China and the return of the Left in Latin America
Global Times, 27 Jan 2022
The landslide election of Gabriel Boric as Chile's youngest president ever followed closely that of Xiomara Castro, Honduras´s (and Central America's) first female president. In their own way, each of these newly elected leaders reflects the powerful currents of change sweeping the region. After a hiatus of right-wing governments, the Left is also back in power in Peru and Bolivia, and, according to current polls, may elect Gustavo Petro to the presidency in Colombia in May, and Luiz Inacio Lula da Silva in Brazil in October. This represents a major change and opens new possibilities for the region's role in world affairs, as well as opportunities for its relations with China. Just as the "Pink Tide" of the 2000s was a reaction against the Washington Consensus, the current trend to oust incumbent rulers is a reaction against their incompetence in handling the twin challenges of the pandemic and the recession that hit the region in 2020.
In the nineties, observers, mesmerized by the supposed "end of history," concluded that people were, in Latin America and elsewhere, also at the end of ideology. Thus the Washington Consensus proclaimed "There is No Alternative" (TINA) to neoliberal solutions. Yet, the ostensible failure of radical market policies (most evidently in Juan Carlos Menem's Argentina, culminating in the country's sovereign default in 2000-2001), opened the doors to a different approach, with a "Pink Tide" washing across South and Central America.
Helped by the commodities boom (2003-2013), leaders like Lula in Brazil, the Kirchners in Argentina, Lagos and Bachelet in Chile, Vázquez and Mujica in Uruguay, as well as Correa in Ecuador and Morales in Bolivia, gave a new impetus to social and economic progress, however haphazardly and unevenly. They also worked together to build new regional schemes, in economic integration and in political cooperation, of which UNASUR and CELAC are the most prominent. That said, it is also true that the legacy of those years is mixed. Despite the increased inflow of foreign exchange from the export boom that took place, the region's low investment rate hardly budged, from 18 percent in the nineties to 19 percent in the 2000s, while the tertiary sector (i.e., manufacturing) shrank as a share of regional GDP, with a surge of extractive activities like mining and agriculture. The sad fate of UNASUR, which no longer exists, is also testimony to Latin America's troubles in establishing long-standing regional bodies. The telling inability to agree on a candidate for secretary-general of the organization contributed to its subsequent demise.
China's policy toward Latin America, of course, is based on the principles of state-to-state relations and non-interference in internal affairs. That said, it is important to understand how, in this new phase, China can best work with Latin American countries in fostering their growth and development. The 2000s were marked by growth in Sino-LAC trade and from 2010 onwards we saw a steady increase in Chinese FDI and finance flows, as well as a shift from investment exclusively in mining and extractive activities, towards physical and digital infrastructure, as well as energy. Although welcome, it should be complemented by incentivizing Sino-LAC joint ventures in manufacturing and adding value to the commodities which abound in the region, especially in South America. This would break new ground, and would also be in keeping with China's shift toward a service economy and away from heavy industry.
The case of lithium, the "white gold" of the new century, is emblematic in this regard. While the so-called "lithium triangle" in Argentina, Bolivia and Chile holds a significant amount of the world's lithium reserves, key to the e-mobility sector in which China leads, efforts to generate Chinese investment in the manufacturing of lithium batteries have not born fruit so far. This perpetuates a pattern in which South American countries export mostly commodities to China while importing manufactured products, accelerating the trend to what Castillo and Martins Neto have referred to as the "premature deindustrialization" of countries like Argentina, Brazil, and Chile. In Argentina, in 1950, 26 percent of the jobs were in industry, but fell to 10 percent in 2010; in Chile, they fell from 20 to 9 percent in the same period.
The new wave of progressive governments is much more aware than its predecessors of the need for industrial policies to foster development and growth. The dire predictions for the region's economic performance in 2022, when it is projected to grow a mere 3 percent, the lowest of any region, reflect not just the impact of the current crisis, but a broader failure. As the region enters a new political cycle, there is an opportunity to break out of the vicious circle of "boom and bust" that has led Latin America from one lost decade to another. In this, China and Chinese companies can and should play a significant role.
Jorge Heine is research professor at the Pardee School of Global Studies, Boston University, a Wilson Center global fellow in Washington D.C. and a non-resident senior research fellow at the Center for China and Globalization (CCG) in Beijing.
Edward and Auriol Greene Directors, GOFAD.