Friday, 23 December 2016

Dr. R. Evan Ellis: China’s Second Policy Paper on Latin America and the Caribbean: Indications of Chinese Intentions, and Recommendations for the U.S. Response







On November 21, 2016, the People’s Republic of China (PRC) published its second white paper on its policy toward Latin America and the Caribbean.   Although the document received very little attention in either the U.S. or region, it serves as a valuable indicator of China’s intentions toward the region, both through what it says on its face, and how it may be read “between the lines.”



China’s engagement in Latin America and the Caribbean increasingly impacts the region, and by extension, the economic and security environment of the U.S.  As such, China’s new document on its approach toward the region is important for policymakers, analysts and businessmen with an interest in that relationship.  This article thus examines that document and provides recommendations for U.S. policymakers of how best to respond.

As with any government policy document, China’s second policy paper toward Latin America and the Caribbean almost certainly does not disclose the full range of the country’s plans for engaging with the region, nor its complete set of intentions.  Yet as with U.S. government documents such as the National Security Strategy and Quadrennial Defense Review, the paper may be understood as a concerted effort by Chinese bureaucrats and academics to express the official vision for how the PRC wishes to advance its relationship with the region across a broad range of areas.  Of course, the document seeks to express those plans in the most diplomatic and non-threatening manner possible.  U.S. and Latin American analysts should thus take the new paper with similar seriousness, although not just interpreting it on its face value.

At a superficial level, China’s second policy paper on Latin America and the Caribbean is similar in content and structure to the first, which was released in conjunction with then President Hu Jintao’s trip to the region in November 2008.  Both the first and second policy white papers toward Latin America and the Caribbean broadly announce China’s intention to expand and maintain a relationship with the region across a broad range of areas, including military, political, social and economic domains.  Both documents generally emphasize China’s intention to maintain a “win-win” relationship, mutually beneficial for both parties.

By contrast to the 2008 document, the new white paper explicitly recognizes that China’s engagement with Latin America and the Caribbean, among other parts of the world, is critical to its strategic objectives, tying such engagement to the currently “in vogue” goals of achieving the level of a “moderately prosperous” nation by 2020 (2021 is the 100th anniversary of the Chinese Communist Party), and into a “prosperous” and “strong” modern socialist country by 2049 (the 100th anniversary of the Communist takeover of the Chinese communist takeover of the mainland.  Through such statements China implicitly acknowledges that, in the interdependent global economy in which it has positioned itself as a manufacturing hub, engagement with Latin America is strategically important for the continuing development of the Chinese economy and state, and by extension, the continuity in power of the Chinese Communist Party.

China’s new policy white paper does not merely highlight the PRC’s present orientation toward the region, but asserts its desire to systematically advance and deepen that relationship in specific ways and directions.  The document characterizes itself as more than an explanation of Chinese thinking about Latin America, but also a “blueprint” for taking it forward.  China’s related disposition to apply a “central planning” approach to its relationship with Latin America, and to develop it through state-to-state efforts, is illustrated  by the document’s favorable reference to the 2015-2019 “Cooperation Plan” that the PRC advanced toward the region during the 2014 China-CELAC forum, as well as the “1+3+6” Chinese engagement framework for the region: one plan, with three pillars (trade, investment and finance), and six focus areas (energy, natural resources, infrastructure, scientific innovation, technology, and agriculture)).  Such a planning disposition is similarly reflected in the document’s favorable mention of the “3x3” framework, calling attention to China’s desire to focus on the construction of logistics, electricity and data connections across Latin America as China’s form of supporting the region’s development.

Also of note, in two separate places, the new policy document references the primacy of the Community of Latin America and Caribbean States (CELAC) (which excludes the United States and Canada), as the PRC’s principal multilateral engagement vehicle in the region.  It notes that such coordination with CELAC should include not only economic dialogue, but also political coordination, working through the “quartet”[1] of foreign ministers of CELAC.

Insofar as China’s engagement with the region is concentrated on commercial activities, it is not surprising that the most extensive section of the new policy document is dedicated to such matters.  While the information that the section provides about China’s disposition toward different areas and vehicles for economic engagement is useful, the details also provide important insights about how China seeks to take that commercial relationship forward:

Among those details, the document notes the PRC desire to use its relationship with Latin America to “consolidate multilateral trading systems.”  This may be understood as its plan to attempt to move beyond the bilateral free trade agreements already negotiated with Chile, Peru, and Costa Rica, in order to advance its Free Trade Area of the Asia-Pacific (FTAAP), building on the framework of the Regional Comprehensive Economic Partnership (RCEP) which it has established in Asia, to create a multilateral trade regime across the Pacific with rules favorable to China, taking advantage of the likely U.S. withdrawal from the Trans Pacific Partnership.

