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China's Involvement in Latin America

Lessons for India

Deepak Bhojwani ( served in the Indian Foreign Service, and was India’s ambassador to seven Latin American countries, including Venezuela, Colombia and Cuba.

China's relations with Latin America and the Caribbean have grown enormously in recent years, built on the back of carefully implemented policies. Extensive funding, technical and strategic assistance to friendly regimes guarantees China staunch political support in a region that has begun to assert its independence from the United States. India lags in its approach to the region; it needs a vision and a strategy for LAC it does not have.

China’s recorded links to Latin America and the Caribbean (LAC) can be traced back to the 16th century. The “silk road of the sea” saw 20 to 60 ships sail between China’s coastal regions and Mexico’s Acapulco every year, exchanging silk, cotton, jewellery and gunpowder for shoes, olive oil and wine (Romero 2010).

Chinese labour flowed in the 19th century to Peru, Brazil, Argentina, Chile, Nicaragua and Panama. By 1920, 26,000 Chinese comprised the largest immigrant group in Mexico, second only to natives of Spain (McAnarney 2012). Significant Chinese communities exist in Peru, Brazil, Nicaragua and Panama.

India’s association with LAC was more recent. In the 19th century, the British, French and Dutch sent labourers from India to work on the plantations in Trinidad and Tobago, Guyana, Suriname and other colonies. More recent migration has been relatively scarce (Bhojwani 2015: Chapter VIII).

The Chinese diaspora in LAC engendered more durable economic ties, although India established diplomatic ties with the region much earlier than communist China. India’s multilateral diplomacy through the Non-Aligned Movement, the New Economic Order, G-77, etc, echoed in LAC, albeit with a time lag in most cases.

Political Relations

By the 1980s, China had established diplomatic relations with most major states in the region. China today maintains embassies in 21 of the 22 states that recognise it (11 recognise Taiwan) in LAC. India has diplomatic relations with all 33 states of LAC, but only 14 embassies.

High-level diplomacy in this century has bolstered China’s presence. Presidents Jiang Zemin and Hu Jintao visited several LAC countries between 2001 and 2005. Investments worth $30 billion were committed and 400 accords signed (Bhojwani 2015: 95). This decade has seen two presidential and two prime ministerial visits from China to Brazil, Argentina, Mexico, Venezuela and Cuba, apart from some smaller countries. Far more visits at this level have taken place from LAC to China.

Four landmarks may be identified in the relationship between China and LAC in this century:

(i) “Policy Paper on Latin America and the Caribbean,” published by the Government of China in November 2008 (Chinese Government 2008) outlining various aspects of China’s policy and relations with LAC. It declares: “China is ready to establish and develop state-to-state relations with all Latin American and Caribbean countries based on the one China principle.”

(ii) Premier Wen Jiabao’s proposal to strengthen political, economic and cooperation relations between China and LAC in June 2012.

(iii) The “1+3+6” outline for cooperation, presented in July 2014 by President Xi Jinping at the first Summit of Leaders of China and the Community of Latin American and Caribbean States (CELAC, which was formalised in 2011), in Brasilia. This was elaborated by Li Keqiang in 2015 as the 3×3 model. The first “3” focuses on the sectors of logistics, energy and information technology. The second “3” comprises interaction between businesses, society and government. The third “3” refers to expansion of the financing channels of funds, credit and insurance (Chinese Government 2015).

(iv) The Cooperation Plan 2015–19 between the member states of CELAC and China, and the Institutional Arrangements and Operating Rules of the CELAC–China Forum, adopted in Beijing in January 2015. This document projects that “China will invite 1,000 political leaders of CELAC countries to visit China in the next five years” (China CELAC 2015).

Economic Strategy and Exchanges

The 3×3 model focuses intensely on infrastructure. Chinese companies are involved in prestigious projects all over the region. In 2014, Nicaragua contracted a Chinese consortium to build an inter-oceanic canal cutting through the central American isthmus, with a projected investment of $50 billion. The massive Coca Codo Sinclair hydroelectric project in Ecuador, and the Atlantic–Pacific railway to link Brazilian and Peruvian ports across the South American continent, are to be financed and executed by Chinese companies.

The state-to-state approach enables China to obtain advantageous terms for Chinese companies, particularly in the left-leaning states of the Bolivarian Alliance for the Americas (ALBA–Cuba, Venezuela, Ecuador, Nicaragua, Bolivia and four smaller Caribbean states) which are more politically driven.  China’s centralised control over its ministries, banks and companies enables it to secure and execute projects without delay or cumbersome procedures.1

India’s engagement with LAC is based on commercial considerations, driven mainly by the private sector. The complementary nature of the economies is similar to the Chinese case. The enormous Indian market suits a region geared to exploit its natural wealth. The global reduction in demand can be compensated by, and provide new markets for, the only big emerging market growing at over 7% annually.


According to the UN Economic Commission for Latin America and the Caribbean (ECLAC), between 2000 and 2014 bilateral trade between LAC and China expanded 22 times (ECLAC 2015). China is now the second biggest trading partner of the region and the first of Chile and Brazil. It is LAC’s second largest source of imports and third largest export destination. The declared aim is to raise the bilateral trade to $500 billion by 2025.

