C3S Report No. 0141/2016
This is the Event Report of a C3S Lecture-discussion held on 8.11.2016.
A lecture-discussion was organized by the Chennai Centre for China Studies on November 8 2016 at C3S, Athena Infonomics Building, T. Nagar, Chennai.
The theme was “Cuento Chino in the Land of Magical Realism: Chinese Interests in Latin America”, which was led by Ambassador R. Viswanathan IFS (Retd.). The event was moderated by Mr. K. Subramanian, Former Joint Secretary (Retd.), Ministry of Finance, GOI & Member, C3S.
Mr. K. Subramanian introduced the speaker. As part of his diplomatic career, Amb. Viswanathan was Ambassador of India to Argentina, Uruguay and Paraguay from 2007 to2012. He was Head of the Latin America Division in the Ministry of External Affairs of India (2004 to 2007); Head of Investment and Trade Promotion Division in the Ministry (2003 – 2004); Ambassador to Venezuela (2000-2003); Consul General of India in Sao Paulo (1996 to 2000). Previous postings include New York (mission to the United Nations), Mauritius, Libya, Pakistan and Portugal. Post-retirement he was Distinguished Fellow, Latin America Studies, Gateway House (Indian Council on Global Relations) from August 2013 to May 2015.
Amb. Viswanathan began by explaining the title of his talk. ‘Cuento Chino’ when translated from Spanish means Chinese tale (or tall tale). ‘Magical Realism’ refers to colouring reality with magic. Latin America, is the ‘land of magical realism’ as it is the dominant literary style of the region.
Once upon a time China was considered was a distant, magical place by Latin Americans. Today the population of the region, from Mexico-Chile, of about 600 million, realizes that their daily lives, markets, economy and foreign policy are deeply impacted by China. That is, the story of China is no longer a ‘Chinese tale’ in Latin America.
In 2002, Argentina had defaulted on USD 90 billion debt- the world’s largest at the time. When Nestor Kirchner became the country’s president, he proposed debt repayment policies which were not acceptable to U.S.A. America wanted to teach Argentina ‘a lesson’ and make an example out of it to other countries. Hence Argentina was isolated from international commerce markets. In 2003 Argentina’s GDP grew by about 4 per cent. By 2010 it was 5 per cent. This slow yet steady growth was due to Chinese investment in Argentina. 2000-2010 was the boom time for China’s foreign investments in Latin America. Beijing imports soybeans, corn, etc. from Argentina which led to prices skyrocketing and Buenos Aries thus benefiting.
Similarly, Venezuela’s Hugo Chavez faced a movement against him by the middle class and businessmen. In his plan to ‘teach them a lesson’, Venezuelan industries suffered. This led to lack of funds to take care of his interests. At the time, China invested USD 50 billion in Venezuela, thereby allowing Chavez’s 21st century Bolivarian socialist policy to survive.
Hence it is seen that China came at a time when Latin America wanted to diversify their investments. Thanks to Chinese investments, the region grew by an average rate of 6 per cent in 2010, while recovering from the 2008 financial crisis. In 2015, trade between China and Latin American countries stood at US 254 billion.
In the process, China has replaced E.U as the second largest trade partner for Latin America, after U.S.A. In fact, Beijing is the largest trade partner for a few Latin American states. It is clear that China has come to stay as a very large trade partner of Latin America for now and the long term. In addition, in 2015, USD 29 billion was loaned to Latin America by China, which is more than the amount loaned by other major global financial institutions combined, to the region. China invested in mining, manufacturing, etc. besides in companies which did business with Latin America. Diverse areas of infrastructure including solar energy were also in focus. Another ambitious project, where China invested USD 10 billion, was a trans-oceanic railway, known in Spanish as the Corredor Ferroviario Bioceánico Central, connecting Rio de Janeiro with Peru. The USD 50 billion Nicaragua Canal project undertaken by China rivals the Panama Canal. Even if this project does not materialize it has captured the imagination of Latin Americans. This is as China is following a different approach from U.S.A which had ‘cut’ Columbia into two by the Panama Canal.
