puerto Cabello (CHEC)

� Military Cooperation9A model for others?� Mil exchanges, 10 radars, Satellite, 40 K-8 A/C, 12 Y-8s

� 1st 6 received Mar 10..1 crash

PRC in Venezuela

For more information, Contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

� One of 1st state visits by Dilma (Apr 11 BRIC Summit in PRC)� But more emphais by Dilma on protecting Brazilian industry

� #1 export destination (May 09)� 65%↑ in PRC demand key in commodity sector during

recession9eg. 45% of CVRD sales� Brazil->PRC: Soy, Oil, Iron, Intermediate Goods� Major surge in PRC investment 09-10: Going to $40B?

� Açu: $50B Megaport project – Aike Batista� Wuhan - MMX - $5 billion steel mill JV – But problems� Cluster: PRC car & other factories

� Wuhan purchase of 22% $400m stake in MMX (09)� $1.2B Itaminas (Minas Gerais) by ECE, � Rumored Baosteel: $1.6b for 30% of Minas Rio from Anglo

American (09) – No further development� Petroleum: $7.1b Sinopec for 40% of Repsol, $3.1b Statoil

stake, Sinopec role in 2 blocks, $7B for 20% stake in OGX+oilfields, $10B loan

� $989M for 6 power transmission facilities (State Grid)� Participation in $19b Bullet Train project� $700m Chery plant in Jacarei� Interest by 6 PRC groups in Ag. Purchases

� Technology Collaboration: CBERS, Embraer (but closure of Harbin plant for lack of demand?)

� $950M Noble investment in 2 sugar refineries from Cerradihno� Integrated Production: eg. components from Manos� Defense co-production? (Aug-Sep 10 Liang-Jobim DM visits)

PRC in Brasil


� $15 billion loan to develop half of El Mutun� Chung Hsing Mining, Citic Guoan� $1 billion ammonia and Urea plant in

Cochabamba by Sinomach (Aug 10)� Meeting of DMs in Beijing – Aug 10� Sale of 6 K-8s A/C

� $58 mil – Financed by PRC� Mid-2011 delivery

� 2 MA-60 transport A/C� “Tupac Katari” satellite - $251M/$295M financed by

CDB� 3 rounds of gifts of equipment

� Mostly non-lethals: 37 Hinger omnibuses, 21 Nissan trucks, 40 outboard motors, 2 patrol boats, 34 FAW trucks9

� Colaboration with YPFB � Shengli oil, strategic partnership

� Interest in Lithium� Also Russian, Japanese, Korean, European

interest

PRC in Bolivia


� $2.4 bil hydroelectric plants (Coca-Coda Sinclair ($1.7b, 6.9%)+ Sopladora+Toachi Pilaton)9Correa returns to the bargaining table � 6 PRC oil companies in Ecuador: >40% non-state pdn.� Andes - $1.42b investment in 2005+$2b since� Exploration and possible future role in ITT (Yasuni)� Problems in Tarapoa (Nov 06), Orellana (Jun-Dec 07)� $1 bil loan for oil (7.25%, 2 yrs - Dec 08) + $1 bil ($200m to Chinese companies for oil projects - Aug 10)

PRC in Ecuador


� 6.5%, 4-Year loan � Possibly funding for $12 bil “Refinery of the Pacific”� 132,000 b/d committed for repayment of loans� Purchase of Corriente by Tongling ($651 million)� $3B mining investment planned9but disputes over terms� Manta – Manaus Corridor + interest in Chinese capital to finance development of Manta as an air hub� Purchase of 2+2 MA-60s, 4 Chinese radars ($80m, Nov 10 delivery) – Following Venezuela lead� Confucius Institute-U. San Francisco de Quito (Dec 10)� But tensions: eg. w/d of Hutchinson from Port of Manta

PRC in Colombia


� Resurection of rail version of trans-Colombia Canal� $7.6B rail linkage� Bay of Cupica to Gulf of Uraba?� Related to improvement of Port of

Buenaventura, improvement of rail linkages from Pacific to Bogota

� Petroleum� First China-India oil JV in LA (Mansrovar)� $876m acquisition of Emerald Energy assets� Sinopec acquisition of Hupecol oil in Colombia for $281M

