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Topic: World
With this weeks visit by Peoples Republic of China Primer Li Keqiang to Brazil, Colombia, Chile and Peru, some analysts have suggested
that the PRC may be turning away from concentrating its engagement with Latin America and the Caribbean on the less market-friendly
regimes of the Bolivarian Alliance. I beg to differ. Premier Lis visit is nothing more and nothing less than the continuation, with ongoing
adjustments, of Chinas growing multidimensional engagement with the region.
It was symbolic that the Chinese government selected Premier Li to represent Beijing on the present trip. Within the Communist Party
leadership, Primer Li is an economist who has been the steward of important parts of Chinas adaptation to the global market system,
including the Shanghai Special Economic Zone. It thus made sense for him to be Chinas standard bearer to Colombia, Peru, and Chile, all
members of the free-trade and market-oriented Pacific Alliance. It was also appropriate for him to visit Brazil, although President Xi just
visited the country last July. For the PRC, size is important, and Brazil is by far the largest country in the region in geographic, economic,
and military terms, as well as Chinas largest trading partner south of the United States.
Premier Lis trip also sends subtle messages about Chinas differentiated rewards to those countries which collaborate and treat it well. Mexico, whose government twice stopped a
China Railway-led consortium from winning a $3.4 billion infrastructure project, and which blocked the construction of the Dragon Mart complex and fined its developers, was the
only Pacific Alliance member not included on the agenda.
The focus and chief beneficiary of Primer Lis tour of the region appears to be Brazil.
Chile, one of the Latin American countries most reluctant to bend its public procurement system to accommodate Chinese preferences, will announce much cooperation but few
specific large-value projects. Colombia and Peru, whose governments took note when they were not included in President Xis two state visits to the region, will receive the kind of
qualified affirmation of their importance that comes from a visit by the second-in-command.
In The Spotlight
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railroad link, advertised to reduce Brazil to China shipping costs by $30 per ton, will facilitate expanded
Brazilian exports of soy and iron to the PRC (even as prices for those commodities decline), while also
making Brazil more accessible for Chinese high value added products and facilitating the integration of
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Chinese components into Brazilian goods in manufacturing centers such as Manaus. In the process, the
railroad will strengthen Brazils economic and financial dependence on the PRC, and if such commodity
exports also drive up the value of the countrys currency (the dutch disease effect), it may make Brazil
less competitive as an exporter of manufactures, vice a source of low value added commodities to feed
the Chinese industrial machine.
One of the most positive stories from Premier Lis visit to Brazil was the announcement of a $1.1 billion
sale of 22 Embraer ERJ-190 aircraft to Chinas Tianjin airlines. When Embraer established a agreement
with the Aviation Industrial Corporation of China (AVIC) in 2003 for the co-production of its mid-sized ERJ-145 aircraft, an ongoing point of contention was whether it would be
allowed to sell its larger ERJ-190s into the Chinese market, or whether its Chinese partner would use the partnership to absorb the technology and develop a new aircraft which, with
the governments help, it, rather than Embraer would sell to the Chinese market.
Colombia: Hopes for Peace and the Resurrection of a Free Trade Accord
As Premier Li left Brazil for Colombia, he released a (Spanish-language) letter to the Colombian people, printed in the nations major newspapers. His eloquent invocation of the
magical realism of Colombias most famous author, Gabriel Garca Mrquez was ironically appropriate; the Chinese investment and win-win relationships that Li describes seems
to correspond more to an imaginary Chinese Macondo,(2) than to the reality of Sino-Colombia cooperation occurring today.
The paucity of agreements for concrete projects announced during Premier Lis stop in Colombia contrasts to the initiatives showcased during his time in Brazil. Nonetheless, the
visit affirms PRC interest in working with Colombia, and lays the groundwork for future advances.
The principal news item from Premier Lis stop in Colombia was arguably resurrection by the two nations of the China-Colombia Free Trade Agreement. Such an accord was
previously called for by Colombias President Manuel Santos, and his Chinese counterpart, during President Santos May 2012 visit to the PRC. Indeed, the assignment of
experienced Chinese Ambassador Wang Xiaoyuan to Colombia, after having overseen the negotiation of a China-Costa Rica free trade agreement as PRC Ambassador to Costa
Rica, was seen by many in Colombia as an indication of Chinas interest in achieving a similar agreement with Colombia.