Despite these bright prospects presented by China in Latin America there are some downsides. For instance, Chinese entrepreneurs wanted to buy large tracts of land in the region. The projects were opaque. Chinese workers were brought in, instead of local human resources being employed. As a counter-measure, Latin America laid restrictions on land acquisition by foreigners, as the large scale investments coming in from China were a cause for concern. It was not the Chinese investment by itself which was opaque, but the Chinese government’s actions. It became common to see Chinese people in Latin American ports.
Latin America also realized that it was unfavourable to be over-dependent on China. For instance, Argentina is the largest supplier of soy oil and China, a high importer of the same. Beunos Aries activated anti-dumping laws against China, and Beijing as a result reduced its import quantity of soy oil, thus adversely affecting Argentina.
Latin America now feels cautious and suspicious of China. There is also a cultural and communication gap. Latin America hence now wants to replace overdependence on China by looking at India.
Nevertheless China remains ahead of India in the region. There are diverse areas of cooperation, ranging from satellites to Confucian Institutes. China also has high level diplomatic visits annually with Latin American states.
It must be noted that Mexico and Central America are exceptions in the Chinese context. This is as they are aligned more towards NAFTA. Significantly, 300,000 Mexican jobs were lost to China, despite longer freight times, as it was cheaper to make goods in China. Now the scenario is changing. China’s wages are increasing. Mexico is competing with China in domains like automobiles and white goods (televisions, refrigerators, etc.). The advantage China has over other countries doing business with Latin America is that China puts on blinkers when it comes to ideology.
Another point that is highlighted is that eight countries in Latin America refuse to recognize Mainland China. They have elevated business ties with Taiwan.
On the other hand, there is USD 30 billion worth of trade between India and Latin America. It is noteworthy that in 2015 India exported to Guatamela (USD 255 million) than to Cambodia (USD 240 million). USD 240 billion worth of goods were exported to Mexico, which is more than India’s exports to Myanmar, Russia, Canada or Egypt. In 2015, India had USD 655 million worth of trade with the Dominican Republic, which surpasses India’s trade with the Central Asian Republics.
While trade with Brazil was only USD 6.5 billion, it was far beyond that of India’s dealings with France, Germany, Russia or Canada. Latin America is the largest destination for our vehicle exports, with Mexico being the largest for India’s car exports. 27 per cent of our two-wheelers are exported to Latin America, with Columbia being the largest destination.
India’s imports from Latin America contribute to our energy security and to an extent our food security. We imported 15 per cent of crude oil from Latin America in 2015, that is, 99 tonnes. This figure is set to increase.
Food imports from Latin America to India are worth USD 2.5 billion. These include soya, sunflower oil and pulses. The growth of food imports has been phenomenal. For instance, in 1992-1993, there was 0.1 million tonnes of vegetable oil imported to India. In 2015, the figure sat at 15.7 million tonnes. In fact, the demand for oil seeds is going to increase in India, as the country’s population increases, as will its buying power. There is also the parallel issue of loss of agricultural land in India to globalization. This can be a serious problem in the decades to come. Water supply problems also exist in India. Hence we imported wheat from Argentina due to low rainfall in 2008. Nevertheless one cannot compare India with China’s reach in Latin America.
The talk was followed an insightful interactive session. Cmde. R. S. Vasan, Director, C3S queried the speaker on his views on the two accidents which happened to Indian ALHs (Advanced Light Helicopters) sold to Chile. The response described how some are of the opinion that it was “a political deal more than a commercial deal.” Leftists had suffered in Latin America under rightist governments propped up by America. Hence Latin American countries largely cut off defence ties with U.S.A, while also reducing their defence budgets. Therefore they looked for affordable products. While China was an option as a seller, it did not materialize, as Beijing does not desire antagonizing U.S.A.
There was also interaction with the audience on Latin America’s cashew industry, the Trans-Pacific Partnership (TPP), Brazil’s leather industry compared to India’s and the scope of BRICS Bank.
Cmde. R. S. Vasan gave the vote of thanks.
(Compiled by Asma Masood, Research Officer, C3S)