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China and Latin America:

Dynamics and Strategic Implications for the US and the Hemisphere

Presentation to the Norwegian Institute of International Affairs Oslo, Norway 16 March 2011

Dramatic Trade Expansion Inspiring Political Attention

· $118.8b in bilateral trade in 2009 (IMF) · From $10b in 2000 (PRC MOFCOM) · But from $143b in 2008 · Balanced, but winners and losers · $63.2b to LATAM to PRC · $55.6b PRC to LATAM · Attention from leaders on both sides · Rousseff - Apr 2011 · Piñera ­ Nov 2010 · Fernandez - Jul 2010 · Hu to Brazil ­ Apr 2010 · Golding ­ Feb 2010 · Lula - May 09 · Pre-2004 Apr 09 PH: Chávez invisible growth | 2004-2008 Emergence | 2008- Post-Recession PH: Pre-2004 invisible growth | 2004-2008 Emergence | 2008- Post-Recession

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Strategic Imperatives for the PRC Associated with its (Re)Emergence

· Securing access to reliable sources of primary products · Assuring ability to feed the population · Establishing and protecting markets for Chinese goods · Securing access to technology and global information flows · Maintaining a presence in institutions key to China's global economic transactions · Avoiding an international coalition opposing the "rise" of the PRC

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Trade Pattern ­ China

PRC Exports to LA

PRC Imports From LA

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Dynamics and Effects ­ China (1)

1. Role as investor: mining, petroleum, manufacturing, retail Junin-4, Repsol Brazil, Statoil, Wuhan-MMX JV, Itaminas, State Grid, PanAmerican, Bridas, Oxy, Rio Blanco, Toromocho, Galeno, Pampa de Pongo, Marcona, Cobriza, Tongling, Bahamas resort, 2 x $1b Urea plants: Tierra del Fuego, Cochabamba, $700m Chery plant in Jacarei, Chana, Sany, Jialing 2.Seller of more sophisticated goods 3. Role as banker ­ Finally getting it right · $110b: More in past 2 years than World Bank · $28b to Ven., $10b to Petrobras, $10b Ar. Rail equipment, $1+$1+$2.3 billion to Ecuador + $400m Jamaica road project · $2.85T currency surplus / $250b CIC sov. wealth fund · High rates of interest (Ec) ­ Lender of last resort

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Dynamics and Effects ­ China (2)

4. Role in Regional Institutions IADB, OAS, ECLAC UN ­ Latin America 5. Role in on the Ground (eg. Services) Telecommunications: Huawei, ZTE Logistics: COSCO, China Shipping, HPH Construction:

Argentine, Venezuela railway projects Colombia dry canal proposals $6B Cuban refinery expansion Hydroelectric, thermoelectric projects: Ecuador, Venezuela Pto. Cabello conainer terminal Jamaica highway modernization

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Dynamics and Effects ­ China (3)

6. Military Relationships Sales ­ value-added chain / Venezuela as a launching point

Venezuela: K-8s, Y-8s, L-15s, UAVs, Radars C2 facilities Ecuador: MA-60s, Radars Bolivia: K-8s, MA-60s, gifts (comm equipment, Hinger buses, Nisan & Toyota SUVs, outboard motors, gunboats, FAW truck, NV equipment, nonlethal goods, 10,000 assault rifles (1987-1996) Argentina: WMZ-551 APCs Peru: Interest in MBT-2000 Colombia: Interest in armored vehicles Jamaica ­ 3.5M donation of non-lethal goods to JDF

High-Level Visits ­ 6 DM-level visits In last half of 2010 alone Officer interchanges: Military students from 18 LATAM countries Defense Studies Institute of NDU (Chanping) Chinese Navy Command School (Nanjing) Army Command College (Outside Nanjing) MINUSTAH (since Sep 04) Angel de la Paz joint exercise with Peru (Nov 10)

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Sources of PRC Soft Power

· Hopes for future access to Chinese markets · Hopes for future Chinese investment · Influence of Chinese entities and infrastructure in Latin America · Increasing business presence "in country" · China as "the wave of the future." · China as a development model · PRC as a counterweight to US and Western institutions

Different from sources of US leverage (eg. Culture)

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Position of PRC as Export Partner * Country Argentina Brazil Chile Peru Venezuela Costa Rica Cuba 2000 6 12 5 4 37 26 5 2008 2 1 1 2 3 2 2

Limits of PRC Influence

· Lack of understanding of each side by the other · Difficulty in learning each other's culture and language · Pervasive sense of mistrust of the Chinese within Latin America generally Significant gap between the two cultures

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

* Data from CEPAL

Coming PRC Struggles in Latin America

1. Access to Markets / Struggle x Protectionism 2. Protection of Investments and Contracts 3. Preservation of Resource Flows 4. Enforcement of Loan Payments 5. Protection of Nationals and Operations 6. Taiwan "end game"

Like dilemmas US has faced in LATAM But different international constraints + different style more use of soft power, indirect pressure?

