China and Latin America Forum

China and Latin America Forum


On behalf of my fellow
residents and the staff, it is my pleasure to
welcome you to International House at the
University of Chicago, and to the China and
Latin America Forum. Today’s program is sponsored by
the International House Global Voices lecture
series, the Center for Latin American
studies, the Organization of Latin American
Students, U Chicago Chinese undergraduate Student
Association Graduate Council, Office of Multicultural
Student Affairs, and student government. I hope all of you will
return to International House throughout the remainder of
the 2016-2017 academic year to attend to other Global Voices
lectures and performances. The Global Voices public
programming series advances cross-cultural understanding
and opportunities for civic discourse on
community, national, and world affairs through music,
dance performances, films, lectures, conferences, and
roundtable discussions. You can find information
about these programs on the literature table
at the front entrance. Please feel free to sign
up for a mailing list in order to receive
announcements about all of exciting upcoming events. Now, I am very pleased
to introduce to you to Ming [INAUDIBLE] a
fourth-year economics undergraduate student
and co-organizer of this forum, who will begin
today’s very special program. [APPLAUSE] SPEAKER 1: Hello, everyone. Welcome to the University of
Chicago’s first China and Latin America Forum. My name is Ming
[INAUDIBLE] and I’m a fourth-year undergraduate
economics student at Chicago, as well as one of the
co-founders of the forum. And I will be your
host for today. First of all, I would
like to introduce Dr. Brodwyn Fischer, professor
of Latin American history, as well as director of Center
for Latin American Studies at the University of Chicago. Dr. Fischer is a historian
of Brazil and Latin America, and is especially interested
in cities, citizenship, law, migration, race, and
social inequality. Her research is focused
on the historical dynamics of Brazil’s racial inequalities,
criminal law, Brazil’s 20th century great migrations,
and the relationship between urban poor and
Brazil’s political life. Now, please join me in
welcoming Dr. Brodwyn Fischer. [APPLAUSE] BRODWYN FISCHER: Good
morning, everybody. Thank you so much for being out
here on this cold, and rainy, and very busy day. I’d like to just extend a
welcome to everyone on behalf of the Center for Latin
American Studies, one of the co-sponsors
of this event, and to give a special
thanks to the organizers. We’ve been wanting to
do an event such as this for literally as long as I’ve
been at Chicago, which is not too long, but four years. And it really took
the initiative of these students to
bring it all together, and the generosity of
I House in putting all the legwork into organizing. So thanks to everyone. I’d like to also thank
all of the panelists who have come today– Carol Wise, Lourdes Casanova,
Benjamin Creutzfeldt, and Stephen Kaplan,
and Ted Piccone. It’s very exciting
to have you here, and we’re really grateful
for your presence. This topic is important, not
only from the perspective of people who care about what
is happening in Latin America right now. I think that in
the United States, China’s new role in
Latin American economies has been somewhat downplayed. We don’t read about
investments in infrastructure and natural resources and the
growing importance of China as a trading partner
in Latin America nearly to the same extent that
our Latin American counterparts might. And so in some ways,
it’s a transformation that might seem somewhat
silent from our perspective. But certainly within
Latin America, it’s one of the most
transformative forces of the modern age. And for Latin Americans,
this is something that doesn’t just
exist in the past, but is also part of a
much longer trajectory. Latin America is
arguably the region in the world that finds
its origins most closely in globalization. Latin America would
quite literally not exist, had it not been for
the movement of Europeans across the seas,
if it had not been for the origins of
global capitalism that were forged through
sugar, through slavery, through the many commodities
that Latin America has produced, and that have been
consumed around the world. And for Latin America,
this relationship with the outside
world has always been fraught and complicated. On the one hand, it’s the
reason for being for the region as a whole. It’s the reason that
we classify this region of the world as Latin America,
rather than a collection of disparate places. It’s brought enormous
opportunity for development, for raising standards of living
in virtually every country that international
contact has touched. But at the same time, there’s a
very long history of violence, of exploitation, of
fear of foreign control of national resources. And so that this notion
of globalization– this notion of the
world economy– is one that, for
most Latin Americans, is very emotional,
very closely held. And virtually
everyone understands that it’s a relationship
that is actually absolutely crucial to national destinies. In the 20th century,
the main conflicts that have played out over
Latin America’s relation with the international
economy have involved a basic
opposition– that is, the opposition
between development defined as economic growth
that necessitates capital formation, that necessitates the
flow of international resources toward Latin America,
but also foreign control over Latin American economies. So on the one hand,
you have this mandate for economic growth,
and on the other there are desires for
distribution, desires for national control,
which have often been set in opposition to this
mandate for growth that is driven by international forces. And so China, as it has entered
so forcefully and so quickly into Latin American life,
is really inserting itself in the middle of
debates that have been formative to this region
for the entire last century– ever since the
United States began its openly imperial relationship
with Latin America in the mid to late 19th century. And the success of
this relationship– the degree to which Chinese
involvement actually creates opportunity as well as open
veins across Latin America– is really going to depend on the
extent to which they can live up to the ideal of being
a different kind of global economic power– one that understands a
bit better than others have the need to balance
distribution and local control with the mandates for growth
and economic expansion. And I very much hope that in
the discussions of our panelists about China’s economic and
political involvement in Latin America, we’ll
come to understand the dynamics of
this relationship as they’re developing
in our own time. So thank you, and welcome,
and I hope we all learn as much as we hope to today. Thank you. [APPLAUSE] SPEAKER 1: Thank you, Professor
Fischer, for your words. Now I’d like to
introduce [INAUDIBLE] the president of Organization
of Latin American Students, and one of the co-founders of
the China and Latin America Forum. [APPLAUSE] SPEAKER 2: Hey, everyone. Thanks, Bruce, for
your introduction. Before anything, I
want to thank everyone who made this possible, because
it took a lot of effort. And I really
appreciate everyone who made this possible,
and I House for letting us use this amazing space. This event started as an
idea, and it’s very nice to see it be an actual
thing right now. So let me tell you why also
China and Latin America. And I just wanted
to share some facts, because I’m usually someone
who likes facts a lot. So among other things
that I can tell you is that China’s trade with
South America grew 22 times between 2000 and 2013,
almost hitting $100 billion in the period. And yes, that’s like 22 times. And if you want
something for comparison, trade between Latin America
and the US in that same period just doubled. China’s President Xi Jinping
wants to invest US $250 billion in Latin America over
the coming decade. And as the President of the US
withdrew from the Transpacific Trade Alliance
Pacific Partnership, the president of China was
traveling around Latin America establishing relationships. China is a major trading partner
of Brazil, Chile, and Peru. In 2015, Argentina
signed a $1 billion agreement to buy Chinese
fighter jets and ocean vessels. And after the new
president, Mauricio Macri, criticized the deal, he
still confirmed the deal after he came to power. Keeping true as a global
provider of capital, China is also a big lender
in Latin America, also one of the biggest
lenders of Venezuela. Since 2007, China has lent
$60 billion to Venezuela. Not only are both
the Chinese and Latin American economies
changing drastically, but the US, as a major
partner of both regions, has established itself as a
different kind of global player nowadays. And things are happening. When Trump suggested that
the US pull out of NAFTA to keep jobs in America,
Mexico and China, right away, did not waste
time and announced a new auto partnership. The growth of Latin America
has been paralleling Chinese growth, and has been
fueled by Chinese demand for natural resources. I’m from Chile. I have lived through this. Our economy grows when
the Chinese demand copper. And when copper demand goes
low, our economy slows down. Latin America heavily
relies on Chinese investors. They transform our roads. They transform the way we
consume electricity, transform the way we consume our water. And why, however, Latin
America noticeably looks towards the Atlantic–
mainly, of course, due to cultural ties. Should we expect this to
change in the following years? And what about China’s
role in world politics? What role does it play in
the crisis of Venezuela? To what extent does China’s
growing economic and political ties to Latin America
threaten the US and its traditional
leadership in the region? Is it time for Latin
American nations to start to look at
China with the same eyes as they look at
the United States? And basically,
these are the types of questions that inspire
us to create this event. And we hope that you enjoy a
day of great discussion, brought to you by our guests, who
we are very honored to have. And we thank you all very much. [APPLAUSE] SPEAKER 1: Thank
you, [INAUDIBLE] for the great introduction. Now, I’d like to say
a few words before we start Panel A. This
panel will focus on the economic relationship
between China and Latin America. Since the 1990s, trade between
China and Latin America has increased drastically. In 2013, China’s trade
with Latin America was 24 times larger than it
was in 2000, reaching about US $236.5 billion in 2015. However, with the structural
change of Chinese economy– we went from a
manufacturing-based to a service-based one– the relationship is
deemed to change. With that in mind, I’d like
to introduce and welcome the moderators. First of all, the moderator for
this panel is Dr. Bain Borges. Dr. Borges is the
faculty director for Master of Arts program
at the University of Chicago Division of Social Sciences. He’s an historian of modern
Latin America, especially Brazil and the Caribbean. His fields of research are 19th
and 20th century Latin America culture and ideas. Now, to our speakers. Dr. Carol Wise. Dr. Carol Wise is an
associate professor in International Relations
at the University of Southern California. She specializes in
international political economy and development, with an
emphasis on Latin America. She has written widely on trade
integration, exchange rate crisis, institutional reform,
and the political economy of market restructuring
in the region. Dr. Wise completed a
book-length project– Dragonomics: The Rise of
China in Latin America– which analyzes the rapid and
remarkable ties that have developed between China and
North America since the 1990s. Our second speaker is
Dr. Lourdes Casanova. Dr. Casanova is a senior
lecturer of management, and the economic director of
Emerging Markets Institute at the Johnson School of
Business at Cornell University, focusing on
international business and emerging markets
multinationals. She is the co-author of the
Emerging Multinational Report 2016, “The China Surge” and
“Outward FDI in China and Latin America– A Comparative Study.” Now, please join me in welcoming
the moderators and the speakers for Panel A. [APPLAUSE] Thank you. CAROL WISE: This
is a huge topic. And it’s on me to kick off
the conversation, right? So let me begin with
something very simple. Lourdes and I have
been assigned the task of the economic scenario
between China and Latin America. Professor Fischer,
I think, raised one of the most important
points of today. And that is, if I
understood her correctly, will China actually be
able to step up to the role that it has thus
far sought to play? Can they can they walk the walk
instead of talking the talk? But can they step up
and be, if you will, the interested, engaged ally? And another question, which
is the flip side of this one– can the Latin American
countries step up and rise to the occasion? And I’ll elaborate
on that in a moment. So Bruce mentioned, I am
completing a manuscript on the rise of China
in Latin America. And it really narrows down,
if we look at the data– Ezekiel and Bruce mentioned a
lot of data, trade investment and whatnot. But if we were to look
and really break it down, what we see is a
heavy concentration of China at Latin
America economic ties that are really dominated by
just five or six countries. South America is where
the action is, right? The South American countries
that are moving and shaking are Peru, Chile,
Brazil, and Argentina. Brazil and Argentina together
are the biggest recipients of overseas direct
investment from China. And Mexico has a very strong
relationship with China, but it’s on the import side. They’re carrying 80,
85% of the trade deficit that the region has with China. The trade deficit started
as far back as 1989. And I have my views on that. So let me say that China
has designated countries– not just Latin America, but
around the world, mainly in the developing countries–
as strategic partners. And there’s different levels
of strategic partnership. I’m not going to get
into the details. But I’m not a China
expert, all right? So I get a kick out of
some of these things. A strategic partner is
an unfair weather friend. A strategic partner is
your steady ally, etc. But what a strategic
partnership does– it has enabled China to manage
the relationship with country X in a way that, thus far,
has been unoffensive, quite frankly. Certainly unoffensive
compared to US relations with Latin America over
the last 150 years. So who are the
strategic partners? The countries that
I mentioned, those five countries which carry the
bulk of the economic activity with China. And I’m going to mention,
there’s this notion that, oh, the trade investment,
the trade investment. But what we see is that
China’s interaction with these countries is actually
complementing, accentuating, and in some ways improving their
own ongoing development model. I wouldn’t say it’s exacerbated
it up to this point, all right? Let me begin with
Brazil and Argentina. Right? These two strategic partners– those are the longest
strategic partnerships. Brazil was the first
one in Latin America. Both of these have
very complementary economic relationship
with China. They’ve got the resources–
the soybeans, the mineral oil, and whatnot. And China is really still very
avidly buying these resources. When you hear, for
example, Ezekiel mentioned being Chilean. And of course, Chile is the
top copper seller to China right now. And, oh, the price is down. But if we look at the commodity
price index, what we see is that it’s down from where
it was at its peak in– they’re also timing for me– it’s down from its
peak of 2012, 2013. However, it’s certainly
a good 20, 30% higher than it was at the beginning
of this amazing commodity price boom that we saw
between 2003 and 2013. So it isn’t that China bought
those things and went away. It’s that China bought those
things, changed its development strategy to a more
domestic consumption, services-based approach. They wore out their export-led,
heavy investment model. So we’ve got
complementarity with regard to Argentina and Brazil. I would say that the
relationship both country has with China is love hate,
approach avoidance, in the sense that Chinese
manufactured goods are flooding into those markets. But they’re flooding into
everybody’s market, including ours. Right? But each country thinks
it’s their unique problem. So you’ve got
anti-dumping and all kinds of cases being filed by these
two countries against China at the WTO. The Chinese take
that personally. They don’t like it. But the relationship is steady. It isn’t going anywhere,
mainly for the reason that China needs the resources,
and they need the investment. And the kind of
investment thus far has been infrastructure,
which is clearly so important. The region, many developing
countries, our own country has a huge
infrastructure deficit. So I would say, Brazil and
Argentina– complementary. It’s like a bad marriage,
they fight all the time. However, nobody is
going anywhere, right? They are sort of locked
into a very traditional comparative advantage
relationship. Let me talk about
Peru and Chile. By the way, it’s no coincidence. All of the countries
have what China wants. But also, they lump
together very much according to the leading
sectors in the economy, and the factor endowments. Brazil and Argentina– very
similar factor endowments. Chile, Peru– they have dealt
with China very strategically. Peru’s opened up
its mining sector. Chile’s is held
close to the vest. Hence, very little foreign
investment from China in Chile to date, right? But China approached both, and
wanted to sign a free trade agreement with them. And since they were signing
free trade agreements with everybody,