Bilateral trade, which in 2013 peaked at $274 billion, fell to $269 billion in 2014. China had a trade surplus of almost $90 billion.2 In the first semester of 2015, LAC exports to China at $40.58 billion fell 24.2% over the previous year’s $53.55 billion. In the same period, exports from China to LAC grew 2.7% to $82.6 billion from $80.46 billion the previous year.3

According to ministry of commerce data, trade between India and LAC in 2014–15 (April–March) at $45.11 billion was short of the peak $46.67 billion in 2012–13, but dwarfed the $1.6 billion of 2000–01. India has run a trade deficit with LAC over the past decade—$16.5 billion in 2014–15.

Primary and semi-processed commodities account for two-thirds to three-fourths of the region’s exports to China and India. In the case of imports, low-, medium- and high-technology manufactures account for the bulk, reinforcing the model of commodities for manufactures. India’s presence, however, includes an important element of services, principally software.


ECLAC estimates that in the two decades prior to 2010, the region’s foreign direct investment (FDI) from China was $7 billion. Subsequently, Chinese FDI has been estimated at $9–$10 billion annually, almost 6% of the region’s total inward FDI.4 In January 2015, CELAC and China agreed to a mutual investment stock target of at least $250 billion by 2025.

A study by the Inter-American Development Bank (BID) revealed that LAC investment in China between 2002 and 2012 amounted to a mere $917 million (IADB 2014). Several LAC companies have established a presence in China only to channelise imports from there.

According to the Washington DC based Inter-American Dialogue, China’s Development Bank and Export-Import Bank have provided approximately $119 billion in finance to the region since 2005, mostly for exploitation of hydrocarbons and mining in Argentina, Venezuela, Brazil, Colombia, Ecuador and Peru.5 Chinese credit and investment in ALBA countries since 2005, through deals in which the state plays a leading role, have accounted for 75% of this amount.

Ten percent of China’s total crude imports came from Latin America in 2013. Much of this oil was already hypothecated against Chinese loans to Venezuela, Ecuador and Brazil. China’s involvement in trans-regional infrastructure could eventually carry more energy resources to Pacific ports.

Investments between India and LAC have built up steadily. A recent study by the Federation of Indian Chambers of Commerce and Industry (FICCI) reveals that FDI by Latin America in India in the period 2003–13 amounted to $2.68 billion or 0.8% of the overseas FDI of that region, and 1.0% of the total FDI received by India in that period. Indian FDI in Latin America in the same period amounted to $8.4 billion or 7.4% of India’s total FDI outflow, but only 0.7% of Latin America’s FDI inflow.

Some Indian public and private sector oil investments have been viable, even profitable. Political and financial factors have affected others. The abandoned $2 billion Jindal steel project in Bolivia was the most prominent failure. Shree Renuka Sugars has faced problems in Brazil and seeks to disinvest at least part of its $600 million stake. Others include the abandoned ESSAR steel plant in Trinidad, oil concessions in Colombia and Peru (Reliance), and Cuba and Trinidad (ONGC).

India’s private sector has set up or acquired manufacturing units in pharmaceuticals, automobiles, metallurgy and other industries to cater to regional and international demand. China’s state-driven investment has focused on Chinese priorities. Chinese investments in LAC may not all be profitable, but they are sustained by political determination and deep pockets of the Chinese state.

Comparison and Contrast

China and India are important markets for LAC resources and sources of viable and relevant technologies, in areas such as renewable energy, pharmaceuticals, automobiles, communications, software, etc. Latin Americans admire oriental cultures. They are not intrusive nor overtly judgmental. This has helped establish solid political relations and promote economic and cultural ties.

There is however an undeniable difference in the reality, and even perceptions of India and China within LAC:

(i) The sheer scale of Chinese presence dwarfs that of India, whose engagement has been selective and cautious.

(ii) The Chinese establishment has evolved and articulated a well-defined strategy to pursue its interests in that region. India has still to do so.

(iii) China’s interaction with LAC has been elevated to the highest level, through regular visits, and CELAC–China Summits. India’s interaction with CELAC has been sporadic, only at the level of foreign ministers. High level visits, mostly from LAC to India, have delivered comparatively scant results.

(iv) Chinese investment in LAC today challenges that of the US and Europe. Indian investment is marginal by comparison.

(v) China’s trade with LAC is over five times that of India’s, and growing faster. China has free trade agreements with Chile, Peru and Costa Rica. India only has partial tariff reduction agreements with Chile and four members of MERCOSUR.

(vi) Chinese financial institutions have helped Chinese companies gain a foothold and a reputation in that region. China’s lending to LAC is not subject to any policy prescriptions. It has lent more in recent years to LAC than the World Bank and BID combined. India’s combined development assistance and project loans to LAC, well below 500 million dollars, pales in comparison to its own assistance to Africa.