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Strategic Implications for the US and the Region

·Infrastructure ·Pacific Ports ·Roads, Rail links (IIRSA projects) ·Survival of Populist Regimes · of Brazil as Key Actor ·LATAM Organized Crime Shakeup · Commercial Competition by External Powers · Increasing Multipolarity

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

Questions & Coments?

For more information, contact: Dr. R. Evan Ellis

Tel: 202-685-4195

Email: [email protected]

PRC in Venezuela

$20 billion loan (1/2 in yuan + to be repaid in oil ­ 200,000 b/d) $12 billion Heavy Investment Fund, incl. Railroad Petroleum: CNPC in Orinoco: $16.3 billion investment commitment + 2 refineries in PRC + 6 tankers 364,000 b/d->1 mil b/d by 2012 Chinese drills being assembled in Venezuela Commercial cooperation for market position $300 million LABS airline to buy Y-12 A/C from CAIC ZTE factory in Tuiy (Mar 08), Haier factory Mining: $1 bil loan to CVG from CDB, export contract w. Wuhan with "China Price" Las Cristinas Gold Mine $365m pellet production line by CSMC Infrastructure Work: $7.5b railway (CRR), $1.1 bil CAMCE projects, CAMCE and Sinohydro powerplant projects, others, Container terminal at Puerto Cabello (CHEC) Military Cooperation A model for others? Mil exchanges, 10 radars, Satellite, 40 K-8 A/C, 12 Y-8s 1st 6 received Mar 10..1 crash

For more information, Contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Brasil

One of 1st state visits by Dilma (Apr 11 BRIC Summit in PRC) But more emphais by Dilma on protecting Brazilian industry #1 export destination (May 09) 65% in PRC demand key in commodity sector during recession eg. 45% of CVRD sales Brazil->PRC: Soy, Oil, Iron, Intermediate Goods Major surge in PRC investment 09-10: Going to $40B? Açu: $50B Megaport project ­ Aike Batista Wuhan - MMX - $5 billion steel mill JV ­ But problems Cluster: PRC car & other factories Wuhan purchase of 22% $400m stake in MMX (09) $1.2B Itaminas (Minas Gerais) by ECE, Rumored Baosteel: $1.6b for 30% of Minas Rio from Anglo American (09) ­ No further development Petroleum: $7.1b Sinopec for 40% of Repsol, $3.1b Statoil stake, Sinopec role in 2 blocks, $7B for 20% stake in OGX+oilfields, $10B loan $989M for 6 power transmission facilities (State Grid) Participation in $19b Bullet Train project $700m Chery plant in Jacarei Interest by 6 PRC groups in Ag. Purchases Technology Collaboration: CBERS, Embraer (but closure of Harbin plant for lack of demand?) $950M Noble investment in 2 sugar refineries from Cerradihno Integrated Production: eg. components from Manos For co-production? (Aug-Sep Evan Ellis Tel: 202-685-4195 Email: Defensemore information, Contact: Dr. R.10 Liang-Jobim DM visits)

[email protected]

PRC in Bolivia

$15 billion loan to develop half of El Mutun Chung Hsing Mining, Citic Guoan $1 billion ammonia and Urea plant in Cochabamba by Sinomach (Aug 10) Meeting of DMs in Beijing ­ Aug 10 Sale of 6 K-8s A/C $58 mil ­ Financed by PRC Mid-2011 delivery 2 MA-60 transport A/C "Tupac Katari" satellite - $251M/$295M financed by CDB 3 rounds of gifts of equipment Mostly non-lethals: 37 Hinger omnibuses, 21 Nissan trucks, 40 outboard motors, 2 patrol boats, 34 FAW trucks Colaboration with YPFB Shengli oil, strategic partnership Interest in Lithium Also Russian, Japanese, Korean, European interest

For more information, Contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Ecuador

$2.4 bil hydroelectric plants (Coca-Coda Sinclair ($1.7b, 6.9%)+ Sopladora+Toachi Pilaton) Correa returns to the bargaining table 6 PRC oil companies in Ecuador: >40% non-state pdn. Andes - $1.42b investment in 2005+$2b since Exploration and possible future role in ITT (Yasuni) Problems in Tarapoa (Nov 06), Orellana (Jun-Dec 07) $1 bil loan for oil (7.25%, 2 yrs - Dec 08) + $1 bil ($200m to Chinese companies for oil projects - Aug 10) 6.5%, 4-Year loan Possibly funding for $12 bil "Refinery of the Pacific" 132,000 b/d committed for repayment of loans Purchase of Corriente by Tongling ($651 million) $3B mining investment planned but disputes over terms Manta ­ Manaus Corridor + interest in Chinese capital to finance development of Manta as an air hub Purchase of 2+2 MA-60s, 4 Chinese radars ($80m, Nov 10 delivery) ­ Following Venezuela lead Confucius Institute-U. San Francisco de Quito (Dec 10) But tensions: eg. w/d of Hutchinson from Port of Manta