including the US, they seized the opportunity. And when I first heard that
they were signing free trade agreements with China, I thought, oh, this is
going to be interesting. But it is interesting. They are in line with the
World Trade Organization. They cover services. They cover investment. They cover competition policy. And they provided much better
access for both countries to the Chinese market, which– China’s in the WTO, but
access to that market is not guaranteed. It’s been really
quite successful. And then there’s Mexico,
which is a strategic partner. And that relationship is
very difficult to understand, because Mexico unfortunately
put all its eggs in the NAFTA basket, and that
is now unraveling. They’re renegotiating. God knows what’s
going to happen. But Mexico has had one deal
after another fall through with the Chinese, including a
famous $4 billion bullet train. And to hear the
Mexicans tell it, it’s mainly problems
with negotiating on the Mexican side– unrealistic expectations about
high interest rates, and Mexico is going to put
forward joint capital, and they’re going to pay the
interest rate of this crook Carlos Salinas. Roberto Salinas Viego, who
controls the banking sector, they’re going to put
up joint capital. And China’s supposed to
pay 19% interest rates. And the Chinese said,
you’ve got to be kidding, and they walked away. I’m not sure about this auto
deal with China, Mexico, because they’ve had two of
them already fall apart. Investments have fallen apart. There’s a few investments. But Mexico’s relationship
with China, I think they’ve really
strategically mishandled it. They extracted side
payments for voting to admit China to the WTO. They had gigantic
protectionism against China all the way up through 2011. And protectionism in a
global economy like this one is not the way to save
your industrial sector. Anybody knows you
need to restructure, and you need to step
up to the plate, and undertake the
kinds of reforms that would be necessary to compete. The last thing I’ll say is
that Mexico did get a bad deal, in the sense that their
exports are directly competing with Chinese exports. They call it export
similarity index. One for one, they’re
competing, and Mexico’s losing. On that cheery note,
let me stop, and let me hand it over to Lourdes. And I look very much
forward to the discussion with the audience afterward. LOURDES CASANOVA: OK. Thank you. Very happy to be
here also, because I start with an anecdote. I met my husband,
who is from India, in 1985 in another I House– that time in UC Berkeley. And I was always
told over there, you have to go and meet
the other beautiful house, I House in Chicago. So today I had the opportunity. And I’m still married,
which is always a miracle, 32 years later. So thank you very much
for the organization. I’m also very happy to
be here with Benjamin, who came to a similar symposium
we organized in Cornell. So this is a very
interesting topic, very much in
everybody’s mind, mainly because, as we heard
in the introduction, it was a little bit
under the radar, mainly after the famous
visit of President Xi right after the election
of President Trump, in which President Xi told
Latin Americans, don’t worry, I’m here. Of course, it’s too early to
say what is going to happen, because also now, it
seems that the NAFTA is going to be renegotiated. But we don’t know the terms. We don’t know. So there is a lot
of uncertainty, and we don’t know what
is going to happen. So what is clear is that, as it
has been said before, for Latin America, China was the manna– the promised land. Because definitely China
had a very important role in the rise of commodity
prices, and in the golden decade of Latin America between
2003 and 2011, clearly. Now, however, we are
entering in another phase– in a phase with cheaper
commodity prices. So the exports to
China continue, but the value of those
exports has gone down. And, as it was said
again in the material that we received
for the symposium, so what this clear also
is that China somehow– not China. But because you rely
on the exports of very expensive commodity prices. So we saw a decline in
manufacturing, mainly in South America. So that’s what happened. But now we are in a
new phase in which let’s see if China’s
going to play a more important role, mainly
in Mexicans, in Central America. And also, because
China has become now the most important
investor in Brazil. So in the biggest
economy in the region. Let’s remember some numbers. China GDP nominal
is 10 trillion. Latin America as a
whole is 6 trillion. So the economies
still very recently were quite similar in size. But of course, because
of the tremendous rise of growth of the Chinese
economy, it has gone up. So then, in this
new phase in which China has invested in
Brazil, as much as 34% of all investments of this
year, and similar numbers from last year. So that’s when the mismatch– this imbalance–
is more present. Let me also say that I’ve
been teaching about emerging markets, first in a business
school in France called INSEAD. So in INSEAD in Fontainbleau,
and in Singapore, I taught for more than 20
years about emerging markets. But I started teaching about
Latin America in ’95, ’96. It was beginning the
take off of China. But China was
nowhere to be seen. So I’m going to show
you some numbers. We have heard that China
is the most important trade partner of four countries
in South America. But China is today the most
important trade partner of 100 countries in the world. There are almost 200 countries,
so half the countries in the world have China,
including this one, as the most important
trading partner. So we see the imbalance
over there already. So it’s not only Brazil as
a source of [INAUDIBLE],, It’s also Australia
and other countries. And let’s also remind
ourselves that China is rich in commodities, as well. And China is also an economic
and agricultural powerhouse. So how long will China need
the soy from Argentina? Argentina only recently
became an important producer and exporter of soy
that doesn’t consume. So yes, it is important. But for how long
China is going to be so important for Latin America? OK, so I’ll give you some
figures about China outward foreign direct investment. We have seen, for the first
time in the economic history, a developing country, China,
10 trillion economy, US 17 trillion economy, China
still at $8,000 GDP nominal per capita. So still an emerging market
that has become a powerhouse in outward foreign
direct investment. Some years, it’s as much as
the fifth biggest country in the world. So I’ll give you some data
from the recent report that we published
last year, and can be download from the Emerging
Markets Institute web page at Cornell. And we are updating now with
data from the next year. In our conference in
October in New York– 13th of October– we’ll
launch the next one. So here we see
that where is China interested as an investor. These are the stocks. So the accumulation of outward
foreign direct investment of China. So China is here– very interested in Asia,
in its natural market, but then, Latin America. So China’s interest sees
growth in emerging economies, much more than the
developed world. While Latin America
used to invest, when he was a
powerhouse like China is now, when Brazil growth
years of the 70s, Brazil would invest in Latin
America, but immediately would go in Mexican companies as
well, to the US, and to Europe. This is not the case in China. China goes to Asia first,
and then, in many cases, goes to Latin America. And here we see the
percentage of accumulated outward foreign direct
investment stock of China. And then here, another data. So China was nowhere
to be seen in 2000. In 2015, became the
fifth biggest acquirer in the world, so
a global acquirer. And here we see a
different picture. So when you go
abroad, you invest as what we call greenfield,
their own project. And also you invest through
mergers and acquisitions. This is data from Capital IQ. And this is announced
mergers or acquisition deals originated in China. And here we see a
different picture. Here we see that Europe
and US, so in other developing countries, in
other emerging markets, Greenfield own projects,
definitely in Africa. In Europe, in the US,
China buys knowledge. And one of the most
important acquisitions that is reflected here was
the announced acquisition by ChemChina of
Syngenta in Switzerland. And that, because it’s
such a huge acquisition, then we see Europe
more important. This is 2009, 2016. So clearly China took
advantage of the Euro crisis, and went and bought
ports, bought technology companies in
Germany, et cetera, et cetera. And then US, and then
Asia, and Latin America. So a different picture. Not only Latin America
developing countries, but China now, with a
new power, that it is investing in developed world. And here is the
Global 500 of Fortune. And here, we compare
the number of companies from China, US, Mexico,
Latin America, and Korea. So if we look at 2005,
the starting point was very similar– Latin America, similar number
of big companies as China– we are talking about
only 10 years ago, 11. Because this is data from
the publication last year. So we see a certain
decline of US companies in a certain major growth
of Chinese companies, mainly after the 2008. So the 2008 global
financial crisis was a starting point
for Chinese companies to grow and to go global. So quite amazing. That’s an indication
also for the future. And also, here we looked
at different industries– 80 industries. And you can see,
again, in 10 years, 11 years, a tremendous change. A lot of red. All red is China. So no company industry leaders
from China, and many right now. This gives you an indication
that this investment spree of China. And of course, a lot is
going to go through the One Belt, One Road in neighboring
countries– in Asia, and in Europe. But also, in Latin
America we see it. In the meanwhile, the number
of companies from Latin America has remained the same
in the Global 500. So while the local Chinese
private and public business sector has increased
tremendously, the numbers of Latin
American companies has remained the same. So yes, I see an imbalance in
this relation, an imbalance. And let me tell you that
I am, as a scholar who has been studying emerging
markets, still in awe, and continue to be in awe,
seeing the rise of China, how well planned it has
been so far, how powerful, and how much good should
we expect looking forward. So the imbalance is
that, because the trade– Latin America thought, China is
going to depend on us forever– is not the case, because
of the investment trends that we see right now. China is diversifying
tremendously the investment rates to other regions. And China has the power
of a local business sector extremely strong that
will look for the future. And then, China has a
very clear strategy. These five-year plans,
that they always are able to achieve all
their goals before the end of the five years. In Latin America,
that’s in half. And also, Latin America, as we
want to call it from outside as one, is not one. Let’s see what is
going to happen, now that Mexico is turning
again to Latin America, after having been focused since
this signing of the NAFTA, has been focused to the US. Now we are seeing Mexico,
the other powerhouse. So Brazil, $2 trillion economy. Well, now less, because
the currency has gone down. And Mexico 1 trillion economy. The two powerhouses
in Latin America, if they look to
each other, if they see the power of
getting more united, and then having a more clear
strategy, sitting on the table. Chinese are
excellent negotiators sitting on the table, and
finding ways to win-win. Another, for me,
hope in that sense is that, for the new development
bank, the bank of the Brics, China has given an extra year,
given the political turmoil that they are going
through, for Brazil to join. Brazil and South Africa
were unable to join. And now they have
being one more year. So yes, China wants
to dialogue, but the Latin American countries,
for a number of reasons– because they are not
united, because they have their own corruption
and political crisis, and they are embroiled into
this very difficult situation– are unable to sit on the table
with a plan moving forward. DAIN BORGES: So
to coin a phrase, I’m going to prime the pump,
by asking a question or two of my own, and then
we can go quickly to questions from the audience. One question each of you
could try to respond to, and I know it’s a complex one,
but it would help me immensely. If something like 2/3
of international trade goes on within units of
the same corporation, is it useful analytically
to talk about China, even though their many
state-owned firms, even though private firms are
very close to the government, even though there may
be a Chinese style of crony capitalism
to some extent? Is it useful to talk
about China analytically? Or should we be talking
about the strategies of individual Chinese
firms in Latin America? So I think each of you
has spoken to that, or raised that question
for me tangentially. And maybe you could
each say something. Carol, do you want to– CAROL WISE: Yes. Trade is mainly between
developed countries, the bulk of it, in intra-firm, and
inter-firm, and intra-industry, and inter-industry trade. However, since our subject
is China, Latin America, I don’t think there’s
any intra-industry trade, or inter-firm, or intra-firm
trade going on between China and Latin America. Because that’s for higher
value-added industrial goods, or pharmaceuticals, etc. And most of the investment that
China has made so far in Latin America is related to
roads, upgrading of mining, they’re investing
in the soybeans in Brazil, soybean production. So it’s related, quite frankly,
to areas where they’re, shall we say, strengthening
the ability of that country, in terms of infrastructure
and whatnot. Roads, ports to basically
export back to China. So they’re investing. They’ve internationalized
their development strategy. They’ve had to, because they’re
very resource poor, right? And also, they’re sitting
on a pile of money. And if you don’t invest
it, it stagnates. Right? And they need to get more
returns for the money that they are investing. And therefore, this focus
on outward investment at this particular time. China’s a really freak case. We have never seen an emerging
economy with this amount of capital abundance. It just hasn’t happened. And so, they really need
to unload that capital, and invest it. And I think what
we’re seeing here is– and I’m surprised
that the African number was as low as it was, because
that’s where they first set out, right? But Latin America actually has
higher levels of development, and is much more
sophisticated, in terms of the projects that the
Chinese want to undertake in extractive resources. LOURDES CASANOVA: Just adding
to what Carol has said, we are in uncharted territory. Because everything that we
teach in economics departments, in business school, is
bilateral trade, so a balance. US used to trade with Europe,
Europe could trade to the US, and the rest was minimal. Now for the first time,
again, as Carol was saying, is that there is a lot
of south-south trade. That is different. That Is not intra-firm
trade, on the one hand. A lot of the Chinese investments
in Brazil are in services. For instance, one of the
major investors in Brazil is State Grid. Many of you have never
heard about this company, many of the non-Chinese. It is the second biggest company
in the world, after Wal-mart, by revenues. It’s a state-owned company– 100% state owned– with
a tremendous technology. They are reducing
the loss of energy through the electricity
transmission. So one of the major
problems is that electricity is lost in transmission. And they are able to reduce
this loss to a minimum. So these guys are investing
tremendously in Brazil. So we have the irony
of Brazil privatizing to a state-owned company
from another country, which is, again, completely
uncharted territory. And definitely we have
to look into the details. And again, it’s a company
that is very well run, that, as I said,
very innovative. But again, so a question mark
is a state-owned company. And at the same time,
Brazil is privatizing. And I believe also were
some multinationals, mainly from the US, have seen
before the crisis, are coming back home. We are starting to look
inside of many countries– the Brexit, the election of
President Trump, saying America will be great again. So we are all looking at
ourselves a little bit, which is not necessarily bad. And we need to do that. So definitely, we are
looking at ourselves, and this is changing. And another thing that is
also, especially in China, is that, let’s be clear– all developed countries, all, in
Wiki-leaks, show a lot of that. Government and private
sector work together. They are private companies,
but the government helps them. Whether I lived in
France 23 years, I would see that
every single day– Germany, the same. Of course, US, the same. But what is the problem? Latin America, we
don’t see that at all. And guess what? We see that definitely in China. In China, whether
private companies or state-owned companies,
if you look at the expansion phases– and I looked at
that in a working paper that we published recently
with a colleague from Shanghai University. So over there, if you
look at the phases, so there is a policy,
and immediately private and public companies
follow that policy. And companies go abroad,
because the government says, lets go abroad. The China Development
Bank, Ex-Im Bank. So the whole infrastructure,
the whole ecosystem moves. So definitely, I can defend. DAIN BORGES: Another
question I have is in relation to commodity
chains and value added. A couple of years
ago, we had here a conference of
agricultural economists, and a mini symposium
on food policy and agricultural policy
in the soybean sector. And the Argentine economists
complained bitterly that, in their
