Foreign Correspondence

[Amaunet]

China positioning for Cuban transition



"China appears to be interested in doing business in this hemisphere but there is no economy in Cuba to speak of," said the official, who asked not to be identified. "Our guess is that the Chinese, too, appear to be positioning themselves for the inevitable transition. One would be a fool to invest in Cuba for any other reason."

-Am

China's Cuba investments indicate growing influence in region

By GARY MARX

Chicago Tribune

Posted on Mon, Dec. 20, 2004


HAVANA - In his first visit to Cuba, Chinese President Hu Jintao lent strong political support to this besieged nation but also came bearing gifts, including $500 million for a new nickel plant and $15 million for education, health and other areas.

Hu even pledged late last month to finance the manufacture of 1 million television sets on the island.

Experts say the Chinese investments could undercut the Bush administration's efforts to isolate Cuba and symbolize China's growing influence throughout Latin America, a region long known as America's back yard but increasingly ignored by U.S. policy-makers.

Overall, Hu signed investment deals worth more than $30 billion during his 12-day swing last month through a region eager to diversify its ties away from the United States and kick-start its nations' struggling economies with fresh capital.

"There are a lot of things happening in the region that the U.S. is not involved in and don't really seem to care," said Riordan Roett, director of the Western Hemisphere Studies program at Johns Hopkins University's School of Advanced International Studies. "China is a marvelous fit."

So far, President Bush has expressed little concern about China's growing links to a region where the United States remains far and away the largest trading partner.

One U.S. official also dismissed the importance of Hu's trip to Cuba. "There seemed to be lots of agreements," the official said, "but they did not add up to much."

"China appears to be interested in doing business in this hemisphere but there is no economy in Cuba to speak of," said the official, who asked not to be identified. "Our guess is that the Chinese, too, appear to be positioning themselves for the inevitable transition. One would be a fool to invest in Cuba for any other reason."

Peter Hakim, president of the Inter-American Dialogue, a think tank in Washington, said he expects China to proceed cautiously in a region marred by instability despite the optimism generated by Hu's trip.

Nonetheless, Hakim added, "That doesn't mean China is not going to be a major player. It just means that its not going to happen as quick as first indicated."

In Cuba, the Chinese-backed nickel operation will boost production of one of the nation's most important industries and pump tens of millions of dollars annually into the island's moribund economy.

These funds combined with the recent rapprochement between Cuba and the European Union could weaken U.S. efforts to topple President Fidel Castro's government by tightening the four-decade-old trade embargo.

"There is no question that the more foreign exchange Cuba earns the more detrimental it is for the Bush administration," said John Kavulich, president of the U.S.-Cuba Trade and Economic Council. "Clearly, Cuba potentially gaining foreign exchange revenue from nickel is important."

On one level, China's increasing involvement in Latin America is strictly economic. With a surging economy, China is scouring the globe for new markets, trade opportunities and places where it can park its huge cash reserves.

China is specifically looking to Latin America for a steady supply of copper, bauxite, iron ore, oil and other raw materials for its industries, along with soybeans, grains, chicken and other commodities.

In return, Latin America needs Chinese capital to help its nations' economies emerge from recession and to finance costly road, rail and other infrastructure improvements.

As the world's most populous nation, China also represents a huge potential market for Latin American farmers and other exporters, though some Latin American manufacturers fear competition from their lower-cost Chinese counterparts.

Trade between China and Latin America doubled last year to almost $27 billion.

"China's size, fast growth, external openness and trade performance is being felt everywhere in Latin America," the Inter-American Development Bank wrote in an October report.

In Chile, President Ricardo Lagos and Hu announced the start of formal negotiations to secure a bilateral free trade agreement. The two nations agreed to negotiate a deal that would send large quantities of Chilean cooper to China while also securing Chinese financing for new copper mining projects.

In Argentina, the Chinese president signed cooperation deals that could see up to $20 billion in investments over the next decade primarily in railways, oil and gas exploration, and construction projects.

The linchpin of Hu's trip was Brazil, South America's economic and political powerhouse. In addition to offering up to $7 billion in investments in Brazilian ports and railways, Hu said he hoped trade between the two nations would double within three years and pledged wider access for Brazilian goods to China's market.

China is Brazil's third-largest trading partner and Argentina's fourth-largest.

"Sino-Latin American co-operation is facing an unprecedented historical opportunity," Hu told Brazilian legislators. "We should seize it and work side-by-side to push this friendly co-operations towards continuous progress."

But experts say China's aggressive steps into Latin America also contain a political component. China insists that any nation it does business with adopt a "one-China policy" recognizing that Taiwan remains part of China and has no right to conduct foreign relations.

China also is nurturing alliances with many developing countries to solidify its position in the World Trade Organization, flex its muscles on the world stage and act as a counterbalance to U.S. power.

Hu found a receptive audience in Latin America, where Bush, the Iraq war and a perceived unilateralist U.S. foreign policy are unpopular. Resentment also lingers over the failure of neo-liberal economic reforms championed by Washington to alleviate chronic unemployment and poverty.

Bush's main initiative in the region - a hemispheric free-trade accord - also has stalled amid a broader battle between developing nations and the U.S. and Europe over subsidies and other farm trade issues.

"There is a general souring of relations between the U.S. and Latin America," Hakim said.

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