(Jan 11)� New opportunities for petroleum and minerals exploration

with end of Civil War

• Soy – 1.5b in exports to PRC cut off over protectionism• Fernandez July 10 visit, tried to smooth over• Few meat exports to PRC (fitosanitary + Hilton quota)

• Railways: $10b in projects including BsAs rail modernization (Jul 10)

• Oil - $3.1b purchase 50% of Bridas by CNODC + $7.1b purchase of PanAmerican (Nov 10) + 2.4b Oxy

• $1b Urea plant in Tierra del Fuego (Feb 11)• Mining: Jan 10 $140m commitment, 05 Sierra Grande

purchase9but little compared to other Ar. mining exports• $1b Urea plant in Tierra del Fuego + port, Chinese TVs

from FTZInfrastructure Issues: Mendoza-Valparaiso tunnel, rail links

• Space: San Juan observatory + Failed bid to ARSAT• Huawei, ZTE (incl. Huawei cellphone

factory in La Plata)• Military: 4 APCs for Cruz del Sur, Failed bids to sell

trucks, radars, helos


PRC in Argentina

• Pinera visit Nov 2010, Cancelled Hu Visit Apr 10, Apr 08 Bachelet to PRC

• Site of Nov 04 APEC summit• First PRC FTA with Latin America• Concertacion governments focus on making Chile

bridge between LA and Asia• First nation in SA to recognize PRC9survived switch

from Allende to Pinochet• Mineral exports: Copper + Potassium Nitrate• CODELCO 05 advance purchase agreement

• But tensions – Non-Sale of Gaby mine• Some traditional exports--Chilean wine (eg 1428)• Driven by handful of Chilean industrialists (Claro,

Luksik, LeRou, etc.)• Iquique – Santos corridor• CSUV and importance of Panama Canal• Initial resistance to PRC companies in port operations

(Valparaiso)

PRC in Chile


• 22 PRC companies: $10B in 5 years?• Important PRC investments in Mining: Toromocho

(Chinalco), Rio Blanco (Zijin9in Piura), Galleno(Minmetals + Jianxi9in Cajamarca) $2.5b, Nanjinzhaoen Pampa de Pongo ($3.28b?)

• But also Shougang ($1.2b new) and problems with labor, government in Hierro Peru mine in Marcona

• Host of 2008 APEC Summit• Site of 5th China-LA Entrepreneur Summit (Oct 11)• 2nd FTA with PRC in LA9March 08• Oil and Gas (Sapet, PlusPetrol – incl. Camisea)• Fishmeal exports to PRC / Purchase of fleets and

processing facilities by China Fisheries• First functional “improved” inter-oceanic corridors: North

(from Paita, via Iquitos), South (from Ilo)9Key for Manaus

• Expansion of commercial ports: South of Callao, Paita, Ilo, etc.

• BOC in Peru via Interbank (Dec 10)

PRC in Peru


• The country “most damaged” by expanding trade with Asia (IADB)

• Some PRC investment in Mexican maquilladora sector for export to US (Cars –eg. FAW, Geeley, Lenovo en Monterrey)

• Growing PRC presence in Mexican telecom -• Among the greatest collection of language

and Chinese studies programs (eg. ITESM)• Investment by large Mexican companies,

leveraging Mexican culture (Beer – GruposModelo, FEMSA, Tequilla, Bimbo, Maseca, Telenovelas (Televisa)

• Hutchison in ports: Michoacán, Ensenada, Veracruz, Manzanillo

• Political: One of 4 “Strategic Partners” because of influence in CA

• Military: Regular exchanges atwar college level

PRC in Mexico


• Successful “Dual” diplomatic track due to strategic importance to PRC: Diplomatic relations with Taiwan, but large-scale commerce with PRC• Martenelli suggestion, while candidate, to

recognize PRC• Hutchison port operations at Cristobal & Balboa

(but blocked from participation in Farfan project)• COSCO (shipping) a major user of canal• Interest in participating in $9 billion (Oxy) refinery

at Puerto Armuellas, making trans-Panama pipeline bidirectional

• Major source of contraband Chinese goods to LATAM (eg. Colon FTZ)

• Canal widening impacts commerce of Brazil, Argentina with Asia

• Many Panamanians with some Chinese ancestry

PRC in Panama


• Visit by Hu Jintao to Cuba Nov 2008 en route to APEC• Increasing petroleum involvement – $6B refinery

expansion and LNG terminal by CNPC (09)• Nickel – World’s largest proven reserves

