Xi Jinping, President of China, accompanied by Brazil's President Jair Bolsonaro, in 2019. Photo: Isac Nóbrega / PR / Fotos Públicas

The four axes of the Chinese strategy in Latin America

Despite China's long-term planning tradition, the fact that the country still suffers from cultural and political misunderstandings about and from Latin America often causes plans to change or to be cast aside

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Although China reduced its investments in Latin America in 2020, the region is still strategic for the Asian powerhouse in other ways. After all, China’s interests are not only measured by its investments (or the lack of it) in some country or region, but also by more subtle (and sometimes not openly disclosed) strategic actions that often go unnoticed by the general public.

One country’s goals towards others are not static. Despite China’s long-term planning tradition, the fact that the country still suffers from cultural and political misunderstandings about and from Latin America often causes plans to change or to be cast aside. For many government officials in the region, China promises much more than it actually delivers. However, what it delivers ends up being far superior to what any other country does, including the United States.

READ ALSO: Brazil’s economy shrank last year by 4.1% amid the pandemic, less than forecast

With that in mind, People’s Republic of China has basically four goals when it comes to the countries of Latin America and the Caribbean:

1. Generate more and more markets (to sell and to buy from)

China’s first general goal in Latin America is the most obvious and visible of all: to generate more markets for its products and its companies, as well as to acquire natural resources and commodities at the best possible price and within a continuous flow, with the lowest economic, political and diplomatic risks as possible.

At this point, China has been achieving considerable success, especially if we note that the U.S. participation in the trade balance of several of the region’s countries has been decreasing, while that of China rises year after year.

In the energy sector, China has already become an important player in Brazil. It is also relevant in logistics, not only for Brazil but also for Mexico, Peru, Colombia, as well as Argentina and Ecuador. In Chile, the country increases its participation and influence in the mineral sector every day.

READ ALSO: Brazil trade with the U.S. sees worst result in 11 years

2. To lay a foundation for China-dependency

China’s second macro-objective is to make several countries in the region economically and commercially dependent on it. From an economic point of view, China’s financing lines end up becoming excellent deals for Beijing, since Latin American countries usually involve commodities and other products as part of the payment.

Argentina has promised to repay part of its loans to the country with wheat and meat. Venezuela did the same with oil – the problem is that PDVSA, the state-owned oil and natural gas producer, is not managing to produce enough to repay this debt in this way.

But it is important to understand the distinction between economic dependence and commercial or trade dependence.

The economic dependence revolves around the credit lines that are offered in government-to-government negotiations (as in the Venezuelan and Argentine cases), as well as in the negotiations between governments and the private sector (credit lines to enable the expansion of factories and logistics chains that usually involve the participation of Chinese companies as partners in joint ventures that use this capitalization to expand).

Although the Chinese loans are not addressed to the federal government in Brazil, the volume destined to the country’s private sector is highly relevant. Brazil’s largest oil producer, the state-owned company Petrobras, for example, closed a new $5 billion financing deal with the China Development Bank in early February.

READ ALSO: Rough road ahead for Latam and Caribbean economies, says IMF

On the other hand, trade dependence occurs more organically and is clearly present in the relationship that Brazil has with China. Brazilian agribusiness and iron ore exports are highly dependent on China, which is the main buyer of these products. This increases the sector’s risks, since maintaining the success of the main items on Brazil’s export basket depends more on Beijing’s decisions than that made in Brasilia.

3. Influence to the point of changing perceptions (and the vaccine against COVID is quite an asset for that)

The first two points (more markets for Chinese companies and a deep commercial and financial relationship) end up generating a by-product that becomes the third Chinese macro-objective in Latin America: to influence national public policies and the foreign policy in the different countries of the region, in order to strengthen China’s image, perception, and objectives at the international level.