negotiations with Chinese, the Chinese only wanted
to get raw soybeans. Didn’t want soybean
oil, or powder, or anything further up the
value chain exported to China. Is that a particular
policy with regard to the Latin American countries? Is it a policy with regard
to agricultural commodities? Is it a meaningful difference of
Chinese international business from the style of
other countries? CAROL WISE: As Lourdes
and I have said, again, we’re on very uncharted
territory here. The soy oil war, as they
called it in Argentina, was nasty, because indeed, the
Chinese wanted just the beans, and they wanted to add the value
on their side of the border, as most countries do. However, the
Argentines made such a stink that the Chinese
stopped importing soybeans from them for– I forget how long. But it was a disaster,
and here we go. And I did read recently that
there’d been some breakthrough, and that perhaps
the Argentines could export a percentage of soybean
oil, and the rest raw soybeans. So this question of adding value
to exports that go to China is a serious question,
because there’s very little added value. I was just at the Latin American
studies meetings in Lima, Peru. Had a little tiff with a
agricultural economist, a Peruvian, who argued that
Peruvian tomatoes going to China had value added,
because of the packaging, the refrigeration, the
containers they were in. And it wasn’t really
added value to the good. It was just what you did
to get the good over there, which doesn’t really count. So they’re desperate
to show value added, but there really isn’t. And this is one of the big
stinks between, for example, the Brazilian private
sector, industrial sector– very powerfully organized,
but weak in the face of Chinese competition, right? But the added value
and the ability to export their goods
to the Chinese market beyond raw materials
has been a sore point. And the Mexicans are screaming
and yelling about it, although their resort to
protectionism against China, I believe, has set them
back really very far. Instead of whining
and complaining, they should have been
restructuring and really laying down a more competitive–
rising to the occasion, and trying to actually
ramp it up vis-a-vis China. LOURDES CASANOVA: OK. This is a long discussion
in Latin America. And definitely the contradiction
that, for instance, Mexico exports oil to Texas
that is refined in Texas and comes back. So that’s amazing. And Brazil has tried
to build refineries. It’s a problem of the
region, independent of China, of anything else. The region has not been able. There are manufacturing
pockets of excellence, like Embraer in Brazil,
the airplane manufacturer. And then, the only
company that has been able to escape the
scars of natural resources has been Mexico. But in Mexico, they
did something wrong– too much dependent of the US,
of only one trade partner. So now with the crisis,
again, everybody’s talking. We should go up the value
chain, and also integration. So hopefully this crisis
will help with that. DAIN BORGES: Thank you. Can I put the microphone– have it open to
questions from the floor? Do you want to step
up to the microphone? Maybe make a line. AUDIENCE: Hi. I’m a history graduate student
here at the University. I had a question. One of the big
inhibitors to growth in some Caribbean countries is
the immense expense of energy, and the problem of developing
energy infrastructure. Now, China has a
reputation for being a producer of several
cheap energy solutions, in terms of renewable energies. I was wondering about
China’s manufacturing capacity in that front, and its
investments in Latin America, in terms of developing
its energy infrastructure or its finished
goods in that sector. DAIN BORGES: Let’s take three
questions from the floor. AUDIENCE: Going
back to the question of state-owned enterprises,
a lot of economists have said Mexico has
to find some mechanism so state-owned enterprises
can go bankrupt. But Xi Jinping has
made some statements saying that state-owned
enterprises have to be continued
and strengthened, and they play an important role. And so I’m wondering, from
some things that you said– that state-owned enterprises
are playing a big role in investment in Latin America. What is the balance? Are there non-state-owned
enterprises from China that
are also investing? And is there a trend in
one direction or another? And is this part of
a strategy– that is, if there is a strategy
to continue and strengthen an the role of
state-owned enterprises. Is that appearing as a
strategy in Latin America to, for example, have more
crony capitalist connections in Latin America–
in the host country to continue the same mechanism
that has operated in China? And so, in short,
what is the balance? Is it toward more
what Chicago school people would say free markets,
or toward mercantilism? DAIN BORGES: Thank you. Maybe one more
question, and then we’ll have the panelists
speak to them. SPEAKER 4: Thank you for this
fascinating conversation. My question is, if
you can say something about the links between this
global economic strategy of the Chinese state and
its geopolitical vision, especially after the election
of Donald Trump in this country. And the second question is
about whether this strategy or this policy involves private
actors in Latin America, or just state representatives? Thank you. DAIN BORGES: Thank you. So I guess the second
and the 3b questions actually are the same questions. So should we speak
to that first? That is, what is the relation,
or synergy, or interaction between the preponderance
of state-owned enterprises in Latin America and the
preponderance of state enterprises in China? LOURDES CASANOVA: So Latin
America went, in the 90s, to one of the most
radical privatization programs in the world. And Chile was one
of the leaders. But then, moving now about
the telecom sector in Chile was bought by Alan
Bond, the guy who was sponsoring the Cup of America. And three years
later, of course, it was for him a
financial investment. Three years later, Telefonica,
from my country of Spain, bought it. So we are now, 25 years
later, of the privatization. What has happened? So what happened is that
there is a rethinking of that. Because who is dominating
now, for instance, the telecom sector, that was the
first one privatized? The telecom sector in every
country in Latin America is eliminated by two companies–
one, Telefonica from Spain, and another one– guess what? America Movil from Mexico. The Carlos part of the
Carlos Slim empire. And then, government’s
telecom sector is so key– the deployment of broadband,
of having Wi-Fi, the latest technology, so that the
governments are tied, because then the private
companies, of course, are looking for maximum profits. And they don’t always want
to deploy major investments to move forward. Electricity. Electricity was privatized,
again, first in Chile. But a company from
Spain, again, then this dominated this
type privatization. And guess what? Endesa was bought
by Enel, an Italian. So during this very ugly,
very difficult takeover, all investments in
the electricity sector in many countries in Latin
America– in Colombia, and Chile, and in
other countries– were paralyzed,
because the company was going through an acquisition. In banks, two banks dominate–
two banks from Spain, BBVA and Santander dominate quite a
bit of this, except for Brazil. And in most countries, they
have also one local bank. So then this privatization,
who has benefited? So we are in a
moment in which, yes, there is what seems to be a
new wave of privatization, but out of no choice,
because governments are going through crisis, and
they need fresh resources. But then, the citizens
feel a little bit cheated, because they are unhappy
with the telecom services. They are unhappy with
electricity services. And that has favored
either very big companies and all the oligarchs,
so the famous families that dominate economies in many
countries in Latin America. And in this situation, in which
this new wave of privatization, we see, again,
companies from China. The ownership of Chinese
companies is not always clear. It’s very clear in the
banks, in the State Grid, for instance, China Telecom. But in others,
it’s not as clear. Because it’s private, but
then sometimes the local, the regional government
has a stake over there– H&A, for instance, that is
buying a lot here in the US. A huge conglomerate,
a huge company. Again, how much is
still state owned? So for me, it’s
difficult to find out. But in general, are excellent
companies in many cases, as I said, very innovative. Now, China is ahead in mobile
payments, much, much ahead– Alipay, but ahead of any
other country in the world, and used widely. So we see that these
companies are now in a new phase of a
lot of innovation, a lot of local innovation
that has their roots sometimes in some of these acquired
companies in other countries. But of course, fast trains. So these companies
are very innovative and, as Carol was saying, are
deploying their investments, because they have plenty of
resources all over the world. And because US companies
are coming back home for a number of reasons. So then they are occupying
this space as well. CAROL WISE: Well, I have
a Chinese doctoral student at the moment, who
is writing precisely on the role of Chinese
state-owned enterprises in the structure of the
Communist Party, right? And the particular question is
the use of central government transfers funds to especially
regional and very local firms as a way of patronage
control, if you will. So the fact that
China or the president currently is not doing a
big push in privatization is reflected in the fact. I mentioned these
free trade agreements that China negotiated. They’ve got one with Costa
Rica, Chile, and Peru. And they would not budge
on government procurement. And of course, government
procurement and bidding for government
contracts goes right to the heart of the
state-owned enterprises that are investing abroad. Because all the other
countries of Mexico, Peru, Chile have signed on to
government procurement– the liberalization of it,
the transparency of it, with their own free
trade agreements. Let me say that the data on
foreign overseas foreign direct investment from
China are very hazy. You can pay a lot for the
Thomson Reuters database. And you could pay a
lot for the database that some of the think
tanks in China use– CEIP. And you can get completely
different figures. And these are supposed to be
really reliable resources. This gentleman here– you– raised the question about
does it make a difference. And so far, they’re
not all state-owned. Some of these are
public private firms. And thus far, we can’t tell
if it makes a difference, because we haven’t seen
that many fully private Chinese firms investing. It’s always a public
private nature of ownership in the firm
that invests in the region. Lourdes might know
more about that. But are there private– no, no. It’s public private, right? And there’s issues there, too. Because they’re sort
of spinning off, and this central government
is now 10,000 miles away, and can’t really control them
the way they would like to. And just to take this
to the ground level, there are big on the ground
protests around projects– a dam project in Ecuador,
mining in southern Peru. And these are
Chinese investments. They’ve been halted. They’re frozen because
of social protest. And what you see with these
public private companies is that the nature
of Chinese politics is that they’re not
used to dialoguing with the local community. They’re not used to sitting
down over the table, and hashing things
out, because that’s not the way politics work in China. So you’re going to read about
all these projects, and on. And some of them are
just standing still, because of political
problems on the ground. I would like to just raise the
question with this gentleman about– I’d like to try to answer it. What did you say, the
international political geopolitical strategy of China. It’s very interesting,
because since the founding of the PRC in 1949,
they have taken a stance toward nonintervention
and non-anti-imperialism. They’re very clear about that. And I think that they have
tried, in their own way, to really stick to that. Certainly they
haven’t stuck to it very well in their own
region of influence, right? All these scuffles in
the South China Sea. However, when they
get out of that region and over to the Western
hemisphere, I insist– there are these
hawks in the Congress that think China’s going to
invade us tomorrow, right? And there’s just no
evidence of that. So what if they sold
these things to Argentina? They’ve sold helicopters
to Venezuela. They sell, I believe, kind
of second rate hardware and whatnot, to countries that
are on the outs with the US, quite frankly. Right? Bolivia, Ecuador,
Venezuela, and now Argentina, who’s
trying to patch it up, but I don’t think it’s going
very well with the Argentine-US relations. So they tread very carefully,
from my standpoint, when they get out
of their own region. DAIN BORGES: Thank you. Maybe we’re treading
too much on the toes of the topic of the next panel. But let’s go to the
first question, which is, what role, if any, would
Chinese investment have in relatively small
markets in Latin America, such as energy development
in the Caribbean nations? CAROL WISE: I can say
something about that. I have another
student that’s working on this question of
the One China policy and China’s effort to get– there is 12 holdouts
in Latin America that still recognize Taiwan. They don’t recognize
China diplomatically. And this is a very big
thorn in China’s side. And most of these countries
are in Central America in the Caribbean. So there’s been this very
delicate dance going on, where China says it’s not going
to invest in countries that recognize Taiwan,
but it is engaging in a form of
checkbook diplomacy. But my understanding
is that most of it’s these resorts, and golf courses,
and these big fancy tourist opportunities. I don’t know what your
knowledge is about this. You asked the
question, so you’re looking for more information. But this thing about
alternative energy, and alternative development,
or green technology coming from China. Maybe, but I don’t
think that we should expect that to necessarily
come from China. I think that the
green technology and alternate
development is going to come from the
various Silicon Valley’s around the developed countries. And China will get
on board with that. But I don’t really hear anything
about China dedicating itself to any kind of alternative
fuel development. They’re so desperate themselves
for fuel, and for resources, that I haven’t seen that. LOURDES CASANOVA: I think China
is now the biggest producer in the world of solar panels. So yes, they are making
tremendous strides. So I think the countries that
still recognize Taiwan are Paraguay– so one
in South America, and the rest are in Central
America or the Caribbean– Haiti, Dominican Republic, El
Salvador, Guatemala, Nicaragua, and Panama. But OK– this is changing
on a daily basis. Because, as you know, that
is a huge Chinese project in Nicaragua to build an
alternative to the Panama Canal. This is on and off, off and on. We don’t know what
is going to happen. But I assume if this takes
place, [INAUDIBLE] in Nicaragua will change. DAIN BORGES: Thanks. I did want to ask you about that
project and similar project. We know that when capitalists
invest in infrastructure, first they invest in
the good projects, then they invest in the
not so good projects. And then they still
have to place capital, and they invest in
terrible projects. If you look at
railroad construction in France in the 19th century,
or railroads in the United States in the late 19th
century and early 20th century. So these ambitious
infrastructure projects in Latin America– how long will it be before
Chinese investors really have to go to the terrible
railroad that will never pay off, the terrible
inter-oceanic canal that will never pay itself off? I’m asking you to be prophetic. LOURDES CASANOVA: The Nicaragua
canal is a very feasible one. Why? Because, before doing
the Panama Canal, they already
thought of this one. The thing is, do we
need now the Nicaragua canal, now that the
Panama Canal was just– OK, actually, we put at the
cover page of our report on emerging
multinationals, we put the picture of the enlargement
of the Panama Canal. That was one of the
biggest infrastructure projects of the world. Many companies were
involved of all countries. It was tremendous,
had tremendous success for an emerging market. And the picture shows the
first boat that crossed. You had to pay for that. And it was a Chinese boat. So it’s China and Latin America. In China, very much behind
that enlargement because, of course, makes much
cheaper and much faster the going there. By the way, we see
similar projects also in the Mediterranean Sea. The Mediterranean Sea– I’m from Barcelona. So it is being
revised by Chinese. Chinese are building
ports in Greece, they have invested in
the port of Barcelona. Why? Because, again,
all the goods that arrive through the
Suez Canal and all that are much faster to move into
Europe through Barcelona, although we still need
some rail infrastructure, and through Greece,
to Eastern Europe, in detriment of one of the
biggest ports in the world until recently–
that was Rotterdam. So we see many changes
right now because of that. We invited in my class
the economic attache of the Chinese
embassy in Washington. And one of my students
asked this exact question. And the official answer was, I
don’t know anything about it. I don’t know what you
are talking about it. We have nothing to say. When I talked to
Nicaraguan officials and Nicaraguan
business men and women, they say that, OK, there
is a feasibility study, that actually, from an
infrastructure point of view, it’s not so difficult.
