China on the Ground in Latin America

The expansion in commercial and other activities by the Peoples Republic of China (P.R.C.) in Latin America and the Caribbean during the first decade of the twenty-first century has understandably captured the attention of political leaders, businessmen, and academics in the region, as well as in the United States and other parts of the world. In the decade from 2003 through 2012, bilateral trade between the P.R.C. and Latin America and the Caribbean increased by a factor of ten, from $29 billion in 2003 to $270 billion in 2012.¹ During this period almost without exception, there have been multiple presidential-level visits each year between the region; within weeks of Chinese leader Xi Jinping’s ascension to the presidency in March 2013, the leaders of Peru and Mexico made pilgrimages to China to meet with him on the sidelines of the Boao Forum, rapidly followed by President Xi’s June 2013 trip to the region, with state visits to Trinidad and Tobago, Costa Rica, and Mexico, including separate meetings with presidents and prime ministers from a total of ten different countries of the region, before eventually arriving in California for talks with US president Barrack Obama.

In terms of the dollar volume of mergers and acquisitions and future investment commitments, extractive sectors, including petroleum, mining, and agriculture, are arguably where Chinese companies have most focused efforts that are building their physical presence in Latin America. It is also the area in which potential for resistance to and complications with that presence have been greatest, including the approval of large-scale mergers and acquisitions and objections from environmentalists, local communities, indigenous groups and other affected parties. Chinese engagement in the extractive sectors also generates potential for a range of difficulties with the projects in the implementation stage, from relations with local labor forces and actions by the governments on whose territories they are operating, to security issues, given that the areas in which such activities occur are often remote, and put the Chinese operators in contact with a combination of local peoples, criminal elements, and sometimes insurgents who live and operate there.

Paralleling the expanding presence of Chinese companies in the primary product sectors of Latin America and the Caribbean, P.R.C.-based firms have also made significant advances across the region in construction, including work on public buildings, transportation and logistics infrastructures, and commercial facilities. A key part of the Chinese approach has been to bring to the table in a coordinated fashion the company that will do the work and the associated Chinese institution that will finance the project, with a loan relatively free of conditions not tied directly to the project itself. Such a combination has been a significant factor for Chinese companies in winning work in a region where obtaining timely financing for major projects has always been a challenge. The combination has been particularly attractive for regimes such as Venezuela, Ecuador, Nicaragua, and Argentina which, to varying degrees, have rejected or excluded themselves from financing through traditional private and multilateral institutions. It has also been successful with smaller Caribbean basin countries that have historically lacked easy access to capital for large-scale projects. In all cases, it has allowed regional governments from a broad range of political orientations willing to incur debt, to successfully complete infrastructure projects that deliver visible, tangible benefits to their populations, even if the quality of those projects or the terms under which they have been achieved may be questioned.

In a growing group of countries in Latin America and the Caribbean, P.R.C.-based firms have begun to establish a presence in retail and manufacturing. To date, the growing Chinese presence has been concentrated on countries with large markets, such as Brazil, and those which offer privileged access to large markets through trade agreements or geographic proximity.

In addition to the expanding Chinese physical presence in primary products, construction, retail and manufacturing, companies based in the P.R.C. have begun to increase their physical presence in a number of service sectors, including telecommunications, electricity, logistics, and banking.

The thesis of this book is that the expanding physical presence of Chinese companies and personnel in Latin America and the Caribbean creates new challenges for the Chinese. Some of these challenges include the establishment of projects and operations in the region, as well as the management of operational challenges once those companies are established. As Chinese commercial entities confront both types of challenges, the Chinese government will confront increasingly difficult decisions regarding how, and under what circumstances, to use its growing soft power to protect and advance the interests of those companies, their personnel, and the overseas Chinese community more broadly, even as their physical presence also impacts the dynamics of the region.

As Chinese companies and personnel seek to enter Latin America and the Caribbean, the first set of challenges that they face concerns their attempts to acquire assets, and win and set up projects. The difficulties that the Chinese encounter in doing so arises from all directions: obstacles to mergers and acquisitions, objections by extraregional actors to Chinese investments and projects, resistance from regional governments at both the national and local level, attempts by commercial competitors and other parts of the private sector to stop them, and objections from the political opposition and other actors who were not included in the government-to-government deal and any corresponding financial bonanza.

For Chinese companies entering Latin America and the Caribbean, the struggle to establish themselves, win contracts, and initiate projects is only the beginning. Once operating in the region, those companies become local employers, members of the community, and legal entities subject to the actions of the Latin American governments in which they are operating, whether or not they fully recognize and seek to embrace and actively manage those roles.

Although this book has focused on the expanding physical presence of Chinese companies and their personnel in Latin America and the Caribbean that presence is having important effects on the position of Chinese ethnic communities which have long lived in the region. Although separate from the question of Chinese corporations and citizens of the P.R.C., this chapter addresses the question of Chinese communities because the change in their position, due to the phenomenon described in the preceding chapters, creates important dilemmas for the Chinese government regarding how, and under what circumstances to protect them as Chinese power expands globally. As such, the question of Chinese communities is a key part of the dynamic by which the physical presence of Chinese companies will force a re-thinking of the P.R.C. relationship with the region.

The thesis of this book is that the expanding presence of Chinese companies on the ground in Latin America and the Caribbean represents a new stage in the relationship between the P.R.C. and Latin America and the Caribbean that fundamentally changes the dynamics that existed previously. The new presence will force the P.R.C. to rethink how to protect and advocate for the interests of Chinese companies and nationals abroad, as well as overseas Chinese communities in the region.