GOA UNIVERSITY – January 2014 – Ambassador Deepak Bhojwani
The region´s encounter and experience with Asia is a classic story of globalization. Nevertheless, there is a historic dimension. Some Chinese accounts claim that their mariners had discovered Latin America as early as the fifth century AD. There are Indian references, more mythological than historical perhaps, that speak of ancient migrations from India to Central America and further south, tracing links between the ancient Mayan and Vedic civilizations.
Conventional history indicates that the Spanish colonization of the Philippines in the second half of the sixteenth century was the earliest authenticated contact between the region and Asia. The Spaniards carried silver to Manila from Acapulco between 1575 and 1815 in return for spices and Chinese silks, etc. over what could have been the “sea silk route.”[1] The Philippines was also reportedly the principal entrepôt between medieval India and Hispanic America.
CHINA
Through the nineteenth century, half a million Chinese reportedly went to Latin America, and their descendents lived on in Brazil, Cuba, Mexico, Peru and parts of Central America. The Chinese Republic, established after the overthrow of the monarchy in 1911, was recognized by Brazil and Peru (1913), and by Mexico, Chile, Bolivia, Nicaragua and Guatemala in quick succession. The founding of the People’s Republic of China in 1949 elicited some sympathy, but little political support, in a region under the influence of the United States.
Initially, China’s relations strengthened with Cuba after the Revolution. China’s Maoist ideology was embraced by several insurgent movements and even some Governments in the region, in preference to the Soviet model. With the normalization of relations with the US, China’s attitude turned more pragmatic, focusing on economic relations. This was logical since China was on a high growth trajectory by this time, seeking raw materials as well as markets.
By the late 1970s, China had established diplomatic relations with most major States in the region, including Argentina, Brazil, Chile, Mexico and Peru. Beijing’s motivation also included the reduction of the diplomatic presence and influence of Taiwan. Of the twenty-three Governments maintaining diplomatic relations with the Republic of China, eleven were in this region.[2] China’s aggressive diplomacy included massive projects all over the region, particularly in the smaller countries such as Costa Rica and Guyana. High-level diplomacy consolidated China’s presence in the region.
In 2001, President Jiang Zemin visited Brazil, Cuba, Venezuela, Chile, Argentina and Uruguay. However, the turning point was the visit of President Hu Jintao to Chile, Brazil, Cuba and Venezuela in 2004. During this visit, US$30 billion worth of investments were committed, and 400 accords signed.[3] In 2005 Vice-President Zeng Qinghong went to Mexico, Venezuela and Peru. He also attended the meeting of the China-Caribbean Economic and Trade Cooperation.
During the APEC meeting in 2004 in Santiago, Chile, President Hu Jintao had extensive business meetings, accompanied by a massive delegation. Later that year, Presidents Lula of Brazil, Kirchner of Argentina and Chavez of Venezuela visited China. Bolivia’s President Morales visited the following year. President Hu Jintao visited Mexico in 2005 and met Chile’s President Michelle Bachelet in 2006.
