free market at work
great power competition
I received a relatively last minute invitation Tuesday to speak on a panel today. The topic is great power competition. The audience is U.S. military attachés who advance our interests around the world through strengthening defense cooperation. Of course I said yes, even though I hate driving home through Friday afternoon traffic.
Of course adding a speaker on Latin America was last minute. None of the attachés I will address today are actually stationed in the region.
We still treat Latin America as an extension of ourselves yet the region is now more likely to turn to new found Chinese and occasionally Russian or Iranian visitors than they are the United States for ties. This is neither a response to any particular Republican nor Democratic administration but to the generalized U.S. attitude towards an area we proclaimed eighty years ago, through founding of the Organization of American States, mattered a great deal to us. Did you know the Rio Treaty of 1947 predates NATO as our first regional mutual defense accord by two years? No accident, my friends.
We are seeing the reality of the free market working in an unanticipated manner. You likely think I am insane but let’s see how relationships with great powers look to Latin America. Latin America is choosing China to meet its interests.
This vast region is still replete with many natural resources running from copper (Chile produces 27% of the global output, for example) to lithium to gold to bauxite among a long list. The Economist opined the region has a natural (pun intended) advantage for the heart of the new global green revolution, a movement about which we remain ambiguous. Xi Jinping avows China will lead that revolution. Until that revolution is over, Venezuela, Ecuador, and Peru export petroleum while Brazil excels at deep sea (think South China Sea, perhaps) exploration.
Brazil is a major source of soybeans, vital to China’s diet. Argentina and Brazil rival the United States, Canada and Australia for wheat production. Chilean salmon is prized.
Why, therefore, are we surprised that leaders in the region overwhelmingly welcome relations with China? What part should surprise us of the mutual benefit of LatAm states selling extractive resources in exchange for cash, trade preferences, and investment deals? Isn’t that how we explain the advantages of laizzez-faire economics over state-driven systems? Doesn’t our economic system encourage precisely this type of complementarity?
Americans have long believed this region ought hue to what we see as a “special relationship” based on geography and colonial histories. Various nods to a hemispheric system, whether the Pan American version of John Hay in the late nineteenth century, or the Inter-American system of the Cold War built on the Rio Treaty of 1947 and the Organization of American States, or the post-Cold War “Washington Consensus” emphasizing market tools, were our periodic foci on the region. But they are swept away by our determination to control the region’s choices.
China, in particular, began creating ties in Latin America just after the turn of the millennium. At that point, the United States was knee deep in Afghanistan, then Iraq. Our sole seeming concern about the region was the ending the devastating drug trade born of decades’ long chaos in Colombia, a nation for whom we sent much aid, military assistance, and hope. While Colombia has so far successfully navigated its deep internal challenges, we paid virtually no heed to the upheavals and progressive growth of poverty in Argentina as it suffered through one of the many economic-turned-political traumas of five presidents in five days in 2001.
China focused on economic benefitss, initially concentrating efforts on Hugo Chávez Frías’s decidedly anti-yanqui Venezuela. As Beijing began working to find sources of petroleum for long term contracts, even the incompatible Venezuelan crude offered the potential energy independence resulting from future technological developments. Caracas, in turn, welcomed Beijing’s loans so desperately needed en lieu of Washington’s support. Venezuela was perhaps the earliest victim of China’s “debt” policies so condemned today but also illustrated that these ties were two way. China became enmeshed in an increasingly isolated and precarious political system, a worry to some in the Chinese system.
Hu Jintao made what I called at the time a “rock star” visit through the region in November 2004, coincident with a trip by then-president George W. Bush, as both attended an APEC conclave. Hu drew huge crowds as an Asian novelty as well as a man bringing an expanding cheque book as China’s economy grew. Bush, understandably absorbed by other parts of the world, appeared remote, stopping only in Cartagena for talks with his Colombian counterpart on a remote (thus safe) island. The contrast was dramatic and noted.