A clear example of this third point is outside Latin America. In 2020, Saudi Arabia, the United Arab Emirates, Qatar, Iran, among others, signed a letter of support to China regarding the Chinese government’s stance in Xinjiang province, on top of the treatment given to Uighur Muslims.

While Western countries highlight acts of human rights violations in the province, others interpret them as national security measures. Hence, Islamic countries – alongside Saudi Arabia and Iran (historic enemies) – signed a letter defending China on an issue affecting Chinese Muslims.

The increase of the Chinese influence in the Middle East, especially in the mentioned countries, is remarkable in recent years. While China has become a partner in uranium exploration and the main importer of Saudi oil, the country has also substantially increased its relationship with Iran, by offering commodity-backed loan lines.

It is important to note that China’s vaccine diplomacy also plays a crucial role in shaping the actions and international perception of countries that receive the vaccine on general Chinese issues.

In Latin America, several countries are receiving the Chinese vaccine, causing the warmongering tone of some presidents to be diluted by their need to obtain inputs for more immunizers. The clearest example of this is Brazilian President Jair Bolsonaro.

The lack of articulation to obtain vaccines from other manufacturers in time meant that the negotiations made by the governor of Sao Paulo State, Joao Doria, with Sinovac, the Chinese manufacturer of CoronaVac, ended up being the lifeline of Bolsonaro’s government. It was with CoronaVac that the federal government started the national immunization program and vaccinated a large part of the Brazilian population. For this, Bolsonaro had to directly ask Xi Jinping to increase the volume of inputs needed for the vaccine to be produced in sufficient numbers at the production center of the Butantan Institute, the local partner of Sinovac for the production of CoronaVac.

Naturally, as there is no ‘free lunch’, Xi Jinping was able to ease President Bolsonaro’s urge to exclude Chinese technology company Huawei from participating in the country’s 5G auction. In 2020, because of his close relationship with former President Donald Trump, Bolsonaro made it clear that Huawei represented a security risk to the Brazilian 5G.

With the end of Trump’s term and the beginning of Joe Biden‘s and, at the same time, the need to obtain vaccines in the face of the tragic management of the fight against COVID-19 in Brazil, Bolsonaro eased his stance on Huawei and, thus, obtained necessary inputs for CoronaVac.

This week, the executive secretary of the Ministry of Health, Elcio Franco, sent a letter to the Chinese ambassador to Brazil, Yang Wanming, to “investigate the possibility” of buying doses of BBIBP-CorV, the Sinopharm‘s vaccine with an average effectiveness of 79%. In the document, the Brazilian government official also asks for the delivery of doses, if possible, to occur in the first semester.

READ ALSO: Brazil waives bidding and buys Covaxin and Sputnik V to speed up the vaccination program

4. Improve China’s image, via governments or not

For the Chinese strategic cycle to become more efficient, China needs to strengthen its image through numerous organizations (governmental and semi-governmental); this is a primary process to fit the points mentioned above.

In countries with decision-making centralized in the federal government, relations with China primarily occur through diplomatic and official channels. In decentralized countries, where private companies, municipal governments, associations can deal directly with China, the country focuses on semi-independent organizations to work its image, to avoid wear and tear due to negative perceptions.

These are, roughly speaking, the four tactics that make up the Chinese strategy in the region. Two of these four categories are straightforward and easily understood: expanding trade relations and offering credit/financing, which can be paid for with commodities (or other favors to Beijing, such as facilitating the construction of a space observation center in Argentine Patagonia, for example).

The two subsequent strategies are by-products of the first two: the use of commercial and financial dependence to align the region diplomatically and open opportunities in other areas internally; and strengthening China’s image among decision-makers.

The Chinese strategy will continue in full swing after the end of the COVID-19 pandemic. The vaccine diplomacy has a limit, of course, but the its results for China may be better than expected, since all the ties that are being created and expanded with several countries at a time like this tend to last beyond the crisis of the novel coronavirus.

Translated by Fabiane Ziolla Menezes