After having been declared dead and being entombed away from the public discourse for three years, the China-Colombia free trade agreement was resurrected this week, first in
the interview given by Ambassador Wang, then in Premier Lis published message to the Colombian people, and finally, in the meeting between Premier Li and President Santos.
It was also significant that China and Colombia committed, during Premier Lis visit, to a development plan for Colombias troubled Pacific Coast port of Buenaventura. The port is
Colombias principal commercial access point to the Pacific Ocean, yet is so hampered by criminal violence, poor infrastructure, corruption and inefficiency, that many logistics
companies prefer to use the much longer route through the Panama Canal to the Atlantic Coast ports of Cartagena, Santa Marta, and Barranquilla to serve the nations principal
inland cities.
While the details of the plan for Buenaventura were not clear, it likely involves taking forward one of two initiatives already in the works. One is the construction of an ambitious 200
km free trade zone complex north of the city. The other is a previously blocked attempt by a Chinese consortium to re-zone the entire area surrounding Buenaventura into a port
concession which it would presumably then be given to manage, effectively doing an end run around the Colombian, Philippine and Hong Kong based businessmen currently
working on individual port infrastructure projects in the area: the Buenaventura public terminal, TCBuen, and Aguadulce.
Also unclear is whether the initiative to reclaim Buenaventura from the terrorist groups and criminal bands (BACRIM) which currently dominate the area will involve an expansion of
Sino-Colombian security cooperation. Chinese owned companies such as Huawei and Emerald Energy have had difficulties with criminal violence against their operations in the
country in recent years. Officers from the Peoples Liberation Army already attend training courses at the Colombian military base at Tolemaida
Also welcome news during Premier Lis visit to Colombia was Chinas pledge to assist the country with the transition from conflict to peace, although the $8 million in aid offered by
Premier Li is probably less than what the Colombian government spent to host the Premier and his delegation during the current visit.
Moreover, if the Chinese government is serious about supporting Colombias struggle to reclaim the country from insurgents and criminal bands, one place to start is arguably
imposing greater control over PRC-based companies operating in Colombia. In recent years, the Chinese NORINCO group reportedly shipped thousands of small arms to the FARC
based on falsified documents in the name of Colombian armed forces head, General Freddy Padilla. Similarly, former Colombian Congressman scar Tulio Lizcano claims to have
personally observed helicopters from the China National Petroleum Corporation flying medical personnel and supplies into FARC camps while he was a captive of the FARC in such
camps.
While Premier Lis promises of Chinese invest in a post-conflict Colombia were welcome, the timing of such expressions was also auspicious; during the visit, the Colombian military
launched a major bombing raid against a FARC encampment, and in retaliation, the FARC declared an end to their previous announced unilateral cease-fire.
Yet another agreement signed during Premier Lis stop in Colombia was a commitment to set up facilities in Colombia to produce iron and steel, construction materials and
engineering equipment. The move is likely an effort by Chinese companies to expand their participation in Colombias mining sector, from which it already purchases coal and
nickel, but in which it has been unable to establish a significant presence on the ground, with established mining firms already operating there.
Such cooperation in establishing a local presence in iron and steel, construction materials and engineering equipment also may reflect PRC hopes to win work on infrastructure
projects in the country, overcoming its dismal track record in the sector to date. Chinese companies have been notably absent from participation in Colombias Highways of
Prosperity, while a Chinese offer to build the Bogota metro when the previous contract collapsed amidst a corruption scandal, was a non-starter. Efforts by Chinese companies to
win work on the Hydroituango hydroelectric facility in Antioquia, and projects on the Magdalena River have produced similarly poor results. Work by China United Engineering
Corporation (ChinaCUC) on the GECELCA III coal-fired power plant in Crdoba has reportedly been mired in production delays and associated contractual disputes.
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competitive public procurement system, including the requirements of Colombias Public Law 1508 for Private-Public partnerships. Yet Colombian legal experts suggest that there
are avenues for the country to circumvent the established system and negotiate state-to-state deals with the PRC. To this end, it was auspicious that Chinese Ambassador Wang, in
his interview with the Colombian press reminded his audience of the availability of the $35 billion infrastructure fund for the region that President Xi announced during his visit to
South America in 2014.
[Full Bio]
Dr. R. Evan Ellis is Research Professor with the U.S. Army War College Strategic Studies Institute and author of over 80 works on Latin American
security issues, including his new book, "China on the Ground in Latin America.
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