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Sunday, Sep 20, 2020

As US turns inward, coronavirus gives China ‘opportunity of the century’ in Latin America

As the region heads for a coronavirus-induced economic crisis, Beijing is well placed to capitalise, researchers say. Vacuum left by the United States gives China a chance to show leadership while further building its commercial presence and political influence

On April 13, Argentina received a consignment of boxes from China containing not only surgical masks and other health-care equipment, but also a quote written in Chinese and Spanish from the well-known Argentine poem El Gaucho Martín Fierro. The sentence, placed beneath the Chinese and Argentine flags on the boxes, talked about brotherhood and “true union”.

Felipe Sola, Argentina’s foreign minister, was quick to take to Twitter, applauding China: “Thank you for your solidarity. No one can save themselves alone.”


Just two weeks ago, Beijing’s official news agency Xinhua ran a piece about how a Chinese-backed energy project in Argentina was helping to launch the Health Silk Road in the region – a moniker linked to the Belt and Road Initiative, which has been promoted as an opportunity for nations to build infrastructure, enhance connections and develop trade with China.

Tonnes of state-sponsored and private companies’ donations from China have recently made headlines in countries in Latin American – declared by the World Health Organisation (WHO) as the new epicentre of the pandemic.

But will the so-called “face-mask diplomacy” have a long-term effect in a region plunging into economic recession? Most experts who spoke to This Week in Asia say China’s presence is likely to grow in the southern hemisphere after the coronavirus crisis, with a potential greater focus on health and technological cooperation.

Although it is hard to predict how geopolitical and commercial interests will realign, some researchers say Beijing is winning the perception battle in Latin America, while emerging as a more active and helpful partner amid the pandemic than the United States. This crisis, they argue, can be an opportunity like no other for China to show its leadership ability in a region that will need further help.

There have been more than 6.6 million confirmed cases worldwide of the virus, which causes the respiratory disease Covid-19, and over 391,000 deaths. Brazil has so far been the worst-affected Latin American country.

“The biggest winner as the crisis in Latin America deepens is likely to be China,” says Evan Ellis, research professor of Latin American affairs at the US Army War College Strategic Studies Institute. “China will likely expand its commercial presence and political influence in Latin America and the Caribbean.”

The researcher, who last month finished a one-year stint with the US State Department, wrote in a recent paper that Chinese companies would be better positioned, with the support of the Chinese government and its financial partners, to expand their role in global supply chains by acquiring strategic assets that go bankrupt or that distressed local and Western companies will seek to sell.

Mauricio Santoro, assistant professor of the Department of International Relations at the State University of Rio de Janeiro, also expects the Chinese economic presence to increase in Latin America. “The other big economic partners of Latin America – the US and the European Union – are heading for a big recession … and Latin America itself is marching towards a very serious economic crisis. China may be the provider of much-needed trade, investment and health aid,” he says.

Trade between China and the region hit record levels last year, reaching US$307.4 billion, according to Fitch Solutions. China is now Latin America’s second-largest trading partner, after the US – and it is catching up fast.

Taiwanese-Ecuadorean economist and scholar Po Chun Lee argues that “China has the opportunity of the century in Latin America and the Caribbean because most developed countries are planning a disinvestment in foreign operations and preparing to repatriate their supply chains”.

According to the economist based in Quito, this may allow China to continue expanding its influence abroad, as one of the few countries that can offer full packages: financing, building and maintaining infrastructure projects. Such developments, Lee notes, are often obliged to use Chinese technology, capital and workforce.

“Recession in the region just helps China to capitalise on this downturn,” he says.

Ruben Gonzalez-Vicente, lecturer in global political economy at the Leiden University, says it is hard to predict how commercial interests will realign after the pandemic.

“There is a big question mark on whether the Chinese government will continue supporting the internationalisation of Chinese capital with as much impetus as until now, or whether the Chinese state’s financial prowess will be reoriented towards the domestic market in the wake of the crisis,” the scholar says.

A Fitch Solutions report published in January had projected Latin America to be the “bright spark” for Chinese investment throughout this year.

But an April report predicted that China’s ability to finance infrastructure projects overseas would be reduced as funds were redirected to revive the domestic economy, while the belt and road investments were likely to fall further in the coming months.

This comes as some Chinese-backed developments across Latin America have been halted, delayed or dropped amid the pandemic.

But Cui Shoujun, associate professor and assistant dean at the School of International Studies at Renmin University of China, argues there are no signs of China decreasing its commitment in the southern hemisphere. Instead, he says, Beijing is poised to “steadily advance” its influence in the region.

