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Economy: South America as China's New Backyard

Economy: South America as China's New Backyard

As a afflicted continent, Latin America has always been a puppet of geopolitical powers – first Europe, then the United States, and now China. The raw materials captured from European colonial territories then fueled Europe's economic progress. “One could say they made it possible,” Uruguayan writer Eduardo Galeano wrote in his book The Open Veins of Latin America.

In the nineteenth and twentieth centuries, the United States replaced Europe and imposed its economic policy interests in the “backyard” of Latin America as part of the “Monroe Doctrine.” For nearly twenty years, the People's Republic of China has been steadily expanding its influence in Latin America. It has already replaced the USA in South America as the top trading partner, and in Latin America it is right behind.

Tamara Seal

“Cerro Rico” in Potosi, Bolivia – to this day a symbol of the wealth of exploited raw materials in South America

Trade with China: “The Story Continues”

Anna Preiser, an expert in international politics at the University of Vienna with a focus on the political environment and Latin America who is currently based in Lima, Peru, sees close trade ties with China as a continuation of Latin America’s history. As China’s economic growth began in the early 2000s, demand for raw materials also rose sharply—and since then, a huge influx of Chinese capital has flowed into Latin America, particularly in extractive sectors such as mining and oil production.

“In recent years, China has also begun to invest in road construction, in infrastructure projects, in telecommunications, and in the energy sector,” says Preiser. For example, a Chinese company controls 100% of Lima's electricity grid.

Meeting with Huawei and China Railway Construction Corporation

A look at the Peruvian president’s schedule seems to confirm China’s great economic and political power in Latin America: Accompanied by the ministers of economy, foreign affairs, construction, transport and communications, she will meet with representatives from Huawei, COSCO Shipping and the China Railway Construction Corporation (CRCC) and will deliver a keynote speech on “investment opportunities in Peru,” as the online news platform Infobae recently reported.

port

Tamara Seal

Port of Valparaiso, Chile – Here too China is the most important import partner

Megaport as a showcase project

Infobae also wrote that the “flagship project” of bilateral trade relations between Peru and China is currently the mega project of the port of Chancay in northern Lima. Although there is a legal dispute over exclusive rights to the business, Hong Kong-based Cosco Shipping Ports plans to open by the end of the year.

Silk Road in Latin America

China announced the “New Silk Road” in 2013. The People's Republic grants loans to other countries around the world, thus securing political and economic advantages. According to the Council on Foreign Relations, 21 Latin American countries are already part of it.

The port is set to become a major trade route between Asia and South America, with COSCO’s initial investment totaling $1.3 billion. According to a study by the US Council on Foreign Relations, China is already involved in more than 40 port projects in Latin America.

However, the United States and the European Union are concerned about Chinese interference. However, for Latin American countries, investments would allow more “room to work and negotiate” with imperialist powers, said Breiser. Ultimately, Peru could use China to exert geopolitical pressure on the United States and hope to attract more investment.

Workers in front of the tunnel.  Above it are signs in Chinese characters, including one in Spanish

APA/AFP/Ernesto Benavides

The huge port in Chancay, Peru, aims to bring Asia and South America closer together

Latin America returns to the “role of raw material supplier”

In the context of its proclaimed “South-South cooperation,” China claims to be a partner of solidarity, a partner that wants to allow its partners to participate in and promote development, but in reality it is not at an equivalent hierarchical level.

In the end, Latin American countries will eventually be forced to return to the role of suppliers of raw materials and manufacturing operations will be blocked, Preiser analyzes. Moreover: “If you look at the trade between China and Peru, Peru mainly sells raw materials to China, but then buys, for example, mobile phones from China, that is, additional manufactured products. This means that there will be this trade that is not Equal again.”

lagoon

Tamara Seal

While ceramics, silk and spices were once sought-after trade goods, now demand is for raw materials such as lithium. The world's largest deposits are said to lie here beneath the salt lakes of Uyuni, Bolivia.

Energy transition at the expense of the global south

The expert predicts that this development will continue in the future. With the energy transition, the demand for raw materials is increasing dramatically: “If we want everything to be green, we will need more metals. Demand for copper, for example, is expected to increase by 50 percent by 2040. Demand for lithium will also increase significantly. “The question naturally arises: who will actually have access to these raw materials?” says Preser, who is currently analyzing environmental policy developments in the mining sector in Peru as part of her doctoral thesis.

According to a report by the American think tank CFR, the China Development Bank has made significant investments in renewable energy. Latin America's largest solar power plant in Jujuy, Argentina, and a wind farm in Coquimbo, Chile, were built with the bank's money.

The road in the Amazon region

Tamara Seal

Critics complain that Chinese investments would lower environmental and labor rights standards in countries

Criticism of lax environmental and labor standards

Preiser criticized the fact that it is the countries of the Global South that once again have to bear the social and environmental costs of exploiting raw materials. In the case of investments from China in particular, there are lax environmental and labor standards, as well as questionable human rights practices.

Peru's former ambassador to China, Harold Forsyth, was also skeptical about the president's visit to China: “China is a very important country for Peru, but at the same time it is a country whose foreign policy is not at all oriented toward democracy and democracy.” human rights. “This is exactly the main deficit in Peru,” he was quoted as saying by the Infobay newspaper.

The Council on Foreign Relations report also states that Chinese companies have lower environmental and labor standards. China's increasing control over critical infrastructure such as ports and energy grids also poses national security risks. In addition, Chinese loans often come with lower conditions, but relying on them can push economically unstable countries like Venezuela into a debt trap that can lead to bankruptcy.

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