China gradually deepened ties with every state in the region except Paraguay, Haiti and Guatemala, all of whom retain diplomatic relations with Taiwan. China buys natural resources and food stuffs, the latter of which Brazil and Argentina particularly excel in producing. Taiwan clings to these tiny markets and ties but one must wonder for how long. Beijing’s options must appeal to many in these three societies.
The CCP is remarkably able to ignore internal disparities and tensions transactional relationships rather than something vaguely ideological basis. Xi advocates a better world but that really means for China as he continues the eight decade policy of non-intervention in the affairs of sovereign countries. While Latin American states joined the Belt & Road Initiative as it looped itself around the globe, Beijing managed to remain above the political debates in these countries. As long as Chinese citizens are unharmed and China can continue purchasing resources to assure its economic machine advances, even if at a sputtering pace of late, the ties deepen. It would be nice to have countries repay loans but not always a mandate, it would appear.
Washington periodically awakens to China’s Latin American forays but takes few steps to incentivize Latin capitals ejecting Chinese activities. While we have improved on filling of ambassadorships over the past few years (currently I find only Colombia, Bolivia, and the Dominican Republic without formal representation since we have not seated anyone in Caracas or Havana for ages), our primary interlocutor within the region remains the Southern Command leader. General Laura Richardson, rotating out after a relatively successful three year tour, was a visible presence but that is far from sufficient if we want to assure Latin America that we are committed to the region and a viable long-term partner instead of Beijing.
In fact, we appear to continue seeing the value of Latin America only when Beijing, Moscow, or Teheran arrive on the scene. At least that is how our neighbors see our sporadic attention. Note Javier Milei, upon taking office in Buenos Aires, assured his countrymen and women he would not embrace Chinese ties but is softening on that pledge. We need sustained visits by senior officials regularly, not because there is a crisis.
Latin Americans read newspapers, hear our briefings, and know two things about us that we apparently forget. One, our priority since the Clinton administration was to increase our footprint and embrace of Asia, from India to the east; that is not Latin America, my friends and they know we are not as concerned about their future. That is cold, hard realpolitik. I understand why but we should recognize that is not a cost-free choice when it comes to anxiety about China moving into areas where we seem absent. Our attention is on containing China in the its Asian base, thus sending unintended signals that we don’t care what they do elsewhere since we assume the Belt & Road is a cynical ploy to entrap others not able to see the light. For those on the receiving end, the Belt & Road is an important source of aid, sales, and trade. Statements have consequences as do actions. It is offering something we are not.
We waver on that commitment to Asia when other critical threats concern us. Our attention on Ukraine and now the Israeli-Palestinian-Iranian conflict shows that while we declare a rebalance to Asia, we actually respond to other challenges when we see them undermining our allies. But that again is not interest in what is going on, successfully or dangerously, south of us.
An array of us talk about invasions of this country, often citing Hispanics as “rapists and murderers” while we often (but never entirely) welcome non-Hispanics fleeing poor conditions in their homelands. The message is bleak for these nations (including those like Argentina and Colombia which we call “major non-NATO allies” but don’t seem to care much about) as we debate how to keep them out of our country. Mexico is seen in the region as an extension of the United States but certainly not so in our political dialogue. Do we honestly think the region doesn’t internalize this?
Our ability to alter this state of affairs is relatively simple but the simple is often the hardest. We need genuine, sustained engagement by highest level officials as well as the workerbee level if we seek to displace China as the partner of choice in this region. That is not the job of the attachés I might meet this afternoon; it has to be a national level decision we appear far from making.
But arguing to this region, where they see engagements as a zero-sum in our worldwide priorities, that they shouldn’t have such strong links with China makes us look disingenuous. Shared links between us and the states of this region are much more logical than ties between them with China. Geography alone makes that abundantly clear. But, religion, a stronger commitment to participatory politics, and shared social values are important to this region so they could offer incentives to strengthen ties with us. Our ambivalence to acknowledging and addressing global warming and our determination to keep out immigrants not so much. But this will take work on our part rather than presuming shared thinking. We now have ample evidence that thinking is not shared in practice as this region is one of Chinese involvement in many ways.
