China pivots to Latin America

By Kerry Sun on October 8, 2013 • ( 2 )

Alternative routes of the proposed Nicaragua Canal

In September of this year, China announced a $40 billion investment to build a canal through Nicaragua that is to be an incredible engineering marvel. The proposed canal is still in the early stages of development, and was rapidly pushed through the Nicaraguan parliament earlier this year. The potential waterway is expected to dwarf the Panama Canal both in economic prospects and in sheer size and glamour. The Panama Canal has long been associated with the military and economic might of America in the region.

However, with the proposed Nicaraguan Canal, it represents a shift in world geopolitics with China becoming an economic powerhouse in the region that is long considered to be America’s private backyard. With America preoccupied with the “Pivot to Asia” and neglecting Latin America, China is stepping up with its own “Pivot to Latin America.”

China is right to work towards closer relations with Latin America. It has a population of 500 million and a $3 trillion market. China is hungry for key resources such as coal, petroleum and agricultural goods that Latin America is able to provide. China has risen out of obscurity to become the number one trading partner of countries such as Brazil, South America’s most pivotal economy, Chile and Argentina. It is poised to overtake the US in other countries in the next couple of years. China has exceeded the World Bank in becoming the number one lender in Latin America lending $110 billion in the past two years. China’s trade with Latin America is estimated to be $250 billion in 2012.

Not only is China’s economic power increasing in Latin America but also its soft military power. China’s naval hospital, the Peace Arch, is sailing the around the region offering medical care. China is increasing arms sales to countries such as Columbia, Peru and Uruguay. China is also using Venezuela as a launch pad into stronger relations with South America.

Is China’s pivot to Latin America benefitting the region? The short answer is yes. China is helping to develop Latin America’s natural resources and infrastructure. China is a major market for Latin America’s exports which has increased by 40% from 2000-2008. By 2009, Latin American exports to China represented 7% of the region’s total exports or $43 billion. Between 2000-2009, China’s two way trade with Latin America increased by 660% to $120 billion in 2009. This trend is projected to grow within the coming years as China has a bottomless appetite for resources. China offers an alternative to the same old western engagement to Latin America for decades.

Though China’s engagement to Latin America is of great benefit and importance to the region, it is not an equal partnership. As with China’s recent push to Africa, China has been facing a lot of criticism. For instance, it has been argued that China is only focusing on infrastructure development linked to the region’s resources and not encouraging in the sound development of transparent political institutions and encouraging good governance. In addition, critics suggest that China’s exports might even undercut the competitiveness of Latin America exports.

You can’t really blame China for wanting to establish stronger relations with Latin America. Not only does the region represent a sea of economic opportunities for both parties, it is China’s response to the recent American “Pivot to Asia.” China is concerned about growing American influence in East Asia which China considers its own backyard. The US has enhanced its military relationships dramatically with Australia, Japan, South Korea and the Philippines. China sees the US as practicing 21st century containment on China.

It sounds like the Cold War all over again. As Bill Gertz stated in the Washington Free Bacon, “China has been quietly taking steps to encircle the United States by arming western hemisphere states, seeking closer military, economic, and diplomatic ties to U.S. neighbours, and sailing warships into U.S. maritime zones.” The proposed Nicaraguan Canal will certainly be China’s mark in the region representing its power, prestige and glory. It is also China’s way of sticking it to the Americans. China is trying to balance out US influence around the world and to show them that the world is not America’s private playground where they could roam as they please.

In short, China is a new face in Latin America. The full impact of its engagement may not be know for some time. Latin America should openly welcome China’s interest in their economies but they should also exercise caution. The primary objective of a nations‘ foreign policy is to advance its own self interests above all else. China is not different. Chinese investment in the region off course comes with preconditions such as supporting China’s claim to the Senkaku/Daioyu Islands or sovereignty over Taiwan. Whatever the case, China will forever reshape Latin America’s geopolitics.