China and Latin America

Relationship between China and Latin America

The Chinese relationship with Latin America started its way back in the year 2004 once President Hu Jintao made his visit to the region. The Latin American relationship started long ago in the 1960s through the trial and errors laying the foundation for the current strong bond in the connection. The Chinese involvement with the Latin American world has gained momentum over the past years. There has been a notice of an economic analyst who speculates the relations between the two worlds bound to grow even stronger with increasing ties on the commercial front. This essay seeks to investigate the relationship between China and Latin America, the origin of their relations as well as the partners’ trade connection over the years.

Structure of China-Latin America Relation

China’s and Latin America’s relationship hinges on a win-win aspect in that both countries benefit mutually from their interaction. During the summit of China-Latin America, China’s President Xi Jinping stated that he intended to build a five-in-one pattern in the world of China-Latin America, as well as to create the Caribbean relations. The building blocks of this connection would include political trust, trade cooperation for economic gains, cultural integration, co-operation in international affairs, and an improved bilateral relationship between the two states with the purpose of the common destiny (Jilberto & Hogenboom, 2010). The Chinese-Latin American relationship hinges on a 1+3+6 structure. The number one in the structure refers to a single or one plan for both partners in the connection. It means an establishment of a China-Latin America Countries Cooperation Plan in the year 2015-2019. This cooperation aims at achieving inclusive growth, as well as sustainable development in the economy of both partners involved.

The number three in the proposed structure stands for three engines that entail the promotion of the comprehensive growth of China-Latin America’s actual co-operation. It involves commerce, investment, and fiscal co-operation as a driving force, targeting to promote China-Latin America commerce to reach 500 billion USD (Jilberto & Hogenboom, 2010). This co-operation also intends to push up the investment stock to Latin America. It is done to hit the height of 250 billion USD in a period of ten years. This co-operation also intends to promote the growth of the local currency settlement as well as currency exchange in bilateral trade.

The number six in the proposed structure refers to the fields that this co-operation is going to address. The areas include energy and resources, agriculture, infrastructure construction, science, and technological advancement, as well as information technologies. President Xi Jinping has added that the proposed cooperation will remain within not only the listed fields. However, it will also foster friendship among people since state-state connections become stronger if the citizens in the countries in question enjoy positive relations (Jilberto & Hogenboom, 2010).

Future Projection

The relation between China and Latin America is bound to grow even stronger from 6,000 scholarships that the Chinese government intends to offer Latin America for studying in China. The two countries also enjoy strong political ties. It is evident from the fact that China intends to invite 1,000 leaders of various political parties from Latin America to China for an official launch of the Future Bridge. It is a training program targeting 1,000 Latin America and Chinese youth leaders (Jilberto & Hogenboom, 2010). The relationship between these two countries also fosters cultural integration for them. It is evident from the proposal to set 2016 as the year for Chinese-Latin America’s cultural swap year.

China established bilateral ties with the Latin American continent in the year 1997. Since then, the relationship between these two countries has always been on an upward trajectory. Trade, South-South cooperation, and diplomacy have defined China’s and Latin America’s relations. The global financial crisis has seen Latin American countries learning from China and aping their development trajectory. To overcome the financial crisis, Latin American states have taken on a stimulus package, instituting active industrial policies, and adopting strict regulatory controls, among other strategies (Jilberto & Hogenboom, 2010). However, China’s-Latin America’s connection has raised concern over China’s role in undermining transparency and other established human rights preserved by the US.

It should be noted that the Chinese-Latin American relation extends beyond commercial interests to incorporate inclusion into the state-managed programs in science, education, media, culture, and even arts. Economic analysts assert that China rose to become an ideal trading partner of the Latin American countries after the departure of the United States in 2000-2008. It occurred during the George Bush administration and partly in 2008 under Obama’s regime. China has moved fast and filled the void behind by the United States. Another explanation for this strong cooperation between China and Latin America is that the United States had been pre-occupied with a fight against world terrorism, military actions in Iraq and Afghanistan, nuclear activities of North Korea, and the need to rebuild the collapsing Atlantic Alliance. This all has pushed Latin America to have a status of a smaller concern in the hierarchy of the US priority (Jilberto & Hogenboom, 2010).

