Latin America Drifts East -- Evo Morales Stakes Bolivia's Future on China

New America Media, News Analysis, Marcelo Ballv Posted: Jan 04, 2006

Editor's Note: Bolivia and other Latin American governments are using new ties and investment with China to gain greater political and economic independence from the United States.

BUENOS AIRES, Argentina--Evo Morales, a former coca farmer and Aymara Indian, is hoping Chinese capital will help him develop Bolivia's natural gas resources, which he has vowed to exploit for the benefit of the country's poor indigenous majority. In one of his first actions as Bolivia's president-elect, Morales skipped the United States and scheduled a two-day visit to Beijing.

To Latin American analysts, Morales's choice of China as he angles for investment is the latest evidence of a trend: The region, once firmly in the U.S. sphere of influence, is slowly but surely drifting East.

Andrs Oppenheimer, hemispheric affairs columnist for the Miami Herald and El Nuevo Herald, writes that 2005 will go down in history as "the year in which the United States lost much of its once almighty influence in Latin America, and (China) began to play a modest but rapidly growing role in hemispheric affairs."

Charles Shapiro, U.S. Deputy Assistant Secretary of State for the Andean Region, told a congressional committee that "China is an important new investor in the region as it searches for resources." He said China's imports from Latin America ($22 billion worth in 2004) are growing, increasing 16 percent in the first half of 2005 alone.

It may be too early to say that China is threatening to supplant U.S. influence in a region that Washington, D.C., has long treated as its own bailiwick. But as China's star rises, Latin America is increasingly looking to Beijing for guidance and investments.

China has become a blockbuster market for Latin America's mineral and agricultural exports-including Chilean copper, Argentine and Brazilian soybeans and the region's ores and gas resources. China also has demonstrated a desire to invest in infrastructure projects that Latin America needs to export more efficiently and reorient itself toward Asia.

China's interest in Bolivia is motivated by the desire to secure global natural gas resources. Morales, eager to exploit the second-largest natural gas reserves in Latin America, would welcome investors like the Chinese, who understand his desire for a partially nationalized energy sector and are willing not to meddle in Bolivia's internal affairs.

The Bolivian news blog MABB, written by economist Miguel A. Buitrago, notes that Asia's demand for natural gas will rise 220 percent by 2030, according to the World Energy Outlook Report. "This should have a direct impact on Bolivia," he writes, "whether Bolivians want it or not."

Buitrago continues: "The world's appetite for NG (natural gas) is insatiable and will devour anything that remotely resembles NG ... China alone is expected to drive that demand ... China has even been to Bolivia offering huge amounts of investments in order to secure much needed resources ... The challenge is whether Bolivians can take this opportunity and use their resources to achieve development."

In fact, when reporters asked Morales how he would confront U.S. displeasure with his policies, such as his desire to decriminalize the coca plant, he quickly snapped back that there were other governments willing to help him -- and immediately cited China.

In neighboring Argentina, booming soybean exports to China, nearly $2.5 billion dollars worth, helped it accumulate enough cash reserves to make a surprise move -- in the first days of 2006 Argentina paid off its $9 billion debt to the International Monetary Fund in one lump sum. This freed it from onerous economic prescriptions (often dictated by the United States, the IMF's dominant shareholder).

Brazil, Latin America's largest economy, is also aggressively pursuing the Chinese market.

"We've increased our exports to China a great deal in the last two years," Brazil's Minister of Planning, Ivan Ramalho, told the China's official Xinhua news agency in late 2005. Soybeans and iron still account for half of Brazil's exports to China, but some of Brazil's biggest industrial players -- including state-run aircraft manufacturer Embraer -- are establishing plants in China in partnership with Chinese entrepreneurs.

Of course not all is rosy in China-Latin American relations. The Mexican economy, tied to low-skill manufacturing, has suffered from Chinese competition. China take a huge share of all foreign investments, leaving other emerging markets like Latin America without important capital. Finally, there is the risk that by selling raw materials to a booming China, which processes them into finished products, Latin America will perpetuate its status as an underdeveloped, second-tier player in the world economy.

The Ciencia Maldita economics news blog in Argentina warns: "(Argentina) should not rest on its laurels, or rather, on its soybean shoots ... " Selling soybeans to booming markets like India and China is fine, he writes, but Argentina needs to use its soybean windfall to develop high-tech, high-value sectors like software to stay competitive in the long-run.

For now, the U.S. volume of trade and investment with Latin America, not to mention its cultural influence, still dwarfs Chinese involvement. But in the current political moment, China's ascendancy is offering a window for Latin American economies to at least marginally reduce their economic dependence on the United States, and enjoy greater political maneuverability as a result. For Bolivia's Morales, stronger ties to China may mean he can follow through with promises to suspend the drug war and nationalize the economy, over U.S. objections.

PNS Associate Editor Marcelo Ballv writes about Latin America and is a 2005 Inter American Press Association Scholar.


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