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From Forgotten to Fundamental: China’s Evolving Relations with the Southern Cone

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I’ve decided to return to a subject that I believe is important and underreported: the development of the Southern Cone in an era of Chinese engagement. I hope the analysis below is useful and sparks a healthy discussion.

Introduction

            China boasts a multi-century history of affairs with Latin America. Over much of the past two centuries, this history did not entail long periods of engagement, particularly in the Southern Cone (Argentina, Chile, and Uruguay). This extends to the early history of the People’s Republic of China (PRC), where diplomatic recognition of the new Beijing regime from Santiago, Buenos Aires, and Montevideo took decades to materialize.

            Over the past fifteen years, however, China has aggressively courted Latin America to sustain its growth. The Southern Cone has featured prominently in this strategy due to the value of its natural resources and a recent willingness of more stable national governments to accept Chinese investment to fill a vacuum left by United States apathy and inaction in the region. Specifically, the subregion and China share important characteristics, namely:

·      Security Concerns. China has a massive population and minimal arable land. It is thus attracted to the food security that Argentinian and Uruguay export staples like soybeans and beef provide. Argentina also benefits from Chinese infrastructural and equipment investments to upgrade its military capability.

·      Growth. In both China and the Southern Cone, positive economic activity is a major feature of policy plans. To China, growth is a sign that a neoliberally reformed Communist Party can legitimately rule. For Chile, it is a point of national pride to maintain high economic status in a region known for impoverished states. For Argentina, growth is a powerful harbinger of past glory and a sign that economic pain is ending.

·      Avoiding US-dictated rules, norms, and desires. Both China and the Southern Cone have faced decades of unsolicited US influence. The Southern Cone especially bears serious scars from Washington’s involvement in traumatic Cold War events. China has also resisted US interference in its affairs for centuries.

China’s Motivations

            China brings a uniform set of priorities to its relationship with the Southern Cone. Economic growth is paramount to maintaining stability for the Communist Party in China. To accomplish such goals China must create viable trade and logistical networks that continue to push expansion forward. For this reason, China has entered into an increasing array of trade partnerships with developing economies whose output – mostly food and raw materials – aligns well with meeting the demands of a burgeoning Chinese economy.

            Policies like One Belt One Road (OBOR), an infrastructure and investment focused Chinese foreign policy, are intended to create meaningful relationships that bolster both the Chinese economy and its leadership. This is even more pronounced today given the increasing centralization of power in China surrounding Xi Jinping. Given the importance of his views in contemporary China, it can also be said the China’s relationships – the Southern Cone included – are dependent on Xi’s decisions. While this may suggest on the surface that growing partnerships with Chile, Argentina, and Uruguay are fleeting and capricious, they are more likely in fact solidified due to Xi’s dual priorities to increase Chinese economic output and take advantage of areas where US leadership is currently lacking.

            As such, the Southern Cone can help China tackle significant elements of its security dilemma. From a broad strategic perspective, China’s involvement in this most stable section of Latin America represents a building of new relationships to challenge US global supremacy. At home, the imports of foodstuffs, minerals, and other valuable natural resources literally feeds the Chinese economy, solving the aforementioned critical need for food security in a country with a history of famines. In addition, China similarly reaps from major investments made in technology and defense as it races its way towards 5G network implementation, moon landings, and beyond.

            China also faces some points of divergence with its Southern Cone counterparts which represent the main challenges facing Beijing going forward. These include:

·      Disagreements over debt levels incurred by Chinese investment deals.

·      Protectionist and populist waves sweeping democracies and implanting in the Southern Cone, with hostility towards trade with China as a byproduct.

·      The general public opinion risks inherent in Chinese monopolization of industries, land, technology, etc. in foreign countries.

·      The inevitable end of natural resource/food export sustainability from the Southern Cone to China (due to climate change, weather, production, or other reasons).

The Southern Cone: A Brief Overview

            The Southern Cone possesses several attributes which encourage trade. The subregion has a reputation for stability and economic development potential. To that end, the Southern Cone has several principal characteristics that attract foreign engagement, including:

·      Corruption. Although the Southern Cone countries embody some of the Latin American political culture trends regarding corruption, they are more transparent compared to broader regional standards.

·      Finance. Though Argentina still has reputational struggles in global financial markets, the Southern Cone countries all have governments in which fiscal stability is a priority. Chile has particularly prided itself on managing commodity prices well, a responsible attitude copied in Argentina by President Mauricio Macri during his term of tough reform.

·      Commodities. The Southern Cone countries specialize in exporting natural resource commodities to global markets, from copper to soybeans to meat. This has attracted the attention of large buyers like China, who see these markets as viable alternative options compared to competitor supplier nations like the US.

Examining Bilateral Relationships with China

            Argentina

            In recent years, China has been a source of uncertain promise to Argentina. In fact, when Mauricio Macri was first elected, he was initially cool towards Chinese investment overtures. This coincided with Macri’s desire to bring Argentina back into the international financial mold. Considering these two instances in tandem, it is likely that there were debt concerns attached to the acceptance of Chinese investment.

            The money and resources offered by China have since proven too much for Argentina to reject. The largesse of the Chinese export market has emboldened Argentine producers to direct the bulk of their products abroad, including its national beef which was previously reserved for domestic consumption. Argentina has also benefited from Chinese technology. China has installed significant infrastructure in the country and has offered or provided military, agricultural, hydro/nuclear power, and commercial items that aid Argentina’s development as a regional power.

            The upcoming elections in Argentina makes these developments potentially less permanent. Macri, whose reforms have proven difficult and unpopular during a period of continued economic strife, faces the populist former President Cristina Fernandez Kirchner and her allies. She is also under investigation for corruption, threatening to undo advances in transparency and stability in the country.

            Chile

            Chile has arguably the strongest Southern Cone relationship with Beijing. Santiago was the first city in the subregion to recognize the PRC and was one of the first Latin American states to deepen ties with China. China has also utilized Chile as a major hub for conducting business in the Americas, taking advantage of Chile’s political culture which places business elites in a powerful position within society.

            Chile’s most attractive characteristic is its consistency as an international business partner and recent member of OBOR. This has made it easy for China to establish and maintain trade relations to access goods like copper, fruit, and fish. However, Chile’s culture is driven by a wide divide of political elites, including clergy and middle class voters. The latter of these groups is not widely found in countries across Latin America and their political potency is evident in uproars over perceived corruption in recent years.

            Uruguay

            Uruguay is facing recent historical export deficits. This likely explains its activity within multinational organizations, namely the South American trade bloc known as Mercosur. Montevideo has been very interested in China and has sought to deepen ties, putting itself at odds with its valued Mercosur counterparts. Uruguay has also fostered controversy within its own borders with the leasing of port space outside of Montevideo to a Chinese firm; protesters have environmental and overfishing concerns based on a lack of oversight in the deal-making process.

Conclusions

            It is clear that China has productive relationships with the Southern Cone states. For each country, the relationship solves significant security and development issues in an international setting defined by a lack of US global leadership. This reflects a diplomatic progression over the past two decades as China has reached out to developing countries for assistance with its rise.

            Going forward, these relations provide solid benefits to both China and the Southern Cone. It is significant that countries like Chile and Uruguay have enthusiastically obtained OBOR membership and the result of such associations on debt accumulation is worth monitoring closely. That said, the 2019 election in Argentina and changes to US foreign policy in the Americas are major influencers that could impact the nature of Chinese involvement in the Southern Cone and throughout Latin America.

William VogtComment