That everybody had thought about that
canal before the Panama Canal was constructed. So let’s see. We don’t know that. And there is so much
deficit in infrastructure in many countries– rail infrastructure
among others, definitely in South
America and in Mexico– that I think, before we go into
the completely unproductive projects, there are many
very productive projects everywhere in the world, and
definitely in emerging markets. And in any case, these big
infrastructure projects are always a nightmare
in every single country, including this one,
including Europe, et cetera. So China is now trying, has
the five biggest construction companies in the
world right now. I showed the chart. So they have the capacity,
they have the know-how, because of what they have
done in China is tremendous. So they have the
very recent know-how. So then they are now
trying their luck. What I hear is that
in Luxembourg there are like 250 holding companies,
with billions of dollars, and billions of Euros,
ready to invest. So they tried 10, and two come. So fine. They tried. And how many will be profitable? Well, as any huge infrastructure
project, it depends. CAROL WISE: I’ll say just
a little bit about that. I think, actually, the Chinese
have a three-pronged strategy– productive projects,
medium projects, which could go either way,
and then bad projects. They hit the wall in Venezuela. Venezuela has gotten
the most loans. They had all kinds of
plans with the Venezuelans to build this and build that. And now it’s all
come to a standstill. Venezuela, when it was riding
high on oil revenues coming in, agreed with the Chinese to repay
the loans from the development banks with oil. Right? And so now oil prices
are really low, and the economy
is bottoming out, and the country is imploding,
and they’ve stopped payment. And I had a scholar from the
Chinese Academy of Social Sciences on my
campus last week who presented on China, Venezuela. It’s one of the
newer, if you will, strategic partners,
for obvious reasons– oil. But instead of taking the
US strategy of threats, and freezing accounts,
and this sort of thing, the Chinese are just
quietly withdrawing. They’re just
quietly withdrawing. And they’re not going to
commit any more money there. They don’t like the situation. They’re not getting the oil. For them, a $60 billion
write-off for the Chinese is serious. But it’s not that
big of a thing. Burned once, they’re out. They don’t wait
for the third try. So that’s a bomb. Then they did buy the Argentine
railroad, which is a joke. They wanted to buy the
Mexican railroad, which is a bigger joke. And the Mexicans have all of the
export processing zones right along the border
going all the way to Ciudad Juarez in the
center of the country, and no train to get them to
the Pacific port of Ensenada, or even the port of San Diego,
to get them across the Pacific. And so the Chinese were big on
that railroad, but none of this is happening. But mainly on the Mexican side,
the Chinese were hot to trot. But then, at the
same time, they’re trying to do a $4 billion
bullet train with Mexico, which also collapsed. So I see them doing whatever
they perceive to be, obviously, in their best interest, and
obviously getting resources back from countries
that enable them to enhance their own growth
and development strategy. DAIN BORGES: Should we take some
more questions from the floor now? Well, while people are
coming up with questions, may I ask you another? Resource nationalism is
very old in Latin America, but one dimension of it
that is relatively new is connecting it to
environmental concerns. Accusations that
multinational corporations are more likely to
externalize costs, and are more likely
to pollute, are less likely to be responsive
to political pressures. Is there some meaningful change
in the environmental politics in Latin America, because of
the massive Chinese investment in sectors such as mining? LOURDES CASANOVA:
We have not touched here the subjects of corporate
governance, for instance. What is happening now
with this rise of China and other emerging markets is
that the main actors are not part of the– for
instance, the OECD. That is one of the
organizations that is behind the implementation
of many corporate governance rules, and regulations, and
anti-corruption schemes, et cetera. So what is happening is that
neither China nor Brazil– so we are talking all the second
biggest economy in the world and the ninth– well, now it’s
ninth, but it was seventh– are not part of the OECD. Neither India, so only Chile
and Mexico are part of the OECD. China is part of the
OECD Development Center. That is organization
that is smaller. And actually, we are
working with them for their report on
emerging multinationals. So there are many,
many questions that need to be answered, and
many organizations that very rapidly are becoming obsolete. So if 103 companies of
the biggest in the world– one in five coming from China– they don’t feel
organized, because there is no organization
where they belong. Then that questions,
so what is the point of these huge corporate
governance regulations that come as, again, to give
the example of the OECD, while plenty of companies
that now are investors all over the world do not
feel that they are part of it. So I think we need
to rewrite them in a very rapid way, because
everything that is happening is happening very fast. So we need to look at it. We need to look at how we can
include these new actors that are major– not only Latin America, but,
again, all over the world, in Africa, and everywhere. And yes, I would say these
companies face problems. But as Canadian, US,
and needless to say, the major problems that
they had in Ecuador, oil companies from the US. So this is not different. This is not different. But in this case,
as I was saying, there is no multilateral
organization that can appeal to these new
companies, to tell them, OK, please, be aware
that you have to sign this agreement,
or that agreement, because they are not part of it. So I think we have to rethink
all these major subjects, because the future of
Earth depends on them. CAROL WISE: Just a
couple of points. This question of the
environmental impact of Chinese investment
is very important, because Peru is like a political
economy experiment or test case for this right now. Because the La Bamba mine, which
is owned by the Chinese now, famous iron ore mine
in southern Peru, is stopped cold by
local protesters, because of possible pollution
of the water and the soil. These are mainly people
that live off the land. They’re farmers. They’re small communities
surrounding the mine. And what China does is, OK,
this mine seems obsolete. But let’s get in there to
the second deepest vein, and open it up. So it’s mainly on the
ground local politics. A lot of NGOs involved that are
holding their feet to the fire. But I was a reviewer
on an article for The Journal of Development
and Environment recently. And it’s published now. But the authors did a
very interesting study. They compared four different
mines in Peru, again, under different
ownership rights. So there was a
consortium, there’s China, but different owners. Right? And they looked at
labor practices, and they looked at commitment
to environmental conservation. And the Chinese came up no worse
than the other companies, which is what I found interesting. So what does that tell us? Lourdes is talking about
super-national efforts that need to be strengthened
in oversight of these. But it’s also on the
local governments. I mean, an environmental
feasibility study should not be a joke, right? They need to take it seriously. And what the people
on the ground are telling them is that if
you don’t take it seriously, we will. Because this is our lifeblood. This is our water supply. DAIN BORGES: Thank you. Any more questions
from the floor? Yes. Shall we take, once again,
batch two or three questions, and then respond to them? And that will
probably be the last. So two more questions. AUDIENCE: Thank you
for the discussion. So both panelists
mentioned a lot about the infrastructure
projects, and how a lot of them have come to a standstill
because of political issues in Latin America. And now, with the
increase in populism, and the political
instability, like in Brazil and some other countries, seems
like a lot of infrastructure projects, even some
of these investments are going in might
still become standstill. So just looking,
I’m just curious. Looking like five
years, 10 years ahead, do you see the
investment mix is still going to be very clean
infrastructure driven? Or there will be other sectors
and industries are coming in? AUDIENCE: Thank you
all for being here. It’s a great pleasure. My name’s Victor. I’m a Malaysian Chinese
student here at U Chicago, and I took Latin American
Civilizations last year with Professor Fischer. So now, in our class,
we had considered nature of the relationship
between Latin America, as well as other
countries outside of it as a relationship of open veins. I was thinking about
your characterization of the different mines in Peru. And I would like to
ask your panelists, to what extent do you think
that this relationship is indeed an open vein
relationship, where it’s a primarily extractive process? To what extent do you agree
with this characterization? And where do you see
this relationship– how do you see it
evolving in the future? Thank you. CAROL WISE: I’ll say
something, and then you– LOURDES CASANOVA: OK. CAROL WISE: This
is the last one? DAIN BORGES: Yeah. Go to the last question. CAROL WISE: Yeah. Both of these questions
touch on the future and where is this going. And I believe that the Chinese
are sincere when they say, we want to expand two-way
trade, and develop outside of the resource sector. And they’re starting to invest
a lot in industries in Brazil. Where there’s an industry
that is investable in, they’re starting to go in. They’ve been dying to get into
the auto sector in Mexico, for very obvious reasons. Nice platform to
get into the US. And they’re quite willing, as I
said, to do the rules of origin or the content requirements,
which is 62% of the good– let’s say the car– has got to have
North American input. They’re set to go
with all of that. But they haven’t been able
to seal a deal with Mexico. Chinese investment, they’d love
to get into the US auto sector, right? General Motors, I
think it was, just now, in the last few
months, produced a car that would pass all
the US standards, but it was produced in
Shanghai by General Motors. And this was the first one that
met emission standards and all of the other much
higher standards that we have in
the United States. So we’re just a hop,
skip, and a jump away from much more Chinese
investment in industry, autos, and whatnot
in Latin America. I think, again, they’ve
got so much money they need to disperse. And they love Brazil. It’s a 300 million
plus emerging economy. That they love the
consumer market. They want into the
Mexican consumer market. They haven’t been
able to get in. So I do think that they’ve got
their relationships, in terms of suppliers, for all of the
major commodities that they need– soy, copper, iron, ore,
petroleum, natural gas, fish meal, right? They’ve got all that
pretty much locked in from the strategic partners
that I mentioned earlier. And I think that they are
quite sincere about getting into other sectors. And I do think that
some of this suggests, some of the questions there– if
there was a kind of undertone, it was, well, is China going to
stick around in Latin America? They’ve stuck around. The time to make tracks would be
the end of the commodity price boom, and they no longer
have to pay these high prices for commodities. Just the investment plans have
just ramped up dramatically for Chinese investment
coming into Latin America. So this is real. It’s not a passing fancy. They’re here to stay. And I do think that they will
diversify their investments. DAIN BORGES: Lourdes? LOURDES CASANOVA: So as I
said in my presentation, there is an imbalance. For Latin America,
China is very important. The other way
around is not true. As Carol was saying,
the investments they have made in
Brazil, for instance, when you build the
electricity network, you are there for a while. Because it’s, of course,
maintenance, and this, and that. When you buy a stake in
a electricity company like CPFL, like [INAUDIBLE]
has done, you don’t buy and then you leave that
electricity company. So yes. However, because
of this One Belt, One Road, a tremendous
project with 77 countries, with $1 trillion in
10 years, whatever. That is enormous. So if I look at that, I
think, will the investments of China in Latin
America continue? Yes. Will they grow tremendously? It depends. It depends, because we
see a great instability. For instance, yesterday
the Brazilian currency plunged just yet again. So imagine, you buy
something in January. And now this same
asset that you bought has decreased in value
25%, because the currency has decreased 25%. So I am not so sure. It will depend. How much and how fast will
depend the relation within One Belt, One Road. And yes, we have,
also, other instances. So for instance, the Brics,
that no one believes they exist anymore. But yes, they keep meeting, they
launched the new development bank. The new development
bank is there. But of course, China
has launched the Asian Infrastructure Investment Bank. And that is a much
bigger endeavor. So will China and
India keep both? Or will China focus
mainly in the IAB, and forget about that
new development bank? So are starting. Chinese, I see
that they are very opportunistic in
their investments. It’s strategic, and at the
same time opportunistic. They learn by doing. So there is always a margin
of error, a margin of failure. And it will depend how much
they failed in Latin America. It will depend how much they
succeed in the other projects they have. You cannot be
everywhere in the world. Of course not. And we may see, again, depending
on how much we forget about. So I don’t believe that this
is the end of globalization. Globalization is here to stay. But of course,
globalization goes through periods in which
we are more integrated, and others that we are less so. The global context– so how much
countries, or how much Europe is going to close by
itself, how much US is going to close by itself,
it will depend on many global factors,
and Chinese factors, and other projects, how they go. And so I am not so sure that the
investments of China and Latin America will increase
tremendously in the five years that we have in front. DAIN BORGES: So with
Mexican precision, let’s end at 11 as planned. There’ll be a 15
minute coffee break, and we’ll resume after that. But let us thank our
panelists, Professor Carol Wise and Professor Lourdes Casanova. Thank you very much. [APPLAUSE] SPEAKER 1: First
of all, I’d like to thank Dr. Borges,
Dr. Casanova, and Dr. Wise for an engaging and
insightful discussion about the economic relations
between China and Latin America. Now, onward to Panel
B. Panel B will be focusing on the geopolitics
between China and Latin America, and as a result,
the economic implication of Chinese expanding influence
in Latin America and the United States. So it’s my honor right now
to present and introduce the speakers as well as
moderator for the panel. Dr. Benjamin Creutzfeldt. Doctor Creutzfeldt
is a Sinologist and an expert on China,
Latin America, US relations. He received his PhD
for his research on China’s foreign policy
towards Latin America, and is currently a
resident post-doc fellow on Sino-Latin American US
Affairs at Johns Hopkins University. Dr. Stephen B. Kaplan. Dr. Kaplan is an associate
professor of Political Science and International Affairs at the
George Washington University. His research focuses
on the frontier of international comparative
political economy, where he specializes in the political
economy of global finance and development,
the rise of China in the Western hemisphere,
and Latin American politics. Dr. Ted Piccone. Dr. Piccone is a senior
fellow in the project on international
order and strategy, and Latin American initiative
in the foreign policy program at Brookings Institution. His research is focused
on global democracy and human rights policies,
US Latin American relations, including Cuba, emerging powers,
and multinational affairs. Our moderator for the
panel is Dr. Xiaoyu Pu. Doctor Pu is an
assistant professor of political science
at the University of Nevada Reno focusing on
Chinese foreign affairs. Dr. Pu’s research focuses
on emerging powers, the Bric powers,
international security, international relations theory,
and Chinese foreign policy. XIAOYU PU: So I’m the moderator. So today we have three speakers. We will talk about the political
implications of China Latin America relations. So each speaker will
talk about 10 minutes. Then we will discuss for
another 20 or 25 minutes. And then we open the
floor to the audience to get some questions
and feedback. So the first speaker,
Mr. Ted Piccone. TED PICCONE: Good morning. Thank you all for coming. I’m very happy to be here. I have an intern last year
from University of Chicago, and I have a new
intern this fall from University of Chicago. So I know how high-quality
work that is done here at this school. You know, we’ve already
covered a lot of ground this morning on some of
the bigger questions. Sorry to mess that
up by closing that. Can I keep it closed for now? All right. We’ve already heard
a lot of details. So I’m going to only quickly go
over some of my initial points here. But you have to keep
in mind that we’re talking about this big
dramatic growth we’ve seen in China’s role
in Latin America on the economic front has really
started from a very low point. So the numbers are
very impressive, but you’ve got to put it in
comparative and historical perspective. But there’s no
question that this is part of China’s
global strategy to expand its
footprint in the world, as a matter of its own
national interest in building its economy, and
expanding its prosperity for the Chinese
people, and creating, I think, a zone of
security in its own region. So I’m going to be talking
about the implications of that Chinese strategy
for the geopolitics of Latin America and the Caribbean. And it’s based on a paper that
I wrote last fall for Brookings on this question,
in which I focus, in particular, on
what impact this is having on Latin
American governments’ views on the international
order, and for United States national security. So I’m going to make
four key points. One is on China’s soft
power in the region. China is mostly a welcomed
actor in Latin America, particularly for its more
generous loan, investment, and trade policies. Fewer conditions gives
Latin governments more breathing room. And it has also struck a
tone of a congenial partner. It talks a lot about
win-win solutions, about collective development,
common problem solving. Of course, it talks a lot about
noninterference and sovereignty being an important role, and
of south-south relations. as growing importance
of the south-south pole of political and economic power. And of course,
this is in contrast to the image of
the United States, and in particular, the
neoliberal policies pushed by Washington in
the 1990s and the 2000s. You also have to recall that
China’s rise in Latin America coincided with a political wave
in Latin America that featured Hugo Chavez in Venezuela,
Lula da Silva in Brazil, the Kirchners in
Argentina, who were all very receptive to
using China as both a market for its own
exports, and as a hedge against Washington. So all of this was a
bit of a perfect storm in opening new doors for
China’s role in the region. And if you look at China’s
now two white papers that they have released on
its approach to Latin America, one in 2008, and the other one
most recently just last fall, you see these themes
highlighting over and over again of peaceful coexistence,
of noninterference. And all of this is
music to the ears of Latin American nationalists. It has also tried to expand
its soft power position through what I would call
a comprehensive suite of bilateral partnerships,