For more information, Contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Colombia

Resurection of rail version of transColombia Canal $7.6B rail linkage Bay of Cupica to Gulf of Uraba? Related to improvement of Port of Buenaventura, improvement of rail linkages from Pacific to Bogota Petroleum First China-India oil JV in LA (Mansrovar) $876m acquisition of Emerald Energy assets Sinopec acquisition of Hupecol oil in Colombia for $281M (Jan 11) New opportunities for petroleum and minerals exploration with end of Civil War

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Argentina

· Soy ­ 1.5b in exports to PRC cut off over protectionism · Fernandez July 10 visit, tried to smooth over · Few meat exports to PRC (fitosanitary + Hilton quota) Railways: $10b in projects including BsAs rail modernization (Jul 10) Oil - $3.1b purchase 50% of Bridas by CNODC + $7.1b purchase of PanAmerican (Nov 10) + 2.4b Oxy $1b Urea plant in Tierra del Fuego (Feb 11) Mining: Jan 10 $140m commitment, 05 Sierra Grande purchase but little compared to other Ar. mining exports $1b Urea plant in Tierra del Fuego + port, Chinese TVs from FTZInfrastructure Issues: MendozaValparaiso tunnel, rail links Space: San Juan observatory + Failed bid to ARSAT Huawei, ZTE (incl. Huawei cellphone factory in La Plata) Military: 4 APCs for Cruz del Sur, Failed bids to sell trucks, radars, helos

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

· · · · ·

· · ·

PRC in Chile

· Pinera visit Nov 2010, Cancelled Hu Visit Apr 10, Apr 08 Bachelet to PRC · Site of Nov 04 APEC summit · First PRC FTA with Latin America · Concertacion governments focus on making Chile bridge between LA and Asia · First nation in SA to recognize PRC survived switch from Allende to Pinochet · Mineral exports: Copper + Potassium Nitrate · CODELCO 05 advance purchase agreement · But tensions ­ Non-Sale of Gaby mine · Some traditional exports--Chilean wine (eg 1428) · Driven by handful of Chilean industrialists (Claro, Luksik, LeRou, etc.) · Iquique ­ Santos corridor · CSUV and importance of Panama Canal · Initial resistance to PRC companies in port operations (Valparaiso)

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Peru

· · 22 PRC companies: $10B in 5 years? Important PRC investments in Mining: Toromocho (Chinalco), Rio Blanco (Zijin in Piura), Galleno (Minmetals + Jianxi in Cajamarca) $2.5b, Nanjinzhao en Pampa de Pongo ($3.28b?) But also Shougang ($1.2b new) and problems with labor, government in Hierro Peru mine in Marcona Host of 2008 APEC Summit Site of 5th China-LA Entrepreneur Summit (Oct 11) 2nd FTA with PRC in LA March 08 Oil and Gas (Sapet, PlusPetrol ­ incl. Camisea) Fishmeal exports to PRC / Purchase of fleets and processing facilities by China Fisheries First functional "improved" inter-oceanic corridors: North (from Paita, via Iquitos), South (from Ilo) Key for Manaus Expansion of commercial ports: South of Callao, Paita, Ilo, etc. BOC in Peru via Interbank (Dec 10)

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

· · · · · · ·

· ·

PRC in Mexico

· The country "most damaged" by expanding trade with Asia (IADB) · Some PRC investment in Mexican maquilladora sector for export to US (Cars ­ eg. FAW, Geeley, Lenovo en Monterrey) · Growing PRC presence in Mexican telecom · Among the greatest collection of language and Chinese studies programs (eg. ITESM) · Investment by large Mexican companies, leveraging Mexican culture (Beer ­ Grupos Modelo, FEMSA, Tequilla, Bimbo, Maseca, Telenovelas (Televisa) · Hutchison in ports: Michoacán, Ensenada, Veracruz, Manzanillo · Political: One of 4 "Strategic Partners" because of influence in CA · Military: Regular exchanges at war college level

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Panama

· Successful "Dual" diplomatic track due to strategic importance to PRC: Diplomatic relations with Taiwan, but large-scale commerce with PRC · Martenelli suggestion, while candidate, to recognize PRC · Hutchison port operations at Cristobal & Balboa (but blocked from participation in Farfan project) · COSCO (shipping) a major user of canal · Interest in participating in $9 billion (Oxy) refinery at Puerto Armuellas, making trans-Panama pipeline bidirectional · Major source of contraband Chinese goods to LATAM (eg. Colon FTZ) · Canal widening impacts commerce of Brazil, Argentina with Asia · Many Panamanians with some Chinese ancestry