In this decade, China has undertaken an aggressive diplomatic and political campaign in the region. Premier Wen Jiabao visited Brazil, Uruguay, Argentina and Chile on his way to the G20 Summit in Mexico in June 2012. Newly appointed Vice-President Li Yuanchao made his first overseas visit in May 2013 to Latin America, visiting Argentina and Venezuela. On his first stop in Argentina, he expressed Beijing’s ongoing support for “Argentine sovereignty over the Malvinas Islands … (and gratitude) for Argentina’s stance on the ‘one China’ principle, and the question of Taiwan and Tibet.”[4]
Close on the heels of the Vice-President’s visit, President Xi Jinping made a State Visit to Trinidad and Tobago, Costa Rica and Mexico in early June 2013. On an earlier visit to Mexico in 2009 as Vice-President, he had declared “China does not export revolution. China exports neither hunger nor poverty. We do not cause problems. What more can be said of us?” On his visit to Trinidad, he met with several Caribbean leaders, and offered concessional loans worth $3 billion. He also extended a loan of $250 million for a hospital in Trinidad and signed agreements to advance cooperation in energy, mineral and infrastructure development, among other areas. [5]
In July 2014, President Xi Jinping attended the BRICS Summit in Brazil, and held bilateral talks with President Dilma Rousseff. A day after the Summit, he participated in the first summit of leaders from China, Brazil and quartet of the Community of Latin American and Caribbean States (CELAC), integrated by Costa Rica (then President of CELAC), Cuba (former President), Ecuador (next President) and the President of the Caribbean Community. He also paid bilateral visits to Argentina, Venezuela and Cuba.[6]
On 8-9 January 2015, China hosted a China-CELAC Summit with Presidents of the CELAC Quartet – Ecuador, Costa Rica, Venezuela and the Prime Minister of the Bahamas – as well as Foreign Ministers of the region. Chinese President Xi Jinping pledged $250 billion in investment in Latin America over the next 10 years, as part of a drive to boost Beijing’s influence in a region long dominated by the United States. Xi said in a speech that two-way trade between China and Latin America was estimated to rise to $500 billion within the next 10 years. He also proposed at the forum, which China wants to turn into a regular event, to frame an extensive cooperation plan between the two regions for the period 2015-2019.[7]
China’s willingness to finance countries such as Argentina, Ecuador and Venezuela, which have almost opted out of the Bretton Woods System, has provided them a lifeline. Chinese financing, mainly in the natural resources and infrastructure sectors, and through oil sale agreements with Venezuela and Brazil for instance, have been welcomed by their partners. China’s banks also reportedly do not impose policy conditionalities. At the 54th annual meeting of the IDB in Panama in March 2013, the People’s Bank of China agreed to contribute $2 billion to complement the host’s resources on projects in Latin America to alleviate poverty and support private sector projects for sustainable growth in the region.
In recent years, China has signed up over US$ 100 billion in commodity contracts with Latin America: US$ 32 billion to Venezuela in return for oil shipment; US$ 2 billion to Chile in a copper joint venture; US$ 1.4 billion in irrigation infrastructure in Argentina for rights to grow wheat, corn and other crops for export to China. Argentina also signed a US$ 12 billion contract for China to work on rail projects in Argentina. Ecuador signed a US$ 2 billion project with China for a hydroelectric power project in 2010, to be financed by the latter.
A study by the United Nations Economic Commission for Latin America and the Caribbean predicts China will surpass the European Union as Latin America’s second-largest trading partner in 2016. According to Peter Hakim and Margaret Myers in China Policy Review, a magazine of the State Council of China, in fifteen years, China will overtake the US to become Latin America’s largest trade partner.[8]
Latin American apprehensions of China centre around the possibility of lower demand, due to deceleration in the Chinese economy, and an over-dependence on Chinese finance. Several Latin American economies, principally Mexico, are wary of China’s cheap manufactures, which have flooded their markets. The figures bear out some of the fears. Latin America’s trade deficit with China, according to IMF data, was US$ 6.6 billion in 2012, compared to only US$ 150 million in 2011. China’s imports from Latin America were a mere US$ 3 billion during the late-1990s. Its exports then were a little over US$ 5 billion. By 2012, the total trade amounted to US$ 255.5 billion, clocking eight percent growth, faster than 6.2 percent growth with the US. China is already the top trading partner of Chile, Peru and Brazil, trade with the last reaching US$ 85.5 billion compared to US$ 75.8 billion with the US in 2012.
Mexico has 44 FTAs, only one with Asia – with Japan – and is negotiating with South Korea. Conventional wisdom maintains it will not negotiate one with China. Mexican exports to China came to a bit over $5.7 billion in 2012, while its imports from that country stood at almost $57 billion, according to statistics from Mexico’s Economy Department. Mexico exports mainly oil, copper and lead, but imports manufactured products from China. Latin American opinions published from diplomatic cables made available by Wikileaks in 2011 reported statements by officials in Mexico claiming ‘’We don’t want to be China’s Africa.” Colombia, Brazil and Chile also expressed concern in the leaked documents, while Venezuela and Argentina saw China as an opportunity for their exports and to reduce their dependence on the US.[9]
China has also raised its strategic profile through military visits and naval exchanges with Venezuela, Chile, Bolivia and Cuba. Venezuela, Chile and Bolivia have purchased strategic equipment from China. In 2004, China joined the OAS as permanent observer. In 2008, it joined the IDB as a donor. By 2012 China had opened 32 Confucius Institutes all over the region, teaching Mandarin, and staffed by young Chinese acquiring insights into Latin American language and culture.