that cover everything from agriculture, environment,
technology, to more politically sensitive topics, legislative,
media, sub-national, diplomatic, military
exchanges, and cooperation. So really, China
announcing itself, we’re here in this region, not
just as an economic player, but also, we want a much
broader relationship with these countries
in Latin America. Now, this initial boom
of the last 10 years, particularly
economically, is over. And political
trends in the region are less hospitable
to China’s overtures. But nonetheless,
China will inevitably continue to play a growing
role in Latin America, given its deep pocket resources,
its global reach, and its aspirations
to balance US hegemony in the Asia-Pacific region. I would add here
that, most recently, the Trump
administration’s decision to withdraw from the
Trans-Pacific Partnership, and its very strong criticism
of NAFTA, is leading to a vacuum that’s being created, and
which is allowing China to even expand its role further, which
we saw last November, when Xi Jinping visited the
APEC meeting in Peru, and kind of redoubled China’s
commitment to the region. And I think we’ll
see more of that. Now, also, in terms of
the soft power dynamic here, keep in mind that
China’s political system is very different from the
predominant liberal democratic model of Latin America. But so far, it doesn’t
seem to want to impose its model on the region. It’s mainly concerned
with building Latin American Caribbean support
for its more narrow interests. And those interests are,
of course, non-recognition of Taiwan and Tibet, blocking
international criticism of its own domestic records,
especially on human rights, and protecting its
economic assets, and, of course, its
Chinese nationals abroad. It’s trying to build a network
of friends and partners for what it calls its harmonious
rise in global governance. And if you look at
these white papers, calls for democracy
and rule of law in international institutions,
but not necessarily at home. So if you look at who they’ve
chosen to partner with in Latin America, particularly on
the loans and trade side, it basically prefers three
categories of countries. One, ideologically friendly
states like Venezuela, Cuba, Ecuador, and Bolivia. All happen to be part
of the ALBA system that’s very much
anti-US in its approach. Second, economically
important players that we heard a lot
about this morning– Peru, Chile, Brazil,
and Argentina. And then, a group of
smaller states that do not recognize Taiwan. So that was particularly in the
Caribbean and Central America. But as someone pointed
out, 12 of the 22 states in the world that
still recognize Taiwan are in Latin America
and the Caribbean. But if you look at their
record of loans and investment financing, it’s either
gone to countries that have weaker records of
rule of law and good governance, or that do not recognize
Taiwan, or both. So for example, if
you look at China made 0 loans to the 12
states that still recognize Taiwan between 2007 and 2015. Of course, Venezuela
is another example where we see China pouring
billions of dollars into what you might
say is enabling the bad policies of the
Chavez and Maduro regime, and, in my view,
exacerbated the crisis. Now they might be
slowly withdrawing. But nonetheless, the
damage has been done. Now that’s a soft power. On the hard power,
we see some elements that are interesting,
but so far, slow, and largely non-controversial. Arms sales have
increased to Venezuela. We heard about Argentina, in
particular, is noteworthy. And yes, President Macri
has confirmed those. We see military to military
and law enforcement engagements and assistance
growing with, again, Argentina and Bolivia. There is an important project
around strategic space cooperation with Argentina,
as well as assistance on nuclear power plants. So those are some of
the important ones. There’s also, we talked
this morning already about the new
canal in Nicaragua. Now, it’s true. This is a Hong Kong
company that, when you ask Chinese government
officials, they say, we have nothing to do with that. But nonetheless,
it is a bit curious that here they have
the Panama Canal just enlarged to accommodate big
ships coming from China. Why do they need
the Nicaragua canal? Well, it just so happens that
both Nicaragua and Panama still recognize Taiwan. And so you have to
raise the question about whether this is ultimately
a game to flip those two countries in favor of Beijing. So even though there
are some indications along these lines on hard
power, I think in Washington, no one is– except maybe a few– saying this is a direct security
threat to the United States. Maybe we see China writing
a sort of insurance policy, in case Washington, say, decides
to confront China more directly in the South China
Seas or on Taiwan, that China is kind of
preparing the field for having a network of
friends and partners that it can rely on
in such a conflict. And I’ll come back
to that later. I want to mention Cuba,
because I’ve spent a lot of time working on Cuba. It’s, I’d say, a potential
concern between China and the United States. But there’s no
sign that China is prepared to bail out
the Castro regime and replace Venezuela
as its supporter. Yes, it’s an important economic
partner, for sure, for Cuba. There was an expectation that
Cuba would follow China’s model in opening its
economy to the world, and adopting more
of a market economy. And that actually has
not been the case. Yes, there are some
reforms underway in Cuba, but nothing like the dramatic
changes we’ve seen in China. So Cuba has adopted
a much slower process of economic liberalization
that actually doesn’t look that much like the China model,
despite a lot of Cubans going to China to understand
their system. Maybe they are following
the China model when it comes to
one party control, but I don’t think they need
the Chinese to teach them that. So looking now at
the current moment, the Trump administration
is reviewing US policy– the policy of
normalization with Cuba. And there are several of us
that are arguing to the Trump administration that
it should continue, because we don’t want the
likes of China and Russia to fill the vacuum if the
US were to disengage again. Third point has to do with
whether China and Latin American Caribbean states
are converging on issues of international
liberal order at the UN and in other institutions. And I did a study that
looked at, in particular, issues like climate change,
counter-narcotics policy– very important to both sides– as well as internet
governance and human rights. And what I found was
a very mixed story. And given that Latin America
is such a diverse region, it’s not surprising
that you’re going to have these kinds of
divergences along the three categories I mentioned earlier. I would say in general,
because we don’t have time to go into all the details,
Latin American states really stand on their own when
it comes to these issues that I’ve studied. There’s some convergence on
criticizing Iran and North Korea’s aggressive
nuclear weapons program. And over time, you see the
two sides falling in alignment on human rights, which
is, as you can imagine, a highly sensitive
issue for Beijing. We look closely at the voting
patterns at the UN General Assembly, and other scholars
have done this as well. And you do see a period of
convergence towards China and away from the United States
on some human rights issues. But more recently, we documented
a move toward the United States and away from China. And these things
run in parallel. And it’s because you can
find, in so many human rights cases, the United States and
China take opposite positions. And so it’s a zero,
one type of problem in how do you analyze how
Latin American states vote. And so not surprisingly, you see
states like Venezuela and Cuba aligned with China,
and other states, like Argentina,
Brazil, Chile, Peru, despite their close
economic ties with China, very much on a pro
human rights agenda. Mexico and Central
America also tend to converge with the
United States more. So I think that for the swing
states that are not so clearly devoted on this
line, I think China does have some influence
on the issues that really matter to them. So if there were a
critical resolution in Geneva against China, China
would really expect and put some weight on Latin American
states to vote with them. Finally, I wanted to do a
little bit of a thought exercise on potential conflict scenarios
with the United States, and where Latin America would
come out in those instances. As I said before, I think
the United States generally looks on China’s rise
as non-threatening. Some would even
see it positively, as a way to help Latin
American states diversify their global trading relations,
and reduce dependence on the United States, which
some think is a good thing. Because we don’t
want to be spending a lot of our development
money on Latin America. They should stand on
their own two feet. And I think that has to do
with a certain confidence that the United States
has, that Latin Americans, at the end of the
day, if it came to it, would much prefer the United
States as a partner than China, and that they have a
lot more in common. Now, that may change over time. But I think that’s
probably a good bet. A quick word on energy, since
it hasn’t come up that much. But it’s worth mentioning
that, in terms of competition, the United States, with its
expanded domestic resources is not in direct competition
with China’s drive to lock in more natural
resources from China. Of course, it’s not good
for US multinationals, because China is beating
them on a lot of fronts, not just on energy. So what are some examples
of these conflict scenarios very quickly? Maritime disputes in the South
China Sea, the Latin Americans would argue for
judicial remedies under international law. They have a very strong
record on that front on many different scenarios,
and they would largely call on both parties
to resolve this through judicial processes. Of course, the UN is not a
party to the UN convention on law of the sea, so
that’s a bit of a problem. On China, Taiwan–
and we’ve already seen some smoke on this
with Trump administration. But I think there,
we’d obviously line up with the recognition status– the states that recognize
Taiwan versus Beijing. And that very much
favors Beijing. Even though the
numbers are high– 12– the actual countries that
support Beijing over Taiwan, in terms of real power and
influence, favors Beijing. On human rights, again, I
think you’d see a very split type of decision. On trade competition, that’s
a very interesting issue, now that the Trump
administration is withdrawing from TPP. I think Latin American
states have already decided they want to intensify
relations with China, but not abandon the higher
standards that were negotiated through the now-failed TPP. So you have the
Pacific Alliance group of states that are
trying to use the TPP standards as a starting point
for negotiations with China. That’s a good thing, I think. And then if they were
able to really establish a close relationship, a workable
relationship with Mercosur, which includes
Argentina and Brazil, you could really
imagine a scenario where the Latin Americans
have much more negotiating power vis-a-vis China. And we’ll see if it lines up. Of course, China is
aware of this dynamic, and is more than
willing to exploit it for its own interests. Final thoughts on what
should the United States do at this point. I think it should look for
win-win opportunities, where you can actually work with
China on trilateral cooperation areas. China and the United
States actually do Naval exercises together
in the Pacific that include Latin American navies. That’s just one example. But I think much more
on the development side, you could do a lot more. But this would build
some confidence and avoid direct conflict. Second, I think
the United States needs to keep working very
closely with its Latin American partners to buttress the
international liberal order with this administration. That’s a tough call,
where that’s going to go. But there might be
a couple of areas, particularly on
economic and trade. I think the United
States at this point now needs to rethink
its commercial and trade engagement with the region,
because it certainly is losing out a lot
of opportunities, not just to China, but to
the Europeans and others. And then finally, I think
the United States needs to step back from the
heated rhetoric on Mexico, and find ways to protect
Mexico from the damage that could affect the
country if we were to do a radical departure from NAFTA. And I’ll leave it at that. Thank you very much. [APPLAUSE] STEPHEN B. KAPLAN:
Thank you very much for having me here today. Two of the four of my
dissertation advisors originally came from
University of Chicago. So thank you very much
for having me here. And in effect, it’s equivalent
to coming and seeing their upbringing–
where they grew up. So it’s great to be here
at University of Chicago. What I’m going to
today to approach the geopolitical question
is look at Chinese loans and Chinese financing
in the region, and seeing what we can learn
from that from the standpoint of countries’ room to maneuver. In terms of their
economic policy, do they have money to
spend on the things that they want to spend on? And what might be China’s role
in terms of providing finance to these countries. And so ultimately,
what I’m going to do is show you how the rise
of China as a creditor has provided many
countries in the region with greater degrees
of maneuverability. Before we do that, please take
a look at these fine mountain vistas, representing the
potential opportunity that China and Latin
America have together. So effectively, where
all we did is looking at the global financial crisis. You’ve seen in many graphs
today, whether it’s trade, or whether it’s
finance, or whether it’s FDI, that beginning with
the global financial crisis, you see spikes, right, in the
relationship between China and Latin America. The trade relationship
has been there for a long time, since
China joined the WTO. But effectively, going into the
global financial crisis, what happened is a lot of Western
financial institutions start to withdraw
capital from the region, start to withdraw
resources from the region. As that happens, that provides
an opportunity for China. They have the going
global strategy. With that strategy, they
then have the opportunity to go in and increase
their presence from a financial
perspective in the region. So what I’m going
to be looking at is the role, effectively, of
the global financial crisis in creating an
opportunity for China. And so, what I want to
look at in particular is the idea of Chinese
patient capital. Patient capital, this
term, has its roots in the business literature
in the 70s and 80s, looking specifically within
East Asian economies, within their domestic economies,
and putting forth the notion that capital is much more likely
to have a long term focus– to be more patient
than necessarily a Western governance model. So what I’m doing
in this project is looking at the history
of the patient capital, applying that internationally,
the idea that Chinese creditors are going to be more
patient, have a longer term horizon, than necessarily
Western creditors would. So effectively, within
the scholarly literature on the relationship between
creditors and debtors, we often get this idea that when
you have financing or capital, that capital can flow
out very quickly. Debtors get concerned
that they’re not going to get repaid on their
debts, and as a result, aren’t willing to roll over
debts outstanding to countries. And are more likely to pull
that finance out from countries. Now, this can be very
difficult for countries from a historical perspective. In a country like
the United States, when we had our big
economic downturn in 2008, we could slam on the
accelerator, right? We could spend lots
of money in order to help revive our economy. Historically in
Latin America, know it’s much more of a history
of during economic downturn, the capital leaves,
and governments don’t have much capacity
to spend their way out of a crisis. This is known historically
as a sudden stop. And what I’m suggesting
or putting forth is that the presence
of Chinese capital, with a longer term horizon, it’s
less likely to leave a country during an economic downturn. And what that does is give
countries more degrees of maneuverability. So comparatively, if you
have Western financing and capital leaving a country,
what’s traditionally happened is a kind of pattern that you
see happen in Greece recently, right? Or Latin America historically,
where money leaves a country, and in order to attract
that capital back, countries have to pursue higher
interest rates, austerity, etc. The point here is as that
patient capital comes in, it’s less likely to leave
during an economic downturn. That gives countries more
degrees of maneuverability to spend. One of the big focus emphasis
of the Washington consensus is budget discipline, not
to have budgetary deficits. Comparatively, China
and Chinese creditors care about profitability
in the long run, but they’re not necessarily
as concerned with budget discipline. So if countries go into
an economic downturn, they can spend
their way out of it. China’s not going
to object to that. And so when you meet
with government officials throughout the
region, they’ll say, yes, we have
conversations with China. They’re monitoring
what’s going on. But ultimately, they care
about the project’s success. They’re going to be less
focused on policy conditionality per se. So in this project, which is
a book-length project, what I do in order to look
at Chinese capitals, I look at both international
channels and domestic channels. So I have this argument
internationally that suggests, as
I just mentioned, Chinese patient capital
should give countries more policy flexibility. But the domestic dimension
is also very important. So in other words, once the
Chinese capital comes in, what happens to it? And so the argument
here would be, governments get more
degrees of maneuverability if that capital directly
goes to a central government, in terms of
state-to-state lending. Comparatively, that
capital may just go to support
financial projects– project finance–
when a project has been going through private
procurement, bidding, and as a result, rather than
the government getting the funds directly, the funds go to
support whatever project that has been bid on
through private procurement. In that case, it may
have an economic effect, but it’s not going to increase
the degrees of maneuverability that a government has to spend. So just to take a quick
look at some of these slides in terms of who are the
major debtors to China, and what’s been going on. Essentially, this shows
Chinese policy banks to major Latin American debtors. If we only look at the
international channel, you could see, effectively,
as a percentage of their total
external financing, it ranges from about 12% of
external financing in Argentina to as high as 2/3 of
total external financing in Venezuela. So that is the extent to
which a country raises money internationally, and they go
to external sources of finance, what percentage of that is
coming from Chinese loans. One quick clarification,
too, as you’ll see here. Notice for this
$28 billion average you know that goes to
Venezuela from China, I just want to make
a clarification, because the number has been
cited a few times today. That American dialogue has
a number that focuses on $60 billion extended to Venezuela,
which is correct in a nominal . Sense The total amount of
allocations to Venezuela has been $60 billion. But if you look at
any snapshot in time, the number is far lower–
closer to $29 billion dollars, on average. Why would it be that
much lower, nearly half? Well, a lot of these are
tranches that get rolled over. So over time, since
the financial crisis, maybe tranche A of
a loan to Venezuela gets renewed three or
four different times. If you include all
three or four of those, you get the $60 billion. But at any one
point in time, it’s only a set amount such as $5