As a strategy to increase Latin America’s relevance in China, the Chinese government has created a huge demand for Latin America’s raw materials in its market. It ensures that Latin America participates fully in commercial cooperation in a bid to attain a united and common front in tackling a problem of the global financial crisis (Jilberto & Hogenboom, 2010). However, China-Latin America’s commercial relation has also introduced new challenges that mostly disadvantage Latin Americans. The trade is related to unbalanced consumer goods bought from China to have a higher comparative value. It causes trade deficits in the entire region alongside displacing local manufacturers from both foreign and domestic markets. There has been a significant increase in unemployment rates.

Local manufacturers create employment opportunities for the locals who work in the manufacturing sector. Therefore, the displacement of these local manufacturers’ impacts negatively on the Latin American countries since it renders its citizens unemployed. Employment enables people to sustain their livelihood and invest in the economy and thus enhance economic development. Unemployment, on the other hand, reduces the level of local investment. Citizens lack the capital for investments; and it ultimately slows down economic development (Hearn & Leon-Manriquez, 2011). It, therefore, means that the relation between China’s and Latin America’s countries has some negative externalities and skewed to benefit one partner at the expense of the other one.

China embarked on a rapid industrialization program in the 1980s with the aim of increasing its manufactured exports. Meanwhile, the Latin American countries have adopted Washington consensus market principles that emphasized on capitalizing the quick revenues obtained from resource experts (Jilberto & Hogenboom, 2010). There are two scenarios whereby one creates the demand for raw materials, and the other partner creates the requirement that has mutually bound these trading partners.

Early Trade Link between China and Latin America

The early trajectory of Latin America’s engagement with China runs back in the 16th century when the Manila Galleon established a regular trade with Asia to safeguard the interests of the Spanish empire. Spanish sailors discovered favorable winds that could sustain the transpacific relation in the year 1565. It led to the establishment of standard routes that linked the Philippines with the Viceroyalty of Peru in Mexico (Jilberto & Hogenboom, 2010). Usually, the voyage from the Asian archipelago to the Acapulco port had taken six months. The Spanish crown initially allowed only one trip annually for 300-ton gallons.

Later on, in the 17th century, the Spanish Crown authorized two trips per year with an individual ship with each transporting a thousand tons. In the early days, the trade between China and Spain was indirect. Zhong Guo in the Chinese empire was emphatic on foreign economic relations. Therefore, Chinese traders had transported their goods in undersized boats to the Philippines where they joined their products to the galleons going to Acapulco. The Spanish cargo included silver obtained from Mexican highlands, being as present days’ Peru. This triangular trade that involved China, the Philippines, and Latin America had lasted for 250 years. The Asians supplied Latin America with high-quality furniture, porcelain, medicine, and silk (Hearn & Leon-Manriquez, 2011). The trade on silver circulated in the Philippines and the entire Chinese territory as well as Asia turning it into the first global currency.

Latin America regained its independence in the 1820s causing a collapse of the relations between the country and China. The reason for destroying this connection is explained by the following fact. After the Spanish Empire collapsed, none of the new republics in Latin America was stable enough to replace the strong Spanish Empire in the Pacific trade. Secondly, the newly established states were eager to safeguard their sovereignty and thus concentrated on superpower politics. The third explanation for the collapse of the connection is that the Qing Dynasty had been pre-occupied with the territorial expansion of the Empire towards the East as well as Central Asia (Jilberto & Hogenboom, 2010). It is also said that the population increase in the second half of the 19th century from 361 to 430 million people placed a great strain on the arable land compromising the socio-political integrity of China. It has left China with no option; and hence it had to consider foreign interventions especially from European powers.

The economic turmoil forced Heaven Empire’s citizens to look for an alternative survival. By the year 1847, there had emerged advanced migratory channels. They helped to transfer the Chinese workforce from Shantou and Fuji to Peruvian mines, as well as the Cuban sugar plantation. In 1960, the Chinese migration to Latin America reached its climax due to the high demand for the labor force in the construction of the first transcontinental railway (Hearn & Leon-Manriquez, 2011).

The expansion of the gold mines located in the northern Californian region also has increased the requirement for Chinese workers in the Latin American region. It is said that the dwindling returns from gold and the persistent discrimination against Chinese workers forced them to turn to this region. This group alongside the families established has spurred the economic development of the entire Latin American district. It has led to the development of a diplomatic relationship between China and Latin America (Jilberto & Hogenboom, 2010). The collapsing Qing Dynasty has established a founded official relationship with Cuba, Panama, Brazil, and the Latin American states, especially those with a high number of Chinese foreign workers.