• 3 existing plants, new plant in MOA• But Venezuela replaced China Minmetals in

Cubaniquel JV in 07• Deal with Cupet for joint development off Pinar del Rio• Sugar – Previously a leading Cuban export9now more

symbolic• Medical: Cuban doctors in PRC, biomed facilities in

Beijing, Chanchun• Spanish language training for PRC functionaries• Importance for proximity to US: Bejucal, Santiago de

Cuba, Lourdes (“Cyberuniversity) • Value to PRC for “South-South” / Socialist Brethren

Marketing• But historic mistrust between China and Cuba (opposite

sides during Cold War, including in Africa)

PRC in Cuba


• Change in diplomatic relations – 2007• $1 billion refinery project - RECOPE• PRC purchase of $300m government

bonds• $83m soccer stadium• Request for “Phase 2” Chinese

donations during Yang Jiechi visit July 10

• Chinese investment in Pacific Coast tourism

• AFEC controversey over denial of visas for 100 chinese construction workers9cancellation of housing project, lawsuit

PRC in Costa Rica


• ↑ in initiatives• Participation in Shanghai Expo (May 2010)

• Including National Association of Private Industries (ANEP), Salvadoran Industry Association (ASI)

• 1st PRC commercial expo in El Salvador (22-25 Nov 2010)• Participation by 53 PRC companies• Chinese commercial office in El Salvador• Salvadoran Commercial office in Beijing (with help from CCPIT)• Opened Sep 16, 2010

• El Salvador – China Chamber of Commerce (Manuel Flores)• Opened Oct 2010 in Escalón

• China-Salvador Friendship Society (since 2007)• “CA4“ and FTA with PRC: Guatemala, Honduras, El Salvador,

Nicaragua• Proposal for confederation during 2nd «Friendship Forum» of

China-Central American communities (México)• Importance of completion of port of La Union

PRC in El Salvador

Para mas información, comunicarse con: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Construction of dams by Chinese companies: Patuca I, II, III (Sep 10)• $300M gift from Taiwan cancelled May 2009

Taiwán Factor• Visit by head of National Congress to Taiwan (Juan Orlando

Hernandez) Sep 2010 • Visit by Pres. Lobo (Nov 2010)

• Ma Ying-Jeou participation in Jan 2010 inauguration ceremony (during delectate period)

• «One village one product» project with Taiwan• $500k to modernize congress building • $100m in June 2010 for those harmed by Aghata• 65 scholarships for low income students in 2010 (Y4 of

program)

PRC in Honduras


Growing private initiatives• Guatemala-China Chamber of Commerce and Cooperation

(est. 2008)• Participation in Expo Shanghai 2010• Participation in 2nd China-Central America Friendship Forum

(Nov 2010)• Pedro Barnoya

Taiwan Factor

PRC in Guatemala


• Continuing diplomatic relations with Taiwan• Although Sandinista government

previously recognized PRC• Taiwanese aid + little prospect of aid

from PRC• But Expanding Commercial Relations:• ExpoChina trade show in Managua ,

promoted by ProNicaChina, headed by Bayardo Arce, Ortega’s top economic advisor

• PRC presence: Chinese language classes, products

PRC in Nicaragua


• $400m highway project by CHEC..Started Dec 10• Montego Bay Convention Center renovation via a

$45.4M loan from China (June 07)• Sugar: Purchase of 3 refineries, sugarcane fields

for making ethanol by Complant (Aug 10)• Nickel: PRC interest in purchasing Russian

interest in mines (to be reopened July 2010?)• Caribbean warehousing hub at Caymanas Estate

(Kingston)• Strategic maritime location between Cuba and

Hispaniola• Some Jamaican marketing of products to PRC

middle-class (eg. Rum, Blue Mountain Coffee)• Golding visit to PRC (Feb 10)• $3.5M donation of non-lethal gear to JDF (Jan 11)• First Confucius institute in Caribbean

• UWI-Mona 2009

PRC in Jamaica


• Bahamas - $3 billion resort complex at Cable Beach + Freeport Container Terminal, Sports Complex@

• Trinidad – $400 million Aluminum plant

PRC in Other Caribbean Nations


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