or $10 billion in tranche A. So that’s just getting
rolled over again and again. If you account for
those rollovers, and there’s several tranches,
A, B, and C, effectively, the number outstanding
at any given point in time to Venezuela is
much closer to $29 billion on average. So just to put that $60 billion
figure in perspective a bit, because that gets thrown
around a lot in the press, too. I mentioned the
international channel. Now, I want to look at
the domestic channel. So essentially, you have all of
this financing coming into four major debtors like this. But then there’s a
question of, OK, well, is the government getting
any of these funds? Look at Brazil. In terms of what the
government’s actually getting, the percentage of total external
financing is pretty low. Right? Because a lot of that goes
through private procurement– through project finance
outside of government coffers. Comparatively, if you look
at Ecuador or Venezuela, there’s lots of
state-to-state lending. Those countries are receiving
much of these funds directly. So comparatively, compared to
Brazil, in those countries, Chinese loans as a percentage
of external financing is as high as 26% or 45%
of external financing. And the point here is, what
kind of effect that has on your ability to spend. And if you look in this
category over here, this is before the
financial crisis and after the financial crisis. What’s the difference
in fiscal spending? What a government spends
on its priorities. You can see, notwithstanding
the discussion of recent fiscal deterioration
in Brazil, for the most part, they have been fiscally prudent,
relative to other countries that have been receiving
money from China, in part because Brazil gets
so much money from the markets that they have to be
more austere, or at least try to focus on
being more austere. So you see a lot of focus
on fiscal discipline, et cetera, even during
a period of time when you’re in the
economic downturn. Comparatively, in
Ecuador and Venezuela, you get a lot higher
degree of fiscal spending. Another way to look at this
effect of patient capital is to look at Argentina,
Ecuador, and Venezuela, and what’s going on with
Chinese loans over time. You can see here, in the period
before the financial crisis, this is Chinese financing. And it’s going the larger you
have here, the more Chinese financing you have. Before the financial
crisis, you don’t have much in the way of
Chinese loans and financing coming into the region. And then following the
financial crisis years, we get the big
structural change, where all of a
sudden you have lots of Chinese financing coming in. And if you look at budgetary
surpluses, even Venezuela, Ecuador, Argentina– countries
that during this point in time, as Ted was highlighting– often are aligned with countries
that are more to the left, or even radical left. But even in those countries,
you had budgetary surpluses. But as you follow
the financial crisis, and you have increased
lending from China, which puts less scrutiny on
fiscal discipline and budget discipline, less
scrutiny on austerity, during economic
downturn, countries could pursue fiscal deficits. And if you compare other
countries, such as Bolivia, that had budgetary surpluses
prior to the financial crisis, and that don’t receive
Chinese financing post financial crisis, they continue
to have budget surpluses, where these countries end up
spending a lot more money. Another way to look at this,
too, is within Venezuela, I mentioned the withdrawal
of Western financing. This dotted line is BIS
cross-border lending. You could see that. That starts decreasing
particularly as of 2007, when you started to have
the first bankruptcies in the UK, et cetera. And then, at the same
time, you see, effectively, Chinese loans increasing
at this inflection point. And even though oil
prices are dropping– and that’s going to have
effect on fiscal deficits– you have sustained fiscal
deficits over time, once you have Chinese financing
allocated to these countries. So my argument is, you
actually see countries have a lot greater
maneuverability to pursue fiscal deficits and
spending during periods of time where they’re receiving
Chinese capital. One other way I look at this
is to look at bilateral loans compared to other
types of lending– commercial lending
or bond lending– that’s going to these countries. This is the first stab at
this cross-national analysis. But effectively,
what I’m looking at is the more bilateral
loans you have, in terms of total
external financing, what’s the effect
on fiscal spending? What’s the effect on
countries’ ability to spend? And I do find, essentially,
a negative relationship. Essentially, the more bilateral
loans that a country has, the more they’re able to spend. If that were positive, that
would be budgetary surpluses. But the more bilateral loans
the country has, as a percentage of total external
financing, they tend to also have
greater fiscal deficits. So what are the
implications– first, from a research perspective,
then from a policy perspective? Well, one argument
is that countries have greater degrees of
fiscal maneuverability when they have
Chinese financing. During economic
downturns, there’s a history of countries not
being able to spend money. But effectively, it
allows countries to have counter-cyclical policies. But the question is,
it’s an opportunity. You have more financing. You have a longer term horizon. You have more ability to spend. But it still matters how
you spend this money. So we heard about
Venezuela this morning that hasn’t been spending
the money in the way that it’s supposed to, on
infrastructure projects. Comparatively, a
country like Ecuador has constitutionally mandated
that if they borrow money, they have to spend on
capital expenditures. So you see lots of
infrastructure projects. Then the case in Ecuador is,
is that the best spending? So you actually see the money,
you see the opportunity, you see the money spent
in infrastructure. Then the question
is, does Ecuador need eight hydroelectric plants? And some of the domestic
debate is about that. It’s about the efficiency
of this spending on the infrastructure
projects, rather than a question of whether you even
get this infrastructure built. Now, there is sort of an element
of high risk to creditors here– high risk to China. In the history of Latin
America, we know in the 1980s, we had a debt crisis. Many of the banks,
many of the creditors continued to kind of lend
defensively during those years, prodded to some extent
by the US government. But also lent
because they wanted to recover their outstanding
interest and principal payments. And effectively, over the
course of a full decade, eventually a lot of these banks
started to write off loans, because of the frustration
of the ongoing debt problems. What we saw in
Venezuela, we’ve had some talk this morning of the
idea that, in Venezuela’s case, China may be
silently withdrawing. Well, perhaps that’s
true, in terms of not renewing new funds. But nonetheless,
we’ve still, just as there was a question
with the banks in the 1980s, there’s still the
question of what you do with your funds outstanding. And China has been, even
during economic downturns, even during periods
where Venezuela had very low commodity prices,
had been rolling over funds. Rolled over as much
as $10 to $15 billion of funds since 2014. So in the case of
Venezuela, the question is, what do you do
if you are China, in terms of do you
extricate yourself from this relationship, or you
continue to lend defensively. One key thing that
will be coming up is, as there’s more
debt payments coming due in Venezuela, China will be
faced with the question of, not new lending, but
do you roll over what’s already existing or not? And that’s a very key not
only economic question, but also political question. So ultimately, my
main theme here is, to quote Keynes,
“The old saying holds, owe your banker 1,000 pounds
and you are at his mercy. Owe him one million pounds
and the position is reversed.” So effectively, if you do have
situations where lots of debt gets built up, it’s the interest
of both creditors and debtors to try to resolve that. Some final conclusions
about the geopolitics. One thing I would say
from my perspective is, this is not
necessarily your father or mother’s grand strategy
that we’re seeing here. Compared to the Soviet Union,
we have a very different actor that is very tied
economically interdependently with the United States. And it serves a role, I
think, within the region. You have a region that has
a tremendous infrastructure deficit, as we talked about
earlier in this morning. And China is willing
to provide capital in order to solve this problem
of the infrastructure deficit. I think that many Latin
American countries, including Argentina and Brazil– even countries that
currently aren’t necessarily ideologically
aligned with China– still have an incentive
to use this capital in order to address their
infrastructure deficit. So there’s been research
that has historically shown that no matter what
the political party is in a country– people like [INAUDIBLE]
people like Dominguez– that generally, China is
willing to do business. And I think that we’re
seeing this even with change of governments from left
to right or center right, that you still see the
desire to gain capital from China in order to drive
these infrastructure projects. So finally, in terms of
what’s the role for the US? What should the US be doing? I do think we have
a lot of overtures that Ted was mentioning
earlier from China, in terms of commerce and
economics leading the way, and that China’s relationship
is not political. Maybe there’s political
ambitions, ultimately, about a multi-polar world, and
democratizing international relations that looks to seek
to have greater diversification in Latin America. But again, I’d probably
line up on the side and say, look– is greater
diversification such a problem? Is that such a bad thing? And even in terms
of infrastructure, to the extent to which China is
helping create infrastructure, US companies and
firms may ultimately benefit from that
infrastructure, as well. So what I argue could be
an alternative strategy for the US would be, if you
are looking at many rising powers that used the
state very effectively to promote their firms,
why shouldn’t the US do more of that? So instead of talking about
shutting down the Export Import Bank, I think there’s
an opportunity to actually use
resources like that to support our firms
internationally, while, at the same time,
also try to continue the important role
that we’ve heard this morning that
civil society plays alongside a lot of
these investments in the Western hemisphere. Not only local grass
roots movements, but also NGOs and civil
society that continue to push for certain norms, such
as environmental governance, and labor rights, and
things along these lines, to ensure that no matter
who the investor is, that the investor is investing
in a sustainable way. So thank you very much. I look forward to your
comments and questions. [APPLAUSE] BENJAMIN CREUTZFELDT:
Well, first of all, again, thank you also from me very
much for inviting us all here. And it’s been a very
diverse and very interesting morning already. And I feel it’s a challenge
to not exactly wrap it up, because we’ll have
a conversation, but to add a new dimension. I think the idea is that
it’s sort of complementary, and that we touch on
different aspects that help us understand the China
Latin America relationship. And I have worked in Colombia
for about eight years. And before that, I lived in
Panama for a couple of years. So I have gained some insight
into how Latin American societies work from teaching
there, and from studying there. And so I think that
that’s also helpful, and so have many
of my colleagues, obviously, visit
there all the time. And that’s very
valuable in order to better know how
China projects itself, and how it’s picked
up at the other end. So I don’t have a PowerPoint,
but I wanted to convey to you– and I gather those
who are still here understand, also, that this
is a very exciting time. I find it specifically, maybe
since the Trump election, but overall, the
past year or so have shown huge flux, huge movement
in the China Latin America relationship, and Chinese
outward projection as a whole. So I compare it a
little to a wave. And think of a wave, like
a surfer– not a tsunami. I’m talking about a wave
that you sort of pick up the undercurrent and the energy. And I have been known
to be tactless enough, and even had the audacity at
CEPAL, which is an important UN economic institution in
Chile, to actually say, economics is not a science. I was quoting The Guardian. Now, that’s obviously always– nonetheless, there’s
a Nobel Prize for it. And I have great admiration
for what my economist colleagues write a lot about. But nonetheless, I feel
sometimes the focus is a little heavy on that aspect. And I compare it a little to
the surface, and the foam, and the spray of the
undercurrent that really makes the wave move. And I want to emphasize
that, really, that I that, especially if we look at
China’s foreign policy discourse in general. China’s discourse
towards Latin America, it was mentioned
early in 2008, they did a policy paper in 2016. They did another one, published
just two weeks after the– in each case, they
published it either a day after the historic Obama
election, and two weeks after the even more
historic Trump election. And they made it not part
of the US election process, but nonetheless, it’s
timed quite carefully. And there they outlined
certain very important concepts that they’re trying to
bring into the discourse when it comes to
development, when it comes to loans,
financing, and cooperation, and bilateral relations. So what I’m trying
to move away from is the focus we see again
and again in books– one came out in Colombia
just a week ago where the [SPEAKING SPANISH]—- the
model that they’re building on is near realism. And if you take that,
then the realist approach is obviously that
a country will seek to increase its
relative own interests to the detriment or the
relative detriment of others. And that builds into
a China threat theory, which you still hear a
lot, and you still hear a lot, even in Latin America– people being skeptical. Obviously there’s an aspect
of the national histories in Latin America that were
colonized over and over again by different actors
would feel that they were exploited in the past,
and maybe exploited again. And that’s
symptomatic also, sort of the feeling of
the abused child, that expects and is distrustful. But liberal
institutionalism similarly focuses on either
China is determined to join the Western
institutions, as we know them. And it has joined most of them. Or it is trying
to redefine them. And that is the
other alternative that is, again, building up into
alternative institutions that– and I don’t know
where the dragon– I love the image, get
used again and again– the dragon with Latin America,
the dragon all over the world. But there is a little
poetic side note. I don’t know whether
you are familiar with European mythology
on dragons, where dragons generally eat up
princesses and get killed by heroic men in armor. And then, the Chinese dragon,
who doesn’t eat princesses. At least I haven’t heard of any. He is very playful and very
powerful, very strong indeed, but doesn’t have the
same menace implied. And I find that way
it’s interesting that even using one image,
we can have completely different perspectives. I don’t know here
within the audience whether people actually see the
dragon as something benevolent or menacing. So you can see that if we
look at ideas, and therefore, China’s discourse, and
how it is picked up on the other side
of the Pacific, how that can be
seen so differently. And that’s important
to take into account. So one thing that China has
promoted strongly in the last years, Xi Jinping especially,
is the [SPEAKING CHINESE]—- the community of shared
destiny for mankind. Now, that sounds very
grand, but in a way builds on China’s peaceful
development, on development as a principle. And there we also
have to recognize that China has experience. We said earlier in
the first panel, there was a lot of talk
of uncharted territory. It is true. China– first country to lift
a half a billion people out of poverty, largest
emerging market to have such large
funds at its disposal. And yet, there are
many other elements where we can see that
its experience has been– it’s built up its
infrastructure, and has done well integrating
its outlying zones in a side of the country
into the national and the global economies. And if you see that
that is its firm belief, it comes across in
every conversation I have, for example, with a
Chinese executive in Peru, who said, I don’t know why
they don’t want development in that part of Peru,
in that village. Because they definitely
need a road and schools. But if they don’t want it, they
can handle their own destiny. And that was a very
laid back approach. And talking about patient
capital, that was definitely an example of someone who
just basically said, well, we’ve got other lots to
develop, and we’ll leave it. But there’s also underlying
this very deterministic idea of what is the right kind of
development, which is based on physical infrastructure. But there, too, there are
different facets to that. For example, one I was
thinking earlier of Qin Shi Huang, the first
emperor of China, the unifier, who, of
course, standardized axle width, and things like
that, and coinage, and weights, and everything else, and built
roads across the country, thereby unifying it. So that’s a very aggressive– I don’t think Xi Jinping likes
to be compared to Qin Shi Huang, because that would– you hear they’ve started
building his mausoleum, anyway. But there are certainly some
interesting parallels there. On the other hand, if we look at
something as I like to see it, and what China
tends to emphasize is that it’s not about
profiting from something that’s in the short term,
or even in the mid-term. And this I find very helpful. And yet it doesn’t enter
into the discussion, as again and again, the
question, how can a railroad be profitable? But if you look at various
studies that exist now– there was even one, I
think, already 10 years ago, they did one in Xinjiang or
some Western part of China– where they looked at an area,
what its regional economy was able to produce without
roads and railroads. And then, over time,
as they built up that, how the economy increased. And of every dollar
spent on infrastructure, the economy grew by $1.6. So you see that there’s
obviously like Stephen just mentioned, there is a
benefit to be had all around, interestingly. And when I challenged some
Chinese executives in Peru, and said, well, what
happens if the Germans build the cross Brazil, Peru
cross-continental railway? They said, that’s fine, as
long as someone builds it. Because clearly Latin America
requires urgently a lot of infrastructure development. So coming back to
watch Xi Jinping and the Chinese government in
general puts into its rhetoric and how in its discourse, there
was a recent example, just three days ago, at the
Belt and Road initiative summit, where, as we know, there
were two Latin American leaders president– Bachelet and Macri. And it was a 6,000
character speech, and he mentioned
[SPEAKING CHINESE]—- collaboration, 50 times and
[SPEAKING CHINESE] 49 times, and [SPEAKING CHINESE]—-
development, 45 times. So clearly there is much
more about the political idea behind it and the projection
that is much more relevant to– that it’s a political
project more than an economic and
investment project, or even an ownership project. So we can then
look, obviously, one could go on and find many
more, and more subtle examples than just
counting words in speeches. But that is still quite
an interesting exercise about who responded best,
who had the best surface. If we consider this China
energy flowing to Latin America as a wave, then who
is surfing best? And clearly there are– Peru and Chile have
been mentioned a lot as countries that have
their own strategy, that are experimenting,