China had been greatly involved in Latin American politics during the Cold War. The country also seems to be engaged in environmental conservation measures in Latin America. It is seen by its signing of the Protocol under the Treaty of Tlatelolco that has banned the production, storage as well as transportation of nuclear materials and weapons to Latin America. In the 1990s, the connection between China and Latin America changed from political to economic matters. China has established a series of policies that would guide its foreign trade especially with Latin America’s continent (Hearn & Leon-Manriquez, 2011). Beijing has changed its foreign strategy and narrowed it down to three major elements including the peaceful ascent of China as a regional and global power. It has also factored in the multipolar world concept and aligned oneself, according to the vision of global organizations, as a chief instrument of foreign policy. China has further changed its exports to Latin America to include automobiles, electronics, being both medium and high tech products, i.e. ships (He, 2012). It has, in its turn, forced the Latin American countries to downgrade the level of sophistication of their exports to China to cope with the Chinese demand for raw materials.

China’s Imports

China stands as the largest consumer of Latin American raw materials. The country bought 30% of iron, 40% of cement, 20% of copper, 31% of coal, 27% of steel, 25% of aluminum sold on the global market, according to the Consumer Statistics of 2014. It should also be noted that China stands as the second-largest client of fossil fuel products being the second state after America (He, 2012). To boost trade links with the Latin American countries, China has established free trade agreements with them including Peru in 2009 and Chile in 2006.

The demand for raw materials by Chinese industries promises a long-lasting market for Latin America’s raw products. The ever-growing population of China also guarantees the stability of this demand. Critics, however, postulate that the trend within the Latin American countries exports their raw materials to China diminishing the continent’s ability to develop its local industries. The region has learned to depend on Chinese manufacturers to process their raw materials and present them with manufactured goods (Jilberto & Hogenboom, 2010). The killing of local industries plunges the district into an unemployment crisis that has some negative economic implications.

It benefits China, on the other hand, in that the country purchases raw materials at cheaper prices and sells. After those sales, the manufactured products arrive in the same states at the inflated price. China imports iron and other metals from Latin America and, in return, sells automobiles. It means that in China the Chinese people secure jobs in the motor vehicle manufacturing industry. Employment has earned them living. They were able to re-invest their surplus capital back in the economy for economic development. It boosts the economic growth in the country (Jilberto & Hogenboom, 2010). This process favors the large Chinese population that has a high demand for employment.

It suffices to state that the Chinese and Latin American countries mutually benefit from their diplomatic relations in some way. This relation focuses more on the commercial aspects as opposed to the political angle it has taken during and shortly after the Cold War. China has developed to the level of a major world trading power posing some discomfort for America. The USA has started to feel the pressure that China is exerting in the market. Its large population attracts more bilateral relationships with Latin American countries than any other country in the world (Jilberto & Hogenboom, 2010). The state has also embarked on the construction of major engineering projects in the Latin American continent due to the sufficient skilled labor available in China.

Conclusion

It should be concluded that Latin America has the potential to grow in a major trading partner. The reason is related to the presence of raw materials in the region. Conducive climatic conditions support the growth of various agricultural products. It implies that such a country like China stands to benefit so much and for a long period if it establishes good diplomatic relations with the continent. However, it ought to take notice of the concern that it raises among other world commercial superpowers. The country should prepare adequately for any strategy that it might be planning to dislodge itself from the Latin American market. America has been silent about China’s inroad activities in the region for a long time. Some analysts suggest that it is a strategy that might work successfully against the Chinese state.

The competition for the market among countries in the global arena has at times caused some tension among them. Therefore, the need for countries to establish diplomatic ties with one another even if they are not trading partners has appeared. The history indicates that China and Latin America have been trading partners for a very long time. This trend is bound to continue even in the future. However, Latin America stands at the fifth position among those countries that trade with China. Their position is bound to go up in the next three years if China’s demand for raw materials remains on the same wave. The reestablishment of revised diplomatic relations with Latin American countries points to the following fact. These states are warming up for trading activities. Latin American countries have come to an agreement that China remains their ideal trading partner.