AFRICA
Revolutionary Cuba has perhaps had the most in-depth relationship of any Latin American country with Africa. This was through its involvement, primarily at the behest of Che Guevara, in revolutionary movements in Zaire, Ethiopia, Algeria, and most of all, in the liberation of Angola from South Africa’s stranglehold in the 1970s. In October 2014, Cuba despatched several medical personnel to help with the Ebola epidemic in West Africa.
The Portuguese connection, primarily through its colonies in Angola and Mozambique, also through the slave trade, created a latent link between Brazil and Africa. After the independence of several African nations in the 1950s and early 1960s, Brazil President Janio Quadros made overtures to Africa. Rise in oil prices in the 1970s turned Brazil’s attention to Nigeria and Angola. In 1983, President Joao Figueiredo was the first Brazilian Head of State to visit Sub-Saharan Africa.
The twenty-first century saw Brazil undertake a concerted campaign to revive its bond with Africa. President Lula launched his Mission to “bridge the Atlantic” and repay part of what he referred to as Brazil’s “historic debt” to Africa. Lula made twelve trips to twenty-one countries in Africa during his tenure. Brazil received forty-seven African Kings, Presidents and Prime Ministers from twenty-seven nations.
Foreign Minister Celso Amorim made sixty-seven official visits to African countries during President Lula’s tenure. In 2013, Brazil had thirty-seven African Embassies in Brasilia, more than any other capital in that hemisphere, except Washington D.C. Brazil’s Embassies in Africa outnumber those of the UK. Trade had reached US$ 20 billion by 2012. The incorporation of South Africa in the India-Brazil-South Africa Dialogue Forum and the Brazil-Russia-India-China-South Africa grouping, of which Brazil was co-founder with India, further consolidated Brazil´s African connection. Since 2005, Brazilian development projects have been an essential part of its African strategy.
Speaking at Addis Ababa on the 50th anniversary of the African union in May 2013, Brazil´s President, Dilma Roussef, announced Brazil would exonerate $900 million of African debt to her nation. Twelve African countries, principally oil-rich Congo-Brazzaville, Tanzania and Zambia stood to benefit. Brazil has considerable investments in Africa, mainly in the mining and infrastructure sectors.
It was thanks to African votes that Brazil’s Jose Graziano da Silva was elected Director-General of the UN Food and Agriculture Organization in January 2012 and Roberto Azevedo was elected Director-General of the World Trade Organization (WTO) in May 2013, winning against the formidable rival from Mexico, Herminio Blanco, who was backed by the US. Brazil’s African connection also survives through its extensive Afro-American community, which is increasingly being integrated, although there are still discrepancies in their status.
Brazil’s involvement with South Africa and India together in the IBSA and BRICS forums has created a trilateral cannel which further strengthens linkages between the three emerging powers.
The first Africa-South America (ASA) Summit was held in Abuja, Nigeria, in November 2006; the second in Venezuela in September 2009 and the third in Malabo, Equatorial Guinea in February 2013. Sixty-three governments from both continents took part. ASA as an institution faces some challenges in identifying the issues and structure to take the relationship between these two regions forward. Competing priorities between Latin American countries such as Venezuela, Brazil and Chile make it difficult to focus on a concrete and cogent agenda.
While trade between Africa and South America is understood to have increased from US$ 7.2 billion in 2002 to US$ 40 billion in 2011, there is still a long way to go. It remains to be seen whether the ASA permanent secretariat, which was approved and is to be set up in Venezuela, and around 30 joint projects will take off as envisaged by the leaders.