but that are looking at how they can best
benefit their own economies in the long term. And they have a certain vision. Argentina and Brazil have– Brazil has a big
political project through bricks of
global visibility, and carrying greater weight
in international affairs, but is internally, of course,
in some disarray right now. So it’s difficult. Peru has a
very unusual link with China in that Alan Garcia,
whether you like him or not, had, quite early on, not
only the idea for the Pacific Alliance, which projects
towards Asia, but also, interestingly, this focus on– he’s published a book on
Confucius and globalization, which was also
translated into Chinese and presented again and again. And he’s become, therefore,
a friend of China. He’s now politically less
relevant– has less weight. But having been president twice,
the Chinese community ex-pat community in Peru
supports him still. And it’s very interesting
to see that there is sort of a recognition in
one Latin American country of the Chinese
discourse, rhetoric, and vision for a different
kind of globalization. Then I find it significant,
if we look at other reactions, that Colombia, for example– Santos is in Washington right
now, was there yesterday. Which is kind of
characteristic, as Colombia has, for many years,
been more focused and been the
staunchest ally, they describe it, of the United
States in the region. And there again, it
goes to United States, when everybody else is
looking at Belt and Road initiative in Beijing. So it’s kind of surprising,
but again characteristic. Nonetheless, I
should insert there that I’ve been watching
Colombia because of its internal
conflict– has had great difficulties attracting
foreign presence at all over the last 20 years. But that’s hopefully
recovering now. There’s some change,
and specifically that there a Chinese
company that, in a consortium with
a Colombian company, has won building rights for
a number of the G-4 road infrastructure in Colombia. And very interesting,
if you map it, you can see that the Chinese
ambassador to Colombia has been very strategically–
done a huge campaign. You can just follow
him on Facebook, or rather, his interpreter. And there he’s doing lots
of goodwill gestures, being basically the face
of China in Colombia, and going out and showing. So there you see clearly that
there was an earlier question about how much state-owned
companies have a link to the government strategy. And there are different
views on that, including within the company. Some companies
say, no, we just do what is good for
our bottom line, we have our own strategy, mid
and long term sort of views. But the government would insist,
and many scholars in China also insist that it’s actually
the Chinese government sets out a very clear
strategy, especially for its overseas major
projects and major protection, and the companies follow. So in this case, certainly,
the Chinese ambassador can be seen to be laying the
ground for sort of a goodwill campaign. And we’ve seen there are
many different tendencies. So we’ve heard already
a lot about Venezuela, and that’s clearly
a worry for China. And I welcome that, what
you mentioned about the roll over of the tranches. Because that’s something
that is constantly ignored, that Venezuela doesn’t
currently owe $65 billion or whatever the exact figure is. And China has loaned carefully
a little more in order to pay back its own. But there was a title in
[INAUDIBLE] just the other day, an article [SPEAKING CHINESE]
and it means the China Latin America relationship
requires wisdom or knowledge and patience. And that obviously is, on
the surface, quite easy. But it’s a very
good article that outlines why we really
need to watch it more, see how it changes– how this undercurrent, how this
whole tendency is changing. How China is trying to
bring a new discourse to its own relationship
with the rest of the world. But also [SPEAKING CHINESE]
and knowledge and wisdom. That is something that
I worry a lot about when I’m having, as I said, been
in Colombia for many years, that there is still a very
great shortage of coordinated, informed conversation
in every one of the Latin American countries. And including
somewhere like Brazil, doesn’t have more than one or
two dedicated China experts. And that’s astounding. And I hope some information
here and the same goes, where Chile has a
little more Argentina– maybe Mexico and Argentina
are the best examples of having at
least some sort of studies in that direction. And that is something that
is really lacking, and very important. Because if you have–
even surface on a wave, you need to kind of coordinate. And there needs to be
a better preparedness. And David Shambaugh
has mentioned that in many
occasions, that there is insufficient preparedness. So basically with
that, I will stop, because I would like
to have a conversation and hear your questions. But just to sum up, to better
perceive and evaluate shifts, it is really important to
revise theoretical approaches, and have a better understanding
of the Chinese discourse, that accompanies its
outward investment and all its outward activities. Thank you very much. XIAOYU PU: OK. So I would have– the presentation
is so wonderful, sometimes we forgot
to keep time. But I think, all
wonderful presentations. And we have a very
brief comments for all these presenters. I will ask each question
for each presenters, so you can briefly
address this question. Then we open the floor to
collect more questions. My impression is that when
we talk about China and Latin America relations, maybe some
of the important questions of the world, economics
always try to find the secret. What’s the secret? Or the most important factor– shape economic activity,
or economic growth? I think you spend an entire
career to try to find out. In conclusion, they say, it’s
politics, not economic factors. Really, we see China and
Latin America relations, the key factor is
politics in both sides. I think the presenters
really lay out some of the key reasons. So I want to ask one
question for each presenters. For Ted, for your presentation–
very comprehensive, very insightful analysis
of China and Latin America relations– the political
geopolitical implications. So my question is that
how the United States see the growing role of China? So many years ago, I heard
some former administration officials– American officials, diplomats
responsible for Latin America or Africa affairs that did
not know Chinese counterpart. But that’s maybe not
the case anymore. Because 20 years ago,
China was a regional power. But now China’s
growing global actor. Maybe not global power yet. So how you see the US
administration should do with the growing
presence of China, especially in Latin America? Is that always competitive,
or even competitive, but not necessarily a
zero sum game, right? So I completely agree
with you that you say, nowadays the news media
all highlight, oh– the dramatic increase of China
is present in Latin America. But my own reservation
when I visit Brazil, I see China’s relationship
with Latin America is one-dimensional, is largely
economic, not much diplomacy, not yet. So one big interesting example
my Brazilian colleagues told me that the whole Brazilian
foreign ministry, only two diplomats could speak Mandarin. That’s amazing. But I think Latin American
relationship with America is much more comprehensive. So how could the United
States, China, Latin America has some sort of
trilateral dialogue? Maybe not at the
government level. But a think tank level,
or even university level. This is the question for Ted. For Stephen, fascinating
presentations. Very interesting puzzle. Very interesting,
very solid study. You highlight how
Chinese finance shape Latin American politics. And I know your focus is
how Latin America react to China’s finance. But I still was
wondering how you analyze a particular–
another related puzzle is, what are the sources
of China’s patience? Do you have any
intuitive thinking? Or maybe when later
you visit China. My intuitive
thinking is that when Dr. Kissinger talked with
Premier Zhou Enlai of China, how you react of
French Revolution? Premier Zhou said,
that’s too early to tell. But that’s just
history perspective. But any other sources
of Chinese patience? For Benjamin– again, a very
interesting presentation. You highlight and
how Chinese leader now using all this very
nice diplomatic rhetoric or discourse, right? So when President Trump
talking about America first, his Chinese counterpart talking
about the common destiny of humankind. That’s amazing. That’s unusual. But on the other hand, I
still think when China still maintain a relative
authoritarian political system that’s very different from most
of Latin American countries. Does that still pose
a challenge for China to project its
inference, soft power? Especially some people
say, nowadays, we talk of, oh, maybe China will be
emerging global leader in the global economic system. But without a much more
open domestic system, can China really be a
leader in the global system? So that’s my question
for Benjamin. So if you just briefly
address these questions, then we open the
floor to the audience. Thank you. TED PICCONE: Great. Thank you for those questions. Let me start by an anecdote. When I worked at the
National Security Council, one of the issues we had
to negotiate with Panama was our withdrawal from Panama
after we had many decades of military presence there. And one of the concerns was,
as we withdrew, that China would come in and fill. And of course, this coincided
with the Chinese company Hutchison Whampoa taking
control of one of the ports on the Pacific
side of the canal. That this was the camel’s
nose under the tent, that this was
really going to mean Chinese taking over the region. But that argument
didn’t go anywhere. I mean, there was really
only a very small number of members of Congress
who were concerned enough to make that argument. Now, that was back in the 1990s. What have we seen since then? This dramatic rise of
China’s economic role. And I think you have to
look at it from a broader perspective of China’s
strategy to not only become an economic powerhouse, but
a broader power in the world, in terms of
geo-strategic issues. And that’s where you get a much
greater and growing concern, I would say, in Washington. We do have, of course, a very
high-level strategic dialogue with China across
multiple domains. And I think it’s
within that context that policymakers in
Washington have said, well, we see China’s increasing
role in Latin America. We should have our own
dialogue with them– just focus on Latin America. And so that did begin in
the Obama administration. And these dialogues took
place maybe every year, maybe every two years. But they’ve really fallen off. And they haven’t renewed
them in the last year or two. So that raises a little
bit of a concern, I think, when you don’t
see that kind of dialogue, and our countries are certainly
bumping into each other all the time in Latin
America, that there needs to be a renewal of
that kind of dialogue focused specifically on Latin America. Now, TPP– I want
to go back to that. Because this is adding a
whole new dimension of anxiety in the United States. The key argument that the
Obama administration was trying to make, and others
in pro TPP, was that this was ultimately a way
of checking China’s growing role in the world. And that we needed to assert
a US-led economic and trading relationship that would
rise to higher standards. And that if we let
China be the lead, it would lead to
lower standards, in terms of openness and
fairness in the trading system. Well, that argument
did not work. Right now, TPP is dead. So China, of course, is now
telling the Latin Americans and others, we will
be your lead partner on coming up with the new
multilateral trading system. And it’s interesting to see, at
least the Pacific Alliance say, well, we want it in
accordance with TPP standards. Now, I’m not a trade
specialist, and history will tell whether that’s
a good thing or not. But there is a fluid
dynamic underway right now that will feed into
this concern that one of you mentioned– I think Benjamin– this idea
of a rising China as a threat. The China threat issue. And that will make my
final point, which is, I think one of the concerns is
that China has a very different political system. And it doesn’t look like ours. And it is more closed, and more
in control of a one-party state that we don’t know everything
that we want to know. I mean, transparent systems lead
to greater confidence and trust in your partners. And there’s always a sense
of anxiety and concern that we don’t really fully
trust China’s intentions. And so I think that underlies
some of this anxiety that’s building as China continues
to grow, not only in Latin America, but in Africa,
in Europe, and even in the United States. STEPHEN B. KAPLAN: Thank you. So unpacking the idea
of patient capital– essentially, if you think
of the US or Western model, it’s a model of finance that
is very market driven, right? And so, as a result,
a lot of benchmarks, particularly from a
finance perspective, can be shorter term. Within the quarter,
or within the year. Because of that,
capital, at times, can flow out pretty quickly. As soon as market players become
concerned about shorter-term metrics of a country in
terms of its performance, the money can flow out. And even interviewing
many different executives in the region, more
in the banking world. But there’s that perspective. The argument with
patient capital is that comparatively you have
a mix of politics and markets, and a longer-term
horizon because of that, for a few different reasons. One, the geopolitics of it. That China is concerned,
over the long run, of gaining access to
commodities, and food supplies, and energy supplies. And spending and
building relations economically across
the globe enable them to address some of
these longer-term concerns that they have economically. At the same time, I think that
there is a bit of difference. There was a big debate probably
five or six years ago– the Beijing consensus versus
the Washington consensus. Is there a difference from a
governance perspective or not? And all in all, and probably
in the camp that probably would ultimately
minimize the difference between the two models. But I think one
thing that is key is, there is more of a
developmentalist approach, from an economic perspective,
and a willingness to spend on
infrastructure first. In terms of China’s
growth domestically, infrastructure was an
important part of that. And they’re willing to
spend on infrastructure, and let the multiplier
effects come after. I think comparatively from
a Western perspective– it’s starting to
change, particularly at some of the
international institutions. But there’s a little
more skepticism of putting that much
faith in infrastructure, and allowing that
to lead the process, and allowing the
economic opportunities to follow infrastructure. And I think that, because
of that difference, at times there’s a
willingness of China to invest in infrastructure. And this comes back even to
disentangling the politics and economics. In the long run, particularly
from a finance standpoint, they’re still debtors. They’re concerned
about being repaid. But at the same time, as long as
these projects are profitable, the big multiplier effects
may come down the road. And I think China’s a lot
more comfortable with that than necessarily
Western finance is. And I think, when I’m
thinking of patient capital, those are the ideas, in terms
of the differences there. And just one last point, too. I think, in terms of
implementing a model, where you have an
investment push, an infrastructure push, I think
it’s a riskier model for Latin America, compared to China. Because China had
a lot of savings. And so, if things went wrong– if they built projects that
were less successful with less multiplier effects, or
if there was corruption– there was enough savings
to provide a cushion. I think the risk,
to some extent, for particularly the smaller
Latin-American nations, is that if Ecuador, for example,
chooses the infrastructure projects, and they’re
not the most efficient, they don’t get the benefits that
they hoped from these projects in the long run, there’s
not the same savings to absorb that kind of shock. So I think that an
investment-led infrastructure push, it’s well needed
within Latin America. It could be very successful. The only thing is
there’s less savings to absorb bad decisions or
misallocations of capital, compared to China. And I think that’s an
advantage that China had. Thank you. BENJAMIN CREUTZFELDT:
Interesting. Also, speaking of how
successful are the investments, there has been a lot of
talk in Peru in the press, and said the analysis that
there was flooding in Peru– in northern Peru because due
to heavy rains, and mudslides, and things. And in Ecuador, there
was not, although there were similar rains. And many people
argued generally that the cautious and well-designed
river management and water management in Ecuador, which
was heavy infrastructure, was successful. And in Peru, they
simply didn’t do that. So obviously, one always
hopes that they go well. And then it’s good. Well, your question
is very interesting. One is the niceties
of diplomatic talk. Of course, that is
difficult. And when I was teasing and saying, well,
economics is not a science. Obviously, political
science isn’t either. But we all know, and it
can become very polemical, the United States have been
talking a lot about democracy all over the world. And we know that they deal with
very ruthless countries that are not at all democratic, and
don’t even have women’s rights, and so on. So you have quite a number of– XIAOYU PU: Hypocrisy. Different style. BENJAMIN CREUTZFELDT: There’s
a different style of hypocrisy. Or you can say, well,
we will go with. Some wage war, calling
it strengthening democratic institutions, when
it doesn’t seem to really have anything to do with that. And others speak of
win-win situations, even though one wins more
than the other, maybe. One has to, of
course, be cautious. XIAOYU PU: [INAUDIBLE]
China, sir. Win-win is China win twice. BENJAMIN CREUTZFELDT:
Yes, exactly. Then it’s win-win-win. And of course, in their
2016 policy paper, the Chinese said, well,
we also appreciate trilateral engagement– implicit is the United States. So everybody can join in. Talking about the common
destiny of humankind, I think I just was
reading yesterday about this dreadful
sort of development that the ice on the poles
is melting more swiftly now. And that we may, within
the next decade or two, see significant sea level rises. And I wonder whether,
for example, Mr. Trump will no longer have a
Mar-a-Lago, but just Mar. [LAUGHTER] To travel to. And that is a very real
concern, that maybe he’s already unstoppable. And there’s certainty,
whether you like it or not. It’s humankind has
one kind of destiny, and we still have
to try and shape it. When it comes to
politics, specifically, that is fascinating,
is something I was going to mention
earlier is that, of course, you can simply
have this dichotomy democracy and non-democracy. And it does sound
ironic, when China promotes international
democracy, meaning one country, one vote. And yet they don’t have
one person, one vote. And at the same time,
we also know one person, one vote doesn’t really work
in the United States, either. And so you have so many
different democratic systems. Venezuela is sort
of a democracy, but it’s also in a
very real problem. So there are many ways
that politics have– there are many
different possibilities. And I would say,
and this is what I was going to mention
earlier, that China’s really– it’s just like, especially
as Stephen has emphasized, China’s different approach to
finance and to other things may force individual countries
to make very serious decisions. And we know that we haven’t
spoken about it much, but Latin America has
huge social inequalities. And we know now
that, in Colombia, for example– obviously,
I keep mentioning it because I know it best–
but the peace process, there are people who are
against the peace process, because they have to give
