China-CELAC Agreement Strengthens Already Strong Ties

October 13, 2016

The economic relations between China and the Community of Latin American and Caribbean States (CELAC) strengthened significantly as the two actors recently established a bilateral forum. This move will have substantial implications for development in Latin America as China has already promised USD 10 billion in credit to CELAC members and a USD 5 billion fund for Chinese-Latin American investments.1

CELAC is a regional bloc formed in 2011 by 33 countries of the Western Hemisphere, and that notoriously excludes the United States and Canada. CELAC was founded with the intention of reducing the impact of US influence in Latin America. Nicaragua’s President Daniel Ortega described the formation of the bloc as “the death sentence for the Monroe Doctrine.”2

So far, CELAC has made good on its intentions to reduce US interference. It has done so primarily by strengthening ties with China, most recently vis-à-vis the forum created with China this summer. At a summit meeting this July in Brazil, Chinese President Xi Jinping announced that, “the get-together of Chinese and Latin American leaders to discuss the blueprint for China-Latin American relations is a historical event.”3

While the event may certainly have been historic, China is well beyond the blueprinting stage with their plans regarding Latin America. Their aim is clear, to invest heavily in Latin American infrastructure and energy. The sums are staggering. Since 2005 China has provided more than USD 100 billion in loan commitments to Latin America. More so, in 2010 alone their USD 37 billion commitment was larger than that of the World Bank, Inter-American Development Bank, and U.S. Export-Import Bank combined. Of the USD 100 billion figure, over USD 80 billion has been dedicated to either infrastructure or energy.4

Not surprisingly, these loans vary dramatically in size depending on the country. For example, Venezuela, with some of the largest oil reserves in the world, has received 13 loans valued in total at over USD 50 billion. This figure is over half of the sum in loans China has given out over the last decade to Latin America. This should come as little shock as Venezuela and China have had significant relations since former President Hugo Chávez strengthened ties between the two nations. Other nations receiving large amounts in loans include Argentina (USD 14.1 billion), Brazil (USD 13.4 billion), and Ecuador (USD 9.9 billion).4

China’s heavy involvement in the region comes at a time when the United States presence has plateaued.  In a statement given to the US House of Representatives committee on Foreign Affairs this March, Michael Shifter, president of the Inter-American dialogue stated, “The US and Latin America have been moving in separate ways. The drift is a long-term trend: the direct consequence of globalization and, to a large extent, economic and political progress in Latin America.”5 While there are many explanations as to why U.S.-Latin American relations have stalled, it is apparent that US interventionist style strategy of the 20th century hindered more than helped foster strong ties with the region as a whole. The China-CELAC agreement is a clear indication that the region is looking to China now, and for future, for their development.

In the same address to Congress Shifter concluded, “US engagement should not be reduced in Latin America. Doing so would limit our ability to be helpful to our Central American and Caribbean friends in dealing with spreading criminality, which threats democratic governance and the rule of law.”5 It is unclear if the US will change course and try to improve relations and investment in the region. It is also uncertain how the colossal Chinese loans will affect Latin America’s future growth. However, the China-CELAC agreement does make it undeniable that relations between the two regions are becoming increasingly stronger. 


References:

1. Alex Erquicia. “China’s Ever-growing Presence in Latin America”. Available at:http://blogs.blouinnews.com/blouinbeatbusiness/2014/08/18/chinas-ever-growing-presence-in-latin-america/

2. Zolotoev, Timur. “Latin America unites in new bloc, US not invited”. Available at:http://rt.com/news/latin-america-celac-bloc-975/

3. Fan, Zhang. “Leaders Establish China-CELAC Forum”.  Available at:  http://usa.chinadaily.com.cn/epaper/2014-07/18/content_17839295.htm

4. Gallagher, Kevin P. and Amos Irwin (2013) "China-Latin America Finance Database." Inter-American Dialogue, Washington. Available at: http://thedialogue.org/map_list

5. Shifter, Michael. “US Disengagement from Latin America: Compromised Security and Economic Interests”. Available at: http://www.thedialogue.org/page.cfm?pageID=32&pubID=3552

6.http://www.opec.org/library/Annual%20Statistical%20Bulletin/interactive/current/FileZ/XL/T31.HTM

 
 

 

About Author(s)

Connor Weber
Connor Weber is an undergraduate senior at the University of Pittsburgh where he majors in Political Science along with a minor in Spanish and a certificate in Latin American studies. In the Spring of 2013 he studied abroad in Cuba for the semester as part of the program Pitt in Cuba. His time there greatly shaped his interest in U.S. foreign policy and U.S. & Latin American relations. He currently works as an intern for Panoramas and is eager to conduct research this summer in Costa Rica.