In a similar fashion, China’s professed desire to leverage its relationship with Latin America to advance “global governance reform” (mentioned in two separate parts of the document) arguably reflects its ongoing campaign to use its expanding weight in international trade, investment and finance to reshape the Post World War II “Bretton Woods” system of international economic institutions more to its advantage, including the International Monetary Fund’s inclusion of the Chinese RMB as one of its reserve currencies in 2016. 

China’s intention to reshape those institutions principally through leveraging its commercial and political relationships with less developed nations such as those of Latin America, is emphasized by its mention of the Group of 20 in its list of institutions with which it wishes to work on such “global economic governance” issues, while not including  the more elite “G-7/8”.  Within Latin America itself, the PRC approach includes joint financial projects between Chinese banks and the Interamerican Development Bank (IADB).

Part IV of the new policy document highlights the importance of inter-governmental consultation mechanisms such as the “high-level coordination and cooperation committee” and “high-level mixed committee,” as vehicles for strengthening cooperation.  While such bodies are sometimes dismissed by Western analysts as a peculiarity of China’s zeal for centralized planning, their importance in advancing projects, overcoming obstacles, and even gaining intelligence on the ministerial-level personnel with which China must work in relating to the region, should not be underestimated. 

The new policy document also explicitly mentions China’s favorable orientation toward a “public-private partnership model” of business as it pursues infrastructure projects.  These seemingly insignificant words reflect the success that Chinese companies have had with this approach in overcoming difficulties in competing in Western-style public procurements.  In Colombia, for example, the Chinese company China Harbour won its first-ever highway construction contract, by leveraging streamlined acquisition rules under that nation’s “4th Generation” highway program.  China Harbour similarly cemented work to construct a highway across that nation from south to north, through a partnership which not only gave it a concession for collecting tolls from the highway, but granted it state land to build commercial property along the road, the market value of which would take off once the road was built.

The new policy paper further provides important insight into China’s approach to “manufacturing cooperation.”  China does not indicate that it will cease its current practice of working with local partners to build final assembly facilities in major markets such as Brazil and Mexico for products such as cars and heavy equipment.  Yet it leads its discussion of manufacturing cooperation with an assertion that it will “support its strong enterprises” as they participate in major resources and energy development projects and infrastructure projects” by “using these projects as the basis to build production lines and maintenance service bases for the region.”  In other words, the PRC concept of helping Latin America with manufacturing investment for Chinese companies to be awarded major infrastructure contracts, allowing Chinese subcontractors to enter the country to build items locally and provide services which support the contracts of the parent company.

With respect to manufacturing, the document also highlights the role of industrial and logistics parks and special economic zones for Chinese companies, such as those under discussion in Costa Rica and Trinidad and Tobago.   The Chinese government concept of manufacturing in Latin America is thus clearly built around expectations that governments of the region will create enclaves in which Chinese companies are granted tax privileges, and perhaps exemptions from local labor laws and other regulations, as a vehicle for attracting those companies, which would then presumably employ local workers.

With respect to agricultural cooperation, it is of note that China explicitly mentions forestry and fishing in its new white paper.  Chinese companies in these sectors play an important, but often overlooked role in Latin America and the Caribbean, and the new document indicates the Chinese government’s intention to continue to do so.  Such companies include China Fisheries Group, which through multiple acquisitions, had gained control of a substantial portion of Peru’s fishing fleet and fishmeal processing facilities, albeit incurring associated financial problems.  Similarly, Chinese timber companies such as Bai Shan Lin in Guyana, and the China Greenheart Group in Suriname, have played an important role in the economies of their respective countries, and have become mired in political scandals.  It is also of interest that the document mentions the “Special Fund for China-LAC agricultural cooperation” established at the first China-Latin America agricultural forum in 2013, but almost never used.

China’s second policy white paper toward the region also mentions “space cooperation,” reflecting the important advances that the PRC has made in recent years building and launching satellites for Brazil as part of the CBERS program, as well as the construction of facilities on Latin American soil such as a deep-space radar communication facility in Neuquén Argentina, built and manned by Chinese, with restricted access to Argentina’s own personnel.  More worrisome, in recent years, the PRC has not only developed and launched satellites for ALBA partners Venezuela, Bolivia and Ecuador, but has constructed the ground control infrastructure of those countries, and has had a virtually exclusive role in training and thus getting to know, their new space industry personnel.

China dedicates an entire section of its new policy document to engagement in the “cultural and people-to-people fields.”  While often overlooked by analysts, the Chinese characteristically place a significant emphasis on building personal relationships as a cornerstone of their engagement.  As noted by the document, part of the focus of such cultural contacts is expanding appreciation for the rich and grand Chinese culture through organizations such as Hanban and its “Confucius Institutes and Classrooms.”  This disposition ties into China’s historically-rooted belief that knowledge of the greatness of Chinese culture would woo the surrounding “barbarian kingdoms” into alliance with, or submission to, Chinese power.