“China will increase its presence by expanding the bilateral commercial ties and help Latin America and Caribbean countries accelerate their economic recovery momentum,” Cui says.

Margaret Myers, director of the Asia and Latin America programme at the think tank Inter-American Dialogue, says the region will be in need of economic help and engagement from various actors in the coming months and years.

“Latin Americans will be interested in facilitating productive engagement with China, whether through the Belt and Road Initiative or in other forms,” she says.


FILLING IN THE GAPS

In the past two years, Chinese finance in Latin America has dramatically decreased in comparison to the previous decade. But Paulina Garzon, head of the China-Latin America Sustainable Investment Initiative at the American University in Washington, says that “doesn’t translate into less influence of China over the region”.

She expects the core of China-Latin America relations to remain focused on infrastructure and extractive projects after the pandemic. Most governments in the region are announcing as part of their Covid-19 recovery strategies new plans to build infrastructure, such as Brazil, and to increase the extraction of natural resources, including mining in Ecuador and Peru.

“In addition, the most indebted countries are desperately looking for ways to renegotiate their loans … and to access new ones on more favourable terms,” Garzon says. “On all these fronts, China will more likely continue to be a central player.”

Chinese loans became an attractive option for Latin American governments over the past decade, but many, such as Venezuela and Ecuador, are struggling to meet the repayments.

Cui says Beijing may be open to renegotiating conditions and offer further help. “Debt extensions are possible,” the professor says. “As the old saying goes, friends in need are friends indeed.”

Beijing could also use its US Treasury bonds to invest in Latin America, economist Lee says. “They could redirect these [assets] to improve their strategic resources and geoeconomic goals,” he notes. “But this is more likely to happen whenever the pandemic is contained or a cure is found, since investing during the pandemic has higher costs.”

Lee expects China’s plan in Latin America to be focused on enlarging the railroad network and improving trade in the region.

While China was, “even before Covid-19, becoming a big or the biggest buyer of Latin American exports”, Latin America will continue turning to China for affordable goods, such as electronics and machinery, Lee says.

But, as most countries in Latin America fall into recession and see their unemployment rates shoot up, the aftermath of the crisis may bring even greater reliance on the Asian giant.

“Any type of foreign project [will be] a blessing,” Lee says. “[US President] Donald Trump has shown that his policies are protectionist and not outward looking, so China can take advantage of this vacuum.”

Ariel Armony, an Argentinian scholar who is vice-provost for global affairs at the University of Pittsburgh, also says this void has provided an opening for China to fill critical gaps in technology and development across Latin America.

The Trump administration has decreased funding and humanitarian help throughout the region, and last week he announced the US would pull out from the World Health Organisation.

Armony notes that many Latin American nations began to gravitate, both economically and politically, towards China before the pandemic. But “it is difficult to imagine, in the current global context, that a Latin American country could reduce its dependence on the US without experiencing major impediments to its economy, with Venezuela being a glaring example,” he says.

Venezuela, which is believed to be the region’s most reliant country on China, has been plunged into a political and humanitarian crisis while bearing the brunt of American economic sanctions. Experts estimate that China has lent more than US$60 billion to the oil-rich country.

“It will be interesting to see how China works to diminish US influence in the region, as tensions between the two countries increase,” Armony says.



ANTI-CHINA RHETORIC

So far, 19 Latin American countries have taken part in the belt and road, but the major economies of Brazil, Mexico and Argentina have yet to do so.

“This is crucial to China in terms of breaking the US influence in the region,” says Andres Raggio, a researcher on international studies at the University of the Republic in Uruguay.

Brazilian professor Santoro predicts that nations such as Argentina and Chile are likely to move closer to Beijing after the pandemic. But he thinks this will not be so with Brazil.

“[Jair] Bolsonaro is the first Brazilian president in 40 years [to employ] anti-China rhetoric,” Santoro notes.

Although the professor describes Bolsonaro’s foreign policy towards Beijing as “quite pragmatic”, his son congressman Eduardo Bolsonaro and other officials have attacked the country on social media. They have blamed China for the pandemic, while supporters of the president have held demonstrations in front of the Chinese embassy and consulates.

“Your words are a malefic insult against China … Besides that, they will damage the friendly China-Brazil relationship. You should bear all the consequences,” ambassador Yang Wanming wrote on Twitter in March, responding to Bolsonaro’s son.