(vii) The growing strength of the Renmimbi in international finance, and its prospects as a reserve currency, will be another factor in China’s favour in the coming years.

(viii) China has undertaken strategic exchanges in the areas of defence (Bolivia, Peru, Ecuador, Argentina, Venezuela), outer space and aviation (Brazil, Argentina) and other areas with some LAC countries. It has convened multilateral defence-related meetings with LAC countries in 2012, 2014 and 2015 (China Military Online 2015). India’s strategic engagement accounts for purchase of some Brazilian aircraft and sale of seven Dhruv helicopters to Ecuador in 2008, a contract which was cancelled in 2015.

(ix) China is projecting its soft power aggressively in LAC. Of India’s five cultural centres in the region, three are in the diaspora-rich Trinidad & Tobago, Guyana and Suriname. Only two—Brazil and Mexico—are in Latin America.

Lessons for India

Ever since its creation, the People’s Republic of China has assiduously implemented declared policies. Its doctrine of a peaceful rise has challenged the established powers, even as it has sought to allay their apprehensions, with varying degrees of success.

Though China’s engagement with Africa, primarily through the Forum on China–Africa Cooperation (FOCAC) is greater, LAC is not too far behind. Economic relations are frequently conditioned by political imperatives. Extensive funding, technical and strategic assistance to friendly regimes, such as the ALBA grouping, guarantees China staunch political support in a region that has begun to assert its independence from the US. Its financial clout and market attracts even hitherto unsympathetic regimes.

India needs a vision and a strategy for LAC. For the present, engagement is largely restricted to the official establishment headed by the Ministry of External Affairs, which is ill-equipped for the task. The business establishment functions independently, often without adequate awareness of the LAC politico-economic reality. Setbacks redound on the reputation of that region and its governments, which often are seen as overly protective or even uncooperative.

Lack of understanding and preparation are also reasons for the absence of a proper matrix in the form of agreements to protect investments, avoid double taxation, lower barriers to trade, promote connectivity, etc. The official establishment does not possess the human or technical resources to project and negotiate India’s interests adequately in that region. Meagre and uncommitted entrepreneurial presence makes it difficult to create friendly and influential lobbies on either side. Meanwhile important LAC countries are joining the Trans-Pacific Partnership and negotiating free trade agreements with other economies.

India cannot afford to over-extend itself in a region it does not adequately comprehend. Political vicissitudes in LAC have altered and will affect the political landscape in some countries, calling for course correction of intended policies and projects. China is highly leveraged through its loans and investments in the region, some of which are purely political. It may well have calculated the risks involved, and appears to have fine-tuned its political strategy. Its commitments have nevertheless increased LAC dependence and corresponding Chinese responsibility.

China probably faces more daunting barriers to its exports than does India. It is also geographically more distant. For historical and ideological reasons, it has to contend with suspicious official establishments in several LAC countries. Its growing presence and clout has provoked the US, Europe and Japan to reassert themselves in the region. India faces little or no resistance of this sort.

China disaggregates and deals with countries, subregional and regional organisations after acquiring an understanding of their priorities and expectations. It has subsumed the aggregate of its relations within the China–CELAC Summit forum. This helps it enunciate and project clear goals and methods, leaving no room for ambiguity nor vacillation on the part of its interlocutors.

If and when India evolves a strategy for LAC, it will need to undertake an official campaign at the highest level, with a focus of the sort that has been applied to its relations with South East Asia or Africa, to make up for lost time.


1 Myers, Margaret—InterAmerican Dialogue—

2 Statistics from ECLAC— All figures cited in this piece are in dollars.

3 Boletín Nº 7 Primer semestre 2015, Observatorio América Latina Asia Pacífico—ALADI, Montevideo Uruguay—

4 UN ECLAC March 2015.

5 Inter–American Dialogue—www.thedialogue .org.


Bhojwani, Deepak (2015): Latin America, the Caribbean and India: Promise and Challenge, Pentagon Press.

China CELAC (2015): China CELAC Forum Cooperation Plan (2015–19), 23 January.

China Military Online (2015): “China-Latin America Military Logistics Forum Kicks Off in Beijing,” China Military Online, 23 October.

Chinese Government (2008): “China’s Policy Paper on Latin America and the Caribbean,” Reports from China, Embassy of the People’s Republic of China in India, viewed on 5 November 2015, t521025.htm.

— (2015): “Premier Li Keqiang: Upgrade Practical Cooperation Between China and Latin America and the Caribbean under the ‘3×3’ Model,” Communique of the Chinese Foreign Ministry, 22 May, .

ECLAC (2015): “China Bets on Strategic Ties with Latin America and the Caribbean,” Press Release, 25 May,

IADB (2014): LAC Investment in China: A New Chapter in Latin America and the Caribbean-China Relations, Inter-American Development Bank.

McAnarney, Alex (2012): “A Very Long Engagement: 400 Years of Sino-Latin American Relations,” Fair Observer, 8 December.

Romero, Roberto Chao (2010): The History of the Chinese in Mexico 1882–1940, The University of Arizona Press.


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