Wishful thinking won’t substitute for actions. We have work to do if that is our goal. I am just not sure most Americans see things that way nor realize that actions and inactions have consequences. The market reacts to these things, after all.
Thank you for taking time to read Actions today. I welcome your observations and any other thoughts. Thank you to the subscribers and those of you who read this regularly. Please feel free to circulate as it might be of interest to others.
We had some sea smoke this morning.
Be well and be safe. FIN
“Latin America could become this century’s commodity superpower”, Theeconomist.org, 8 August 2023
“Tracker: Current U.S. Ambassadors “, The American Foreign Service Association, at https://afsa.org/list-ambassadorial-appointments
NO question we make it so much harder than they do. NO doubt. Thank you for this opportunity before risk. Great point.
“Latin America is choosing China to meet its interests.” Assumption (mine)…China comes with lots of money and very few (if any) strings attached other than maybe wanting to build a road or a port or both in order to get minerals and other natural resources out of the host country and back to theirs.
During a presentation in February 2021, Aubry Hruby (nonresident senior fellow w/ the Atlantic Council) provided some commentary regarding China’s expansion / interest on the African continent which I again assume tracks as their standard operating procedure. What stuck with me from that presentation was her assertion: “China looks at opportunity first not risk. The U.S. looks at risk first vs. opportunity.” She indicated that when China “moves into” an area, they start with transportation infrastructure first (roads, bridges, ports, airports)...all the mechanisms to move resources. They follow with communication efforts. She indicated that China is extremely responsive once the contract is agree upon, i.e., they show up, work fast and stay until the work is done.
One article I found relevant to China’s footprint in their Belt & Road initiative indicated:
“…development often expands human movement and economic activity into new areas, which can promote deforestation, illegal wildlife trafficking and the spread of invasive species. Past initiatives have also sparked conflict by infringing on Indigenous lands. These projects were often approved without the recognition or consent of local Indigenous communities. ….We found that more than 60% of China’s development projects present some risk to wildlife or Indigenous communities.”
~ https://theconversation.com/china-is-financing-infrastructure-projects-around-the-world-many-could-harm-nature-and-indigenous-communities-168060
I wonder if the promise of new infrastructure and the money China brings to the table for these projects and resources outweigh the host country’s concern about disruption and/or destruction (short or long-term)?
Having lived in Qatar for a year, I noted that just about all of Qatar’s building and expansion work is done by imported labor from India, Pakistan and other countries in that area. Local Qataris almost never were involved in the building trades. The conditions for these workers were abysmal with many living in work-camps that became epicenters for crime, drugs (even in a Muslim country that outlaws drug trafficking on penalty of death) and other humanitarian concerns. That makes me wonder where Latin America countries and China stand on division of labor work-force for their overseas projects. Do they bring all their own Chinese labor with them. Or, do they utilize local labor and thereby help the local economy by providing jobs? One article that addresses this is from The Internationalist from July 2021, again, referencing China’s Belts and Roads program.
The article states: “The governments and populations of host countries usually seek to increase the proportion of local hires on such projects, to increase local income and skills transfer. Chinese firms, however, seek to keep labor costs down while accommodating Beijing’s political preferences. This often results in their importing Chinese labor for BRI projects rather than relying on local workers. Railroads in Laos and pipelines in Myanmar, for instance, have been reportedly constructed with a predominantly Chinese labor force.”
~ https://www.cfr.org/blog/who-built-labor-and-belt-and-road-initiative
So with these potential “negatives” associated with Chinese expansion into Latin America, why are those countries more prone to say “yes” vs. requiring more control over their own projects and exporting of resources? Is it that China makes it easier than the U.S. which requires much more stringent adherence to labor practices, concern with human rights violations, environmental protection while also taking longer to reach agreements and completing projects once contracts are accepted?