President Bolsonaro tried to end the diplomatic spat with a call to his Chinese counterpart Xi Jinping, during which the two discussed how to grow their trade relationship. China is Brazil’s top trading partner and the largest buyer of Brazilian beef, soy and other raw commodities.

But other demeaning comments about China by Brazil’s education ministry emerged on Twitter the following month.

Santoro says although xenophobic remarks won’t change “the fact that China is Brazil’s key economic partner, they will complicate the relationship, and make it more difficult for Brasilia and Beijing to reach good deals and create more opportunities that are mutually profitable.”

Some state governors are taking the task of establishing ties with Beijing into their own hands, Santoro notes. For example, the governor of Sao Paulo has set up an office in Shanghai to attract investment and trade from China.

At the same time, President Bolsonaro has tried to forge a stronger relationship with Trump. “But so far it is not something that has led to benefits for Brazil,” Santoro says.

The scholar notes that the American foreign policy towards Latin America has been focused on negative issues, including tightening migration controls, exercising further pressure on Venezuela and curbing Chinese influence in the region. “But there are no positive ‘carrots’ to attract to Washington nations that look for Beijing in search of economic opportunities, such as trade and investments,” Santoro says.



The US has sent two million doses of hydroxychloroquine to Brazil, the two governments announced about a week ago, despite a recent study suggesting that the anti-malaria drug is ineffective against the coronavirus.

They also said a joint research effort was to be launched, while about 1,000 ventilators were expected to be delivered from America to Brazil, where the government has been criticised for a chaotic response to the pandemic.

But despite some level of cooperation, the US banned Brazilians from entering the country on May 26.

Enrique Dussel Peters, coordinator of the China-Mexico Studies Centre at the National Autonomous University of Mexico, says China’s relations with Latin America will continue to vary widely.

“Unfortunately, [it] highly depends on the respective governments [in the region],” he says, noting that Mexico is an interesting case, as it has engaged with both Washington and Beijing.

But given that “the China-US relationship has worsened drastically in 2020 … it will not be easy for most Latin American countries to deal [with Beijing] under these long-term tensions,” Peters says.

Jorge Malena, director of a programme on contemporary China at the Pontifical Catholic University of Argentina, says few will turn their backs to Beijing.

“In the countries of Latin America, it does not matter if the government is in the hands of a centre-right or leftist party,” Malena argues. “China presents an opportunity that no government is willing to ignore.”


DIGITAL INROADS

In addition to grabbing opportunities in traditional sectors, researchers anticipate greater Chinese influence over areas such as health care and scientific cooperation, along with technology and telecommunications investments in Latin America. Some also say that China could play a leading role in boosting green industries and practices across the region.

Experts Jude Blanchette and Jonathan Hillman, from the Centre for Strategic and International Studies in Washington, say the pandemic is already providing new opportunities for China’s rise as a technology power and global provider of digital infrastructure.

“In the months and years ahead, China’s Digital Silk Road will only accelerate and expand,” they wrote in April.

Chinese telecom giant Huawei – which has been thrust into the middle of the US-China trade war – has worked with countries in Latin America, such as Ecuador and Honduras, to implement coronavirus diagnosis methods using technology and artificial intelligence.

While it is unclear how extensive China’s economic activity will be in Latin America after the pandemic, Myers says “it’s very likely that we’ll see some telecommunications and other hi-tech investment in the region in the coming months and years”.

She notes that Chinese companies had already demonstrated “considerable interest” in these markets before the crisis. And now that Beijing is boosting the country’s digitalisation, “Chinese companies will be increasingly well-positioned to also deliver key infrastructure and services overseas”, Myers says.

In Uruguay, researcher Raggio says that leading telecom provider Antel may use the belt and road as well as other deals signed with Chinese counterparts to source both know-how and financing to develop the nation’s digital infrastructure.

Antel, which previously bought modems from the Chinese telecommunications company ZTE, “has grown remarkably fast in the last 15 years, and a closer relationship with its Chinese counterparts grants access to the newest technologies”, Raggio says.

This is coupled with the fact that Uruguay, which has tightened relations with China through various agreements over the past decade, hopes to transform itself into a regional tech hub.

According to Gillermo Holzmann, a political analyst based in Chile, technology and telecommunications is also an area that may take prominence in China-Chile relations, along with traditional sectors, such as natural resources and agribusiness.

But the adoption of Chinese technology and surveillance systems by Latin American countries in past years has not come without criticism, with some raising human rights and privacy concerns.