Yet China’s emphasis on “people-to-people” links in its engagement with Latin America arguably goes beyond simply building diffuse goodwill toward China among wide-eyed young students.  It involves cultivating bonds with, and in depth knowledge about potential future Latin American leaders, who may become of use to the PRC as they continue to advance in their professional careers.  The document’s mention of “think tank exchanges” such as the program “Future Bridge for 1000 Chinese and LAC Youth Leaders” may be understood in the same light.
The policy white paper’s comments regarding “cooperation in press, publication radio, film and television” should also not be overlooked.  In recent years, Chinese media organizations such as CCTV have made significant advances in the region, buying local media outlets, and signing deals with Latin American and Caribbean governments that make them content providers to audiences in the region as a vehicle for expanding Chinese soft power.  As Chinese broadcasters such as CCTV and other Chinese state-owned media take an increasing share of Latin American markets, questions of the PRC’s use of this media to portray its own country and its relations with Latin America in the most positive possible light are likely to grow.

In a section of the policy document explicitly dedicated to “cyber security” China expresses its desire to work with Latin America toward building a more “multilateral, democratic” internet governance system, mentioning “sovereignty” as a core principle.  Such keywords suggest a Chinese desire to leverage its economic influence with the governments of Latin America, and its substantial and growing presence in the telecommunications sector through companies such as Huawei and ZTE, to move away from a U.S.-centric system of internet governance, toward one in which each country has greater control over its own architecture, creating possibilities for the PRC to shape decisions in those individual countries about its protocols and security.

As in the 2008 policy white paper, China’s new policy document also notes the nation’s desire to continue its military engagement with the region.  The mention of “UN Peacekeeping” and “humanitarian relief” suggests the possibility of future PRC military operations in the hemisphere, such as the presence in the MINUSTAH peacekeeping force in Haiti from 2004 through 2012, as well as bilateral efforts such as the “Peace Angel” disaster response exercise with Peru in November 2010.
Of even greater significance, the new white paper mentions Chinese interest in cooperating with Latin America on “counterterrorism and other non-traditional security fields,” raising the possibility of expanded Chinese counterinsurgency training on Latin American soil, such as its previous attendance in activities such as the “Lanceros” course in the Tolemaida military base in Colombia and the Brazilian riverine combat training facility in Manaos.

China’s policy white paper indicates the nation’s continued desire to “enhance cooperation in military trade and military technology,” providing an official blessing for the efforts of Chinese defense companies such as AVIC and NORINCO to expand their efforts to sell arms to the region, to include offsets and partnerships such as the previously proposed plan to collaborate with the Argentine defense industry to co-produce the Chinese FC-1 fighter in that country, leveraging Argentine technology to improve the product.

Beyond explicitly military cooperation, the document asserts the PRC’s desire to expand its collaboration in “judicial and police affairs.”  Such collaboration is, in part, a necessary response to the expansion of trans-pacific organized crime that has accompanied the growth of commercial ties between the region.  The policy white paper appears to bless further cooperation, such as previously sending Chinese agents to Argentina in 2016 to successfully penetrate a human smuggling ring operated by the Chinese mafia in the country.  

Expanded PRC linkages with Latin American police and other internal security personnel will also help the PRC to address the expanded risk to its companies as they operate mines, oilfields, and construction projects in remote, sometimes politically contested, parts of the region.  In the process, however, the new presence will raise significant concerns about Chinese involvement in the internal security affairs of Latin American and Caribbean countries.  Indeed, the document’s mention of “judicial exchanges and cooperation between courts” should raise eyebrows.  Although China has already conducted such exchanges with Bolivian judges, among others, the possibility afforded by such exchanges for collecting intelligence on, and obtaining methods for influencing Latin American judicial personnel, potentially in a future position to decide cases impacting Chinese personnel in the region, merits closer examination.

Finally, China’s policy document toward the region mentions that the country is ready to carry out “trilateral development cooperation,” presumably referring to projects with the U.S. government and its companies, but potentially also addressing cooperation with Russia, Iran, or other extra-hemispheric actors. 

In discussing such “trilateral” cooperation, the PRC does seem to be sensitive to the perception in Latin America that it would be negotiating with the United States about the future of the region.  The policy paper gives the green light for trilateral cooperation only where “proposed, agreed upon, and dominated by countries. In the region.”  Moreover, while China “encourages its enterprises to carry out trilateral cooperation in economic, social, and cultural fields in Latin American and Caribbean countries,” political and military cooperation do not seem to be on the table.