away some of their land. It’s obviously dreadful to even
contemplate such selfishness. But unfortunately,
human nature, it seems. And so there are these
counter currents. And so different
countries will– some that are able to think
more big-ly, larger, and further ahead will be able to take this
opportunity and turn it around. And others obviously fail,
or have already failed, or will not know how to. So how China influences
the country’s destiny is, again, to a great
extent, down to each country. And we will see. XIAOYU PU: Ted, you want– TED PICCONE: No. I just wanted to respond
to this last point, because I do a lot of
work around democracy. And this is a bit of a canard. I have to call you out on it. Because while, yes,
there are some debates about the definition
of democracy, when we in the United
States talk about it, we’re talking about
liberal democracy, with some basic checks and
balances on executive power, and fundamental rights
with civil liberties, and republican institutions. So I think we can all agree
to that being the term. Let’s also talk
about it in terms of international
human rights, which is a matter of
international law, that China, and
the United States, and every other country
in the world almost, has adopted as part
of their system. And yet, in practice, we see
very different situations, in terms of implementation. Latin America kind of
sits a bit in between, where Latin America has adopted
liberal democratic forms of governance, but is way
behind on issues, in particular, of economic and social rights. And China has done better on
economic and social rights. But that is not all
that human rights are. It also includes freedom of
association, and expression, and media, etc. So I just want to
make sure we have that comprehensive
definition on the table, so we understand the terms. XIAOYU PU: OK, so good. Very good. So we open the floor. So anyone has questions,
comments, brief questions, brief comments? AUDIENCE: Thank you for
this wonderful conversation. I have a question regarding
how the Chinese policymakers– the higher-ups in
the Communist Party or in the state agencies
that deal with Latin America, whether they see Latin America
as a more or less unified region, that ideally, in
a future global order, would have some kind of coherent
representation or unity? Or it’s a purely
pragmatic approach. Two more questions. One is, does China has any kind
of specific diplomatic training in Spanish or
Portuguese language, and the cultural assets
you need in order to engage in a long-term
relationship with Latin America, beyond the
purely economic relations? And the third one is, do
the Chinese government imagine some kind of
a future global order? Because here we have mentioned
the liberal global order. I don’t know exactly
what that is. And in any case, whatever
it is, it’s in crisis, I would say, particularly
in Latin America. Examples like the Guantanamo
concentration camp, and the US support to the coup
in Honduras, those are things that really
lower very dramatically the confidence in the US model
of international human rights and democratic commitments. So I don’t know what’s
China’s stance vis-a-vis this. Thank you. XIAOYU PU: Thank you. So we collect all the questions,
and let the presenters respond. AUDIENCE: Thank you all for the
very informative presentations. My question is mainly about
infrastructure construction in Latin American countries. Why do you guys think,
in the first place, that a lot of Latin
American countries find themselves in the
infrastructure deficit? And why China especially
would pick infrastructure construction as
the starting point of their active
engagement in a lot of Latin American countries? Do you guys think it’s
a wise choice, or not? And also, more
importantly, why do you ask, after so many years
of a longer relationship with Latin American
countries way before China, has not think of infrastructure
as one of the main area to focus of its investment? Thank you. XIAOYU PU: Thank you. AUDIENCE: I wonder what the
impact of domestic regime reform in China would
be on all of this, that Xi Jinping seems to be
interested in doubling down on keeping the monopoly of power
of the Chinese Communist Party, and repressing dissent. But one could conversely
imagine that if there were more separation of
state and enterprise, that that would
lead to more of what the classical liberals call
the harmony of interest, that you don’t need imperialism
when you have states confining their activities to
enforcing the law. And so you could have a less
acrimonious world system. XIAOYU PU: All these questions. You can select it– you guys select it. BENJAMIN CREUTZFELDT: A lot
of interesting questions. I will just take a couple here
and there, because the first XIAOYU PU: Four
or five questions. BENJAMIN CREUTZFELDT: There were
already three questions, right, packed in one. So studies of Latin
America in China as one. That’s certainly something
that is very suddenly recently growing. I’m actually just
putting together a list right now of every
institution in China that is teaching Spanish,
and also the diplomats. And it’s also
interesting to watch this sort of mapping of
the Chinese diplomats as they move around the region. And they’re often sent from
Argentina, then to Cuba, or from Costa Rica to Colombia. And so you can observe
a strategy there. And almost all of them
speak good Spanish, or Portuguese, or English,
depending on the country. Funnily enough, the current
ambassador to Bogota came from Berlin, and
doesn’t speak any Spanish. But nonetheless, he’s the
best at doing all this charm offensive. So it’s not an
essential to come. But generally, you’ll
find Chinese diplomats in the region speak
good enough Spanish, even to give discourses
at universities and stuff like that. So it’s very impressive. And it doesn’t reflect
it the other way around. And as I said, and generally,
studies on Latin America are increasing. Some have told me that it’s a
push from Xi Jinping himself, who said, we need to know
more about these countries. And we need to study more. And they’ve now opened
centers, usually without people who
can actually teach. So any Latin Americans here
who want to teach in China, I think there are opportunities. And then about does China
see Latin America as unified or not? This is something I’ve
grappled with for a long time. And I think they do both. They engage bilaterally
and also with groups. They were invited to be
observer at the Pacific Alliance meeting in Chile recently. And they would like them– I think it’s partly China
that have pushed Venezuela– this is my theory– to organize the
CELAC forum, and then the China CELAC forum,
which is basically an organization
of American States without Canada and
the United States. And then they could
engage more directly. So there are efforts
that China would like to deal with the whole region. We heard the statistics. It was the size of an
economy, it makes sense. But they’ve understood that
Latin America is too dissonant, and too incoherent itself. I’ll leave you there, and
I think of something else. STEPHEN B. KAPLAN:
So perhaps I’ll chime in on the question about
infrastructure, which was, why is there an
infrastructure deficit? And why has China come so late
to spend on infrastructure? Why hasn’t China
entered earlier? So first, in terms of why
there’s an infrastructure deficit, some of this is
a product of the 1990s, and a product of
even the debt crisis, to some extent, where,
throughout the 1990s, a lot of countries
within Latin America were focused on
fiscal discipline. Getting the
macroeconomics in order. In order to do that,
to some extent, countries had to cut spending. Contrary, at times,
to popular belief, spending on education
and health care absolutely continued to
increase during this period. Where a lot of the cuts
were infrastructure. If you think politically,
it’s a lot easier to cut infrastructure projects
than social transfers, or fire public employees. So as a result, when you
did go through these periods of austerity in the
1990s, usually the odd man out was infrastructure. And so part of the reason–
there’s lots of different factors that contribute to it– but part of the
reason is that it’s a product of economic
history that you have this infrastructure deficit. There’s also a savings issue. Compared to a lot of
East Asian economies that have had a high savings
rate, and purposefully, in terms of their
development plans, have really encouraged
savings historically, you don’t have savings
rates that have been as high in Latin America. And that also is an
impediment to the ability to spend on things
like infrastructure. In terms of why China
didn’t come earlier, I would characterize
the economic model that China’s been pursuing that
there was sort of an inflection point, to some extent. That at first, you had
the traditional kind of East Asian export model– an export model
driven growth, where, yes, an undervalued currency did
play a role back in the early to mid 2000s. It’s very hard to make
the case that the currency is undervalued today. If anything, it’s
been appreciating on a real basis over the course
of the last decade or so. But I think that
particularly, following the global financial
crisis, China took the opportunity to change
the way it promotes exports. So it moved away
from a model that emphasized undervalued currency
and export growth directly as a way to support
your export sector. And instead, the product
of that old policy was all these currency reserves. And instead of having
these trillion dollars of currency reserves
arsenal sitting around, the idea is, OK, let’s use
those resources the same way we did domestically. Invest in infrastructure. Help other countries do this
investment infrastructure push, and China could benefit
at the same time, because China had an
oversupply domestically in areas like construction,
machinery, steel. And this was an opportunity to
create export markets abroad, particularly at a time where
export markets in the US were closing. There was less opportunity
there with the crisis. So I think that’s one
of the opportunities with the global
financial crisis, that you see China
entering more forcefully into this world
of banking, policy banking, and infrastructure. And one reason that it was
slow in some countries, take the case of
Brazil, is that I think in Africa, China had
pursued sort of a model, and they had, from
my knowledge– I’m not an African
expert– but there was less grassroots
push-back, less push-back from policymakers. You know, they did encounter,
for example, in Brazil, during early negotiations
with infrastructure, the idea of bringing
Chinese labor was very contentious in Brazil. The policymakers had
pushed back against that. And they do think
that that stalled some of the initial
infrastructure coming into Brazil. Now, that’s less of an
issue in other countries. There is variation
within Latin America. But I do think that
that’s one factor that may have stalled some of
these infrastructure projects initially. And also, it’s
just infrastructure takes a long time to
implement, In the case of certain countries. You have feasibility
studies, there’s lots of stages of
infrastructure development. And it can just take a while. BENJAMIN CREUTZFELDT: Can I
just add something quickly, because I was just
going to add two words to that infrastructure deficit. It’s quite a conundrum. And two words–
urbanization and elites. One is that urbanization– Latin America is, I think,
the most urbanized continent. It doesn’t seem so, because it’s
got a lot of forests and things like that. But in fact, it’s highly
concentrated in a few cities. And that explains, in part,
goes some way to explain it, another factor why there was
not so much interconnection. The other thing is elites. We always have this assumption
that a country works in its own best interest. Well, unfortunately,
my experience– certainly in
Columbia and others– I see that there are elites who
often work against the nation’s own best interests. So I mean really,
it’s very depressing. And I once spoke to a Chinese
investor, a Chinese proven investment group, who was
trying to get Chinese investment into projects in road
building in Colombia, using it as a bridge. And he said, actually,
we find that there’s a resistance to large
land-owning elites in Colombia to infrastructure building. You know, the most educated,
best connected, most powerful, largest land-owning elites
want to keep it that way. You don’t want to educate
everybody and connect everybody. Because it’s not good for you. So I think one has to also see
that it’s quite complicated. There’s other sides that often
go against national interests. TED PICCONE: So I’ll just take
the last questions about– I look at China’s role in the
world as not a rules maker, but a rules taker. That it’s willing to
work within the existing international order,
and to revise it according to its own
wishes and interests, but not to create an
alternative order. Now, nonetheless, you see
some alternative institutions that are being created,
like the ones we’ve talked about today, in which,
for example, the US is not involved. And so that raises
some questions about how alternative is this. Colleagues at Brookings who
have looked, for example, at the setup of– whether
it’s the new development bank of the Brics or the Asian
infrastructure bank– they have been consulting
very closely with the World Bank and the IMF
on the rules that are being written for how that
money’s going to be spent. So that, again,
suggests that China is trying to find
a third path, where it’s working within the
system, but tailoring it to its own needs. I think, at the end
of the day, what we’re talking about
is regime survival. I mean, the Chinese state wants
to maintain a one-party control by the Communist Party. And so it is happy to
engage in the world, as long as those core
interests are not threatened. And so this is why the human
rights regime is challenging to them, or the US
democracy promotion agenda is challenging to them. Because it threatens their
core existence and their model. And so they’re not
aggressive about in trying to impose that model. They’re trying to
lead by example. And a number of African
states, and perhaps some Latin Americans, are
interested in following the Chinese model,
because they’ve been so successful at
dealing with poverty. But this is really the
heart of the contest we’re facing right now, where
the US and China are very much the leading– plus Russia, throwing
Russia in there– challenges to the
international order. And I think we are facing
a crisis of that order. But I would argue that it’s
led by the United States current administration
being an antagonist and undermining the pillars
of the international order that the United States
has benefited from so much for the last 70 years. BENJAMIN CREUTZFELDT: I was
going to invite you to also– I don’t know whether
you feel like it– but also comment on a future
Chinese-led or Chinese world order. Because that’s
something that I know you also work on and
are interested in. Although you are the moderator. But I, mean, because
it’s something that we haven’t really
properly answered. And it’s a very difficult one. I think of my PhD
supervisor [INAUDIBLE] who’s written about
relational theory, and has tried to bring
in other ideas of how international relations
could function when it’s not simply US-led,
let alone a bipolar world order. XIAOYU PU: OK. Yes, thank you. So just one brief
comment regarding China’s competing visions of convening
an international order. During the global financial
crisis a few years ago, I called my then PhD
advisor Randy [INAUDIBLE] we conceptualized
China’s competing via the international order. At that point, we conceptualized
three possibilities. One is, China could be a
spoiler, de-legitimize America Latin liberal order, and replace
it with something entirely new. Second, China could
be a supporter. China could be active
participant, and also contributor of the
existing liberal order. The third possibility
we conceptualized is that China
could be a shirker, in the sense that China
is not eager to replace American leadership. And also, China is not an active
participant or contribute. China will focus on
domestic challenges. So China is already avoid
taking greater responsibility. But when we published
that article, we did not expect Donald
Trump get elected. Nowadays, at least from
a diplomatic rhetoric, China is very active, trying
to defend a global open system. And America, at least
some of the voices, try to avoid taking
global leadership. So America, in some issues,
like climate change, try to be a shirker. So that’s a big challenge for
the global order in the future. I anticipated it
a few years ago. So let me conclude and to saying
all the presenters, panelists– so the China Latin
America relations is increasingly important
relation, in my view. But it’s definitely
understudied. So I think the
presenters provided very interesting arguments,
interesting perspectives. Confucius once said– OK, I have to pretend
to be a China expert– whenever there are
three persons around, at least one person
could be your teacher. So [INAUDIBLE] shouldn’t
be your [INAUDIBLE] So I think three
of the presenters really teach me something new. And I hope you enjoy
their presentations. And then we can have
conversations during lunch. And so thank you for
your patience, as well. [APPLAUSE] SPEAKER 1: Thank you very
much for the speakers and the moderators, for the
engaging and invigorating discussion about the geopolitics
of China’s rise in Latin America. Now, I’d like to introduce
Mr. [INAUDIBLE] who is another organizer
of the event, to give a very few
brief closing remarks. SPEAKER 3: Thanks, Bruce. And thank you, Ted,
Stephen, Benjamin, Xiaoyu, Lourdes, and Professor Dain
Borges, and Carol, come here. And I think both panels provided
an insightful explanation and clarification of the current
China Latin America relations and the Chinese activities
in Latin America. And like Professor
Xiaoyu Pu said that, this is an
ongoing important issue in our study of
political science and the economy of
the Americas and Asia. So I hope that we have more
similar discussions going on, there are more and more
students, researchers, and the general public
interested in this issue, and continuing touching on the
future relations of China Latin America relations. Finally, there’s an old
Chinese going that food is the heaven for all the people. So we provided a
lounge for everybody. Thank you all for
coming, and thank you for the great speeches. Thank you. [APPLAUSE]

One thought on “China and Latin America Forum

  1. The young lady from University of Chicago's statement about globalism being tied to national destiny is very true BUT misleading. Globalism is not compatible with nationalism. Globalists regularly refer to nationalism as an evil. The further one concedes nationalism in favor of globalism, the further from ones national identity one becomes. Those globalists like Soros who regularly fund through his open societies foundation fundamental changes that affect the nation state. They are misrepresented and packaged attractively and are designed to end the sovereignty and individualism of the nation state in favor of open borders, and global consensus that minimize the desires and goals of the people of the nation state. Do not be deceived into believing they have your best interests in mind. Globalism is designed to enrich the globalists not the peoples sovereign state. Globalism is a veiled attempt to return to colonization by the most powerful and wealthy globalists at the expense of the people they purport to assist. Globalism is a culture killer and internationally removes the competition between states that drives innovation and markets. Globalisation is a global totalitarian communist state all dressed up and packaged as something besides the dismal failure it has always proven itself to be. Its acceptance is the first step in schakeling oneself by surrendering self determination to an outsider who works in his own self interest not yours.

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