HEALTH PARTNERSHIPS

Experts like professor Cui also expect China’s presence in Latin America to increase in terms of scientific and health-care cooperation.

Beijing has recently resurrected its idea of launching a Health Silk Road. The concept, which falls under the belt and road, was first used in 2017, when China signed a memorandum of understanding with the WHO. Beijing proposed then to improve health-care infrastructure as well as enhance the flow of medical-related goods and services between countries connected by the initiative.

“With the Covid-19 pandemic exposing the shortcomings and deficiencies of many health-care systems across Belt and Road Initiative countries, we believe the dire situation will transform into an opportunity for China to promote the Health Silk Road,” a Fitch Solutions report said in April.

Researchers predict a rising demand for the construction of health-care facilities. “Also, we anticipate greater cooperation in emergency response between Belt and Road Initiative countries, with China expected to project soft power … in times of crises like the current Covid-19,” the report reads.

Myers notes that some “Chinese companies will be in a position to grow their presence in the region’s medical industries” through “new partnerships” established during the coronavirus-related outreach.

According to Armony, the pandemic could be an opportunity for China to help address major public health challenges in Latin America and to deepen collaboration in medical research with nations such as Argentina and Brazil.

In addition to that, he says, “many Latin American countries depend on China for their medical supply chains and are in desperate need of the donated equipment”.

Well aware of such demand, Raggio says China is now shaping its foreign policy towards Latin America around the pandemic.
The scholar argues that Chinese health-care aid takes great importance in Latin America, which has surpassed both Europe and the US in the number of new daily coronavirus infections.

And he has no doubts that health cooperation will be a “relevant topic” under the belt and road plan, presenting itself as an “opportunity” for China to demonstrate its “leadership ability”.

An example of that is a piece published last month by Xinhua on how the world’s southernmost hydroelectric dams, being built in Argentina’s remote Santa Cruz in collaboration with China, are helping to kick-start the Health Silk Road in the region.

Since the outbreak began, the province has been in touch with Chinese experts and it has received thousands of protective items and test kits from China. But such supplies are part of a broader plan that “includes the elements to set up a laboratory, which is to arrive in the coming months”, said Mariano Musso, director of institutional relations of UTE Represas Patagonia, a company made up of Chinese and Argentine firms.


FACE-MASK DIPLOMACY

Scholar Gonzalez-Vicente does not foresee a radical change in the foreign policies of China or the US towards Latin America and the Caribbean after the pandemic.

But “we can already start to assess the perception battle. Here, it is safe to say that Chinese diplomats [in the region] have so far been savvier than their US counterparts, providing some highly publicised donations and assistance to cope with the pandemic”, he says.

In Mexico, the prompt response from China in aiding the country has been well received, Peters says.

“The Mexican president requested [several] weeks ago support from European [countries], the US and China. So far, the only country that responded massively has been China, sending several aeroplanes with medical supplies,” he says. “Without a doubt these pictures in the media have a very positive effect [on public] opinion.”

But it is hard to tell if this will materialise into something more concrete. “I am not aware of public or private institutions attempting to take this as a basis for a new strategy in the short, medium and long run,” Peters says.

Armony says it is unclear whether China’s face-mask diplomacy is out of genuine concern or part of its renewed efforts to reshape the global narrative around its responsibility over the spread of the virus. But he notes that news outlets in countries such as Argentina have extensively reported on the poor quality of some of the donated materials.

“The shoddy equipment will hurt China’s image, particularly because it reinforces widely held beliefs,” Armony says. “Many Latin Americans associate Chinese products with poor quality – a perception that extends to Chinese business, which people view as abusive and dismissive of legal standards, particularly [when it comes to] labour rights.”

Although China has spent millions on health-care supplies and sent experts to advise multiple countries on how to handle the pandemic, researchers say Beijing will need to do much more to prevent further resentment among local communities who have been negatively affected by Chinese-backed investments in Latin America.

Malena, who has little doubts that relations between China and Latin America will improve, says there are mixed impressions among ordinary citizens – some see China as the country where the pandemic originated, others look at it as the main foreign provider of aid.

“All in all, the Achilles’ heel of China is its authoritarian system” which – in his opinion – prevents Beijing from generating “broad acceptance and adherence not only in Latin America but globally.”

However, much can change depending on how Beijing handles the crisis, says economist Lee.

“It depends on the diplomatic efforts, for example if they find the cure or the treatment and share it with the world and, above all, if they are trying to help their allies and non-allies in good faith and good intention,” he says. “The world is expecting China to step up.”



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