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Cuba

· · · Visit by Hu Jintao to Cuba Nov 2008 en route to APEC Increasing petroleum involvement ­ $6B refinery expansion and LNG terminal by CNPC (09) Nickel ­ World's largest proven reserves · 3 existing plants, new plant in MOA · But Venezuela replaced China Minmetals in Cubaniquel JV in 07 Deal with Cupet for joint development off Pinar del Rio Sugar ­ Previously a leading Cuban export now more symbolic Medical: Cuban doctors in PRC, biomed facilities in Beijing, Chanchun Spanish language training for PRC functionaries Importance for proximity to US: Bejucal, Santiago de Cuba, Lourdes ("Cyberuniversity) Value to PRC for "South-South" / Socialist Brethren Marketing But historic mistrust between China and Cuba (opposite sides during Cold War, including in Africa)

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

· · · · · · ·

PRC in Costa Rica

· Change in diplomatic relations ­ 2007 · $1 billion refinery project - RECOPE · PRC purchase of $300m government bonds · $83m soccer stadium · Request for "Phase 2" Chinese donations during Yang Jiechi visit July 10 · Chinese investment in Pacific Coast tourism · AFEC controversey over denial of visas for 100 chinese construction workers cancellation of housing project, lawsuit

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in El Salvador

· in initiatives · Participation in Shanghai Expo (May 2010) · Including National Association of Private Industries (ANEP), Salvadoran Industry Association (ASI) · 1st PRC commercial expo in El Salvador (22-25 Nov 2010) · Participation by 53 PRC companies · Chinese commercial office in El Salvador · Salvadoran Commercial office in Beijing (with help from CCPIT) · Opened Sep 16, 2010 · El Salvador ­ China Chamber of Commerce (Manuel Flores) · Opened Oct 2010 in Escalón · China-Salvador Friendship Society (since 2007) · "CA4" and FTA with PRC: Guatemala, Honduras, El Salvador, Nicaragua · Proposal for confederation during 2nd «Friendship Forum» of China-Central American communities (México) · Importance of completion of port of La Union

Para mas información, comunicarse con: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Honduras

Construction of dams by Chinese companies: Patuca I, II, III (Sep 10) · $300M gift from Taiwan cancelled May 2009 Taiwán Factor · Visit by head of National Congress to Taiwan (Juan Orlando Hernandez) Sep 2010 · Visit by Pres. Lobo (Nov 2010) · Ma Ying-Jeou participation in Jan 2010 inauguration ceremony (during delectate period) · «One village one product» project with Taiwan · $500k to modernize congress building · $100m in June 2010 for those harmed by Aghata · 65 scholarships for low income students in 2010 (Y4 of program)

Para mas información, comunicarse con: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Guatemala

Growing private initiatives · Guatemala-China Chamber of Commerce and Cooperation (est. 2008) · Participation in Expo Shanghai 2010 · Participation in 2nd China-Central America Friendship Forum (Nov 2010) · Pedro Barnoya Taiwan Factor

Para mas información, comunicarse con:

Dr. R. Evan Ellis

Tel: 202-685-4195

Email: [email protected]

PRC in Nicaragua

· Continuing diplomatic relations with Taiwan · Although Sandinista government previously recognized PRC · Taiwanese aid + little prospect of aid from PRC · But Expanding Commercial Relations: · ExpoChina trade show in Managua , promoted by ProNicaChina, headed by Bayardo Arce, Ortega's top economic advisor · PRC presence: Chinese language classes, products

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195 Email: [email protected]

PRC in Jamaica

· $400m highway project by CHEC..Started Dec 10 · Montego Bay Convention Center renovation via a $45.4M loan from China (June 07) · Sugar: Purchase of 3 refineries, sugarcane fields for making ethanol by Complant (Aug 10) · Nickel: PRC interest in purchasing Russian interest in mines (to be reopened July 2010?) · Caribbean warehousing hub at Caymanas Estate (Kingston) · Strategic maritime location between Cuba and Hispaniola · Some Jamaican marketing of products to PRC middle-class (eg. Rum, Blue Mountain Coffee) · Golding visit to PRC (Feb 10) · $3.5M donation of non-lethal gear to JDF (Jan 11) · First Confucius institute in Caribbean · UWI-Mona 2009

For more information, contact: Dr. R. Evan Ellis Tel: 202-685-4195

Email: [email protected]

PRC in Other Caribbean Nations

· Bahamas - $3 billion resort complex at Cable Beach + Freeport Container Terminal, Sports Complex · Trinidad ­ $400 million Aluminum plant

For more information, contact: Dr. R. Evan Ellis

Tel: 202-685-4195

Email: [email protected]

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