INDIA
India is a sub-continent, with disparate economic conditions prevailing in States that are ever more assertive of their political, fiscal and other rights as constituents of the Union. Foreign representatives also have to contend with India’s continental geography. Geo-political assessments of India’s interlocutors, including Latin Americans, will always take into account the South Asian reality, and the complications thrown up by India’s relations with its neighbours. Emergent India also has an impressive reputation as a middle level power with independent, substantive relations with all other responsible nations. It is consolidating this status through political and economic alliances, military prowess and the accretion of domestic and foreign capital.
Most Latin American governments do not pretend to possess the resources, the energy or the time to prioritize accurate political analysis of the Indian situation. India portrays a reasonably admirable image on economic, social and cultural issues in mainstream media in Latin America and Caribbean. There are, however, not too many analysts or statesmen, or even former functionaries, who would pretend, leave alone venture, to comment seriously on India’s political reality.
This precludes any formation or portrayal of public opinion on coincidence of views, or differences it may naturally have with its Latin American and Caribbean partners. All too frequently, we then see the reflection of the views of the established powers that find their way into LAC political discourse, without sufficient exposure to the Indian point of view. The paucity of intellectual debate on contemporary India is as much a cause, as it is an effect, of the lack of attention or study of this emerging power, even in the most select Latin American official, analytical or academic circles.
Certain elements of Indian democracy are taken for granted, at least in the current context: civilian control of the military; parliamentary governance (as distinct from the presidential system preponderant in Latin America); inordinately powerful central government ministries; a growing sense of regional expression; and the vice-like hold of national and regional bureaucracies.
The virtual absence of any elements of a donor-recipient relationship, between India and most of those countries, apparently further dilutes the need for political analysis or judgment of the situation in India. The current focus of LAC foreign policy towards India is, therefore, essentially on certain aspects of its foreign policy, the economic reality and the machinery that can provide opportunities for Latin American resources and business.
Political positions of several Latin American and Caribbean governments, which differ with India’s, on issues such as arms control, trade in small arms, nuclear weapons, etc. are not unknown, although they do not capture headlines in India nor in Latin America. On most issues of interest to India, such as J&K, terrorism, cyber-espionage, climate change, increased role for the developing world in multilateral economic and financial forums, most Latin American governments are supportive of India’s stand, with subtle, sometimes individual nuances and positions.
Over the past decade, India has established a strong, seemingly durable partnership with Brazil. Positions of both countries in the IBSA and BRICS forums have had an impact, while the negotiating process has served to diminish differences of opinion or policy between them on crucial issues such as negotiations on trade in agricultural products in the WTO.
A similar approximation should have taken place with Mexico and Argentina in the G20, where Brazil and India have made common cause on the reform of the IMF quotas. India is increasingly being seen in Latin America as a responsible emerging power, with an equilibrated stance that safeguards the interests of developing countries, while participating in the new globalized order that seeks to open markets and economies.
Some Latin American countries, such as Venezuela, Peru and Chile, have openly supported India’s candidature as permanent member of the UN Security Council. Indeed, the resistance of Mexico, Argentina, Colombia and Costa Rica, on the other hand, all part of the so-called Coffee Club, backing the Group called Uniting for Consensus, does not favour the proposal largely on account of resistance to Brazil. Their argument is that this expansion would eliminate the chances for a more fundamental reform of the UN, such as abolition of the veto, augment the number of ‘elite’ nations, leaving them out, and also reduce their chances for representation in other UN forums.
It is conceivable that the next decade will witness methods and levels of exchanges, principally in the economic sphere, that could elevate the trade figures close to US$ 100 billion from the US$ 46 billion achieved in 2014. The composition of this trade, however, needs to be studied and analysed.
Trade with the LAC region in the financial year (1 April-31 March) 2013-14 was almost the same as that in 2012-13. The previous decade saw our commerce with that region increase by over thirty percent annually. There could be several reasons for the slowdown. Trade with Brazil actually fell from the previous year, mainly on account of lower levels of imports of fuel oil from that country and diminishing shipments of diesel from India. This had accounted for an average of forty percent of the bilateral trade between the two countries over the past decade. It seems certain that India’s dependence on Latin America for its energy security is set to increase. India’s burgeoning imports of crude oil from Latin America make it second-biggest source of India’s crude oil imports, after the Gulf Region, at almost twenty percent of the total in 2013-14. Africa contributed sixteen percent of India’s crude oil imports in 2013.