Recommendations for U.S. Policymakers:
China’s new policy white paper on Latin America and the Caribbean contains important insights into where the PRC wishes to take its relationship with the region under the leadership of President Xi Jinping, and how.  As such, it should be carefully studied by government, as well as business analysts for insights.  While the PRC may undertake activities other than those explicitly mentioned in the document, and while it may not achieve everything that it has announced that it aspires to do, decisionmakers should at least plan on the basis that the PRC will attempt to do, what it says it wishes to do in Latin America and the Caribbean.

With respect to the U.S., Washington should use its own strategic communications with Latin America and the Caribbean to emphasize its value as a partner which provides meaningful value-added, job-creating investment in the region while purchasing a broad range of its products and working through donations (and not simply tied loans) to strengthen its institutions.  While its behavior has not always been perfect, Washington should remind Latin America of its efforts to legally oblige U.S.-registered companies doing business there to adhere to ethical and environmental norms.  Similarly, while Washington has much to do to reduce its demand for drugs from the region, and the smuggling of arms across its borders, it should also make Latin Americans more aware of its significant, ongoing efforts in the area of drug demand reduction and cross-border firearms smuggling.

In the process, the U.S. should also be attentive to how the messages that it sends to Latin America through its domestic political rhetoric may negatively impact the willingness of Latin America to work with the U.S., or motivate U.S. partners to deepen ties with the PRC and other extra-hemispheric actors as part of their own bargaining posture.

Beyond its messaging, the U.S. should build its engagement with Latin America and the Caribbean around the concept of respectfully working with its partners to increase economic opportunity there while strengthening the region’s institutions and rule of law.  The contemporary global economy is based on the flow of goods, capital, people and information; the U.S. cannot and should not prevent the region from having economic, social and political interactions with the PRC, but it can help strengthen its institutions and provide other forms of support to help Latin America and the Caribbean obtain the best possible deals from its interactions with the PRC.  The U.S. did, after all, just elect a president internationally known for his deal making skills.

By concentrating on creating economic opportunity, strong institutions and the rule of law in the region, the U.S. can most effectively support development and the interests of the people, rather than providing particularistic benefits to an elite that negotiates deals with the PRC.
In addition, the U.S. should closely monitor PRC activities in Latin America and the Caribbean, continually assessing the impact that such engagement is having there, however indirectly or unintentionally.  Such assessments should include:
Analysis of the impact on the changing composition of economies in the region due 
to a combination of incentives to concentrate productive activities on commodity exports to PRC, while domestic value added industries are undercut by competition from Chinese products.

Analysis of the impact of Chinese activities on the level of corruption in the governments of the region (particularly with respect to small economies and left-of-center governments, and particularly with respect to public acquisition infrastructures) as Chinese companies and banks expand their loan-based infrastructure projects in the region.
The impact of the availability of Chinese loans, investments, imports, and other activities, and China’s “strategic partnerships” and associated consultation mechanisms, on the disposition of governments in the region to support policies such as Western-style democracy, free markets, human rights, transparency, and the rule of law.
The impact of Chinese bilateral activities and engagement through CELAC on the health of the Organization of American States and Interamerican system, and the use of that system in multilateral approaches to the region’s challenges, vis-à-vis alternatives such as UNASUR, CELAC and ALBA.

Any undue Chinese influence on the judicial systems of the region, such as that potentially produced through expanded exchanges with judges and other law enforcement personnel.

Changes in the nature of Chinese military engagement with the region, to include any notable shifts from humanitarian-oriented activities to combat exercises, counterinsurgency training, counterterrorism, or other internal security activities.

Within the Department of State, the Department of Defense, and other relevant U.S. government organizations, the United States should strengthen its system of liaison officers other cross-regional vehicles for information exchange, to provide greater visibility within Latin America-facing organizations regarding how events involving the PRC in Asia could impact its behavior in Latin America, as well as how the activities and situation of Chinese companies and personnel in Latin America could impact PRC behavior in Asia.

The policymakers and analysts who seek the hidden plan behind China’s principally economic engagement with Latin America and the Caribbean have valid concerns, yet sometimes miss the point.  China’s second policy white paper on Latin America and the Caribbean, like the one which preceded it, provides broad, if sometimes ambiguous, statement regarding how and where the PRC hopes to advance its relationship with the region.  The challenge for the U.S. and Latin America in making use of this document is to understand the implications for the U.S. and the region, as China attempts to execute its declared ambitions, and to respond in a way that doesn’t create counterproductive resentments among U.S. partners, but rather, but advances a hemisphere of strong, democratic institutions in which prosperity and security are possible for all.

[1] The “quartet” refers to the collection of the country which has held the presidency of CELAC during the past year, the present year, and the next year, plus one permanent representative for the Caribbean.