Vol. 5 Num 675 Sun. April 23, 2006  

Letter From America
US-China face-off in Latin America?

Last April 14, an important meeting took place in Washington DC between officials of the US and China, the countries with the world's biggest economies. The meeting involved formal talks on multilateral cooperation in Latin America. It went largely unnoticed in the press amidst the news coverage of important events in Iraq, Afghanistan, Palestine, Nepal and other world hot spots and the anticipated arrival of Chinese President Hu Jintao in Washington last week.

But the summit was a seminal event, the first of its kind between the two countries. Most significantly, it signifies the importance of China's growing role in a region long regarded by Uncle Sam as its own backyard.

While both the US and China have said that strengthening Sino-Latin America ties will not harm US interests in the region, many US experts say the Bush administration, with its preoccupations elsewhere, has not woken up to the fact that China's increasingly aggressive move in Latin America does have important political, security and economic implications for the country.

"Until recently, Washington had all but ignored that China has made inroads in the region," Xuan-Trang Ho of the Washington-based Council of Hemispheric Affairs wrote in the Panama News last November. "China has deepened their cooperation, especially in the areas of trade and development."

Following recent diplomatic exchanges between China and major Latin America counties such as Brazil, Venezuela and Chile, China committed itself to new investments in Latin America and the Caribbean totaling $50 billion. During the first years of this century, Latin America exports to China have grown phenomenally -- 50.4 percent annually between 2002 and 2003 alone. During the period, exports from Brazil increased 503 percent, Argentina by 363 percent and Chile by 238 percent.

Still despite these impressive growth rates for trade, China is not yet playing a major regional role in investment. That dynamic, however, is expected to change. This past April 13, Jose Luis Machinea, Executive Secretary of the Economic Commission for Latin America and the Caribbean, said China is "potentially" a "large" investor in Latin America. He elaborated: "Traditionally, foreign investment has come from the United States and Europe; however, it's essential to diversify capital flow."

What's behind the strengthening ties? It's obvious on Latin America's part, given the result of recent regional elections. The region wants to reduce its economic and political dependence on Uncle Sam, a country that historically has often operated with a Big Stick in the region. For decades, the US in the name of the Cold War, backed unsavoury right wing dictatorships, which crushed the mainly leftist opposition and supported US corporate interests. Moreover, there is growing discontent over US promulgated neo-liberal policies that don't seem to be working.

As reporter David Lynch explained in USA Today: "Across the region, leaders railing against 'savage capitalism' are now the norm and major US initiatives such as the Free Trade Area of the Americas lie dormant."

China, meanwhile, is hungrily searching the globe for energy sources to fuel its booming economy, while it looks for new markets to sell its low cost manufactured goods. By this year's end, some sources predict China will become the world's biggest oil importer. That's why the country is now diligently searching the world for energy sources.

As it looks to Latin America, China can see that Venezuela, presently the world's fifth largest oil producer, has the Western Hemisphere's largest proven oil reserves. With regard to energy, the strategic objectives of China and oil-producing Venezuela converge.

In 2003 China signed a deal with Venezuela to buy its crude oil. The following year, the country indicated that it would invest heavily in Venezuela's oil sector.

Hugo Chavez, Venezuela's charismatic and Bush-baiting leader, who has called the US president "the world's biggest terrorist," has been a major thorn in the side for the US. He hasn't fallen in line like the region's reactionary caudillos or strongmen of the past usually did.

Right wing critics view Chavez as a "Castro with oil." Critics of the US, on the other hand, believe the CIA was responsible for the 2002 coup attempt that nearly toppled Chavez. Thorn in the side wants to reduce Venezuela's dependence as the US market, which now buys about 15 percent of its oil from the country.

"Analysts have estimated that the demand and availability of the world's petroleum supply will remain tight in 2006 and that fluctuations in crude oil prices will depend to a large extent on the robustness of the Chinese economy and the stability of global geopolitics," assessed Xuan-Trang. "As a result, the rivalry between the US and China for primacy in gaining access to the Western Hemisphere's energy supplies will prove to be a major challenge for Bush."

And oil is not the only energy resource China is after. The amount of wood it imports from Latin America has dramatically increased, as the country will need 120 to 170 million square metres of wood annually until 2002 to sustain current demand. The economic powerhouse is also looking to the region to supply copper, bauxite, iron ore and other raw materials for its industries.

Not all Sino-Latin American experts see China's hunt in Latin America for secure supplies oil and other natural resources as necessarily a bad thing. In 2003, Riordan Roett of the Paul H. Nitze School of Advanced International Studies at John Hopkins University in Baltimore, Maryland, told Congress that it was "good for Latin America, and should be seen by Congress as complimentary to the dynamic relationship between the US and China." Roett added, "A counter plan by the United States in the region is most welcome."

Like many things Bush, that plan yet to be formulated. If a plan does come, let's hope it's not another familiar Blast from the Past -- a botched CIA attempt to remove Mr. Thorn-in-the-Side.

Daily Star columnist Ron Chepesiuk is a Visiting Professor at Chittagong University and a Research Associate at the National Defense College in Dhaka.