Trade enhancement will require imaginative and bold steps. The preferential trade agreements India has with Chile and with the five-nation MERCOSUR block need to be enhanced. Chile has been keen and pro-active but the negotiations to increase the number of tariff lines from around 500 to almost 3000 have been held hostage to Indian protectionist tendencies and bureaucratic lethargy. MERCOSUR on the other hand, is hostage to a protectionist Argentina.
Technology plays a significant role in this relationship. The most obvious example is the presence of a large number of Indian software companies that have set up shop all over Latin America and the Caribbean. The more forward looking Indian enterprises have started familiarizing their local employees with Indian conditions and methods. They are enhancing training and capacitation of their LAC employees, independent of the efforts of governments on both sides.
As the World Bank has pointed out, not all the prospects of the Latin American economic reality augur well. Like other international organizations, it has referred to the need to diversify the Latin American production base to reduce excessive reliance on exploitation and export of basic commodities.[10] In the case of agricultural commodities, the risk is even higher, since climatic and other factors affect even production, and impact industrial investment, as in the case of the Brazilian sugar industry. The challenge facing Latin America – and to a greater extent the Caribbean – is how to diversify and increase value-added production and trade.
This brings us to yet another salient feature of the economic relationship – Indian investment in LAC. Unlike the massive tsunami of Chinese investment, the Indian tide has risen gradually and is concentrated in select Latin American economies. The principal countries that have received Indian investment have been Brazil, Mexico, Chile, Colombia and, to a lesser extent, Peru and Argentina. Investments in Venezuela have focused on the hydrocarbon sector, while the massive Jindal Steel project in Bolivia was a fiasco, due to a hard line taken by the Bolivian government. Some other ventures have also been abandoned, primarily for economic reasons, such as hydrocarbon concessions obtained by Reliance Industries Limited in Peru and Colombia; a steel plant proposed by Essar in Trinidad & Tobago.
The scene is repeated in India although on a smaller scale. Latin American companies such as Mexico’s Cinepolis (cinema multiplexes), Brazil’s Marcopolo (bus chassis), Gerdau (steel) and others are in the vanguard of a Latin American campaign to establish a presence in one of the fastest growing markets in the world. Latin Americans are also aware that India is open to the purchase of Brazilian Embraer jets for military and civil aviation; Brazilian manufactured coaches for the metro; Chilean wine; Colombian coffee blends and other sophisticated value-added products. An Argentine company recently won a contract to export equipment to India to manufacture radioisotopes.
The Pacific Alliance economies – Mexico, Colombia, Peru and Chile – are on their way to integrating their markets with the developed world. This will provide them access to investment, sophisticated markets, and an upgradation of standards in all aspects of business and logistics. While dependence on commodity exploitation and export will remain for some time to come, it is entirely possible that the benefits in future will go to countries such as China, or multinational enterprises with deep pockets and the drive to see projects to their logical and profitable conclusion.
India was welcomed as an observer by the Pacific Alliance in 2014, but shares this privilege with thirty-one other countries from the Americas, Europe and Asia! It has yet to articulate its interests and concerns within the context of this grouping, which is consolidating its economic and comercial linkages not just within, but even externally, with more dynamic partners.
There has been very little effort on the Indian side to convince Latin American enterprise of the benefits of investing and working in India. Although it is incumbent on Latin American businesses and establishments to understand and deal with the Indian reality, it is in India’s interest to facilitate their entry and performance. LAC companies, even their multinationals, may not possess the financial clout, nor the technology of their counterparts in more developed countries. But their desire for a stake in India can redound to the benefit of the Indian economy. This will create the necessary goodwill in India’s favour, within circles that are gaining access to the centres of power in that region, and expose Indian business to potentially useful allies in the future.