Chinese Premier Li Keqiang arrived Monday in South America, where China is announcing a massive amount of investment and trade deals.
Brazil was the first stop on Chinese premier Li’s tour of Latin America, his first visit to the region since he assumed the premiership in 2013. China has already announced $50 billion in deals with South America, and this time they focus largely on infrastructure projects.
According to Matt Ferchen of the Beijing-based Carnegie Tsinghua Center for Global Policy, the shift away from procuring commodities represents a new model for Sino-Latin American relations.
“China faces the same hurdles with the Asia Infrastructure Investment Bank and the new Silk Road, it’s not just that their stuff is needed, it’s that it’s in developing countries where it has been historically difficult to get these projects off the ground," he said. "But especially with the end of the commodities boom I think it’s all the more apparent that China and Latin America need a new model of cooperation, so I think this is one of them they are revisiting.”
Over the last several years, China has provided more loans to Latin America than the World Bank and Inter-American Development Bank. Most of those loans have been for oil. As China shifts its economy from manufacturing to consumption, demand for commodities in South America has dropped. Economic growth on the continent has slowed partly as a result.
According to the International Monetary Fund, Latin American growth is expected to dip below one percent this year, making the region a prime place for investment. China is responding with financing and plans for massive infrastructure projects, including a Twin Ocean Railroad linking Peru to Brazil.
“Infrastructure investment is welcome, but it is crucial to determine where and how this investment will be done," said Rebecca Ray, a research fellow at Boston University’s Global Economic Governance Initiative. "A project that [should] take five years can take ten or fifteen years if it’s not done right and social conflict [increases] because of poor management ... or lack of consultation with indigenous communities.”
Local environmental degradation will also be a key concern for future Chinese infrastructure projects. China is the top destination for South American exports such as petroleum, copper, iron ore, tin and soybeans, whose extraction and cultivation has already exacted a hefty environmental toll in Latin American countries.
China’s engagement with the continent strengthens its ties to the western hemisphere, raising fears among some that China poses a geopolitical threat to the United States in its own neighborhood.
“The Chinese government is aware certainly that what it is doing will cause concern in Washington, D.C.," said Xiaohe Cheng, a professor of international relations at Renmin University. "So on the one hand, the Chinese government has conducted consultations with the United States in recent years, on the other hand the Chinese government as a big power, on these points, does not necessarily need to consult with the U.S.”
In January President Xi Jinping said trade with Latin America would rise to $500 billion in the next decade. Li will also visit Colombia, Peru and Chile.