President Xi and the Americas

When Presidents Xi and Obama meet in California on June 7-8, 2013, they will discuss the traditional topics occupying the leaders of the world’s two largest economies, as well as security-related issues including cyber. The agenda has been set during National Security Advisor Tom Donilon’s trip to Beijing last week. One of the topics that likely will not be discussed at length, but should be, is China’s emerging interest and presence in Latin America and the Caribbean. Both leaders, in fact, will have just been to the region prior to the meeting; President Xi goes to California directly from Mexico City, the last leg of a trip that also included San Jose, Costa Rica and Port of Spain, Trinidad and Tobago. For his part, President Obama himself was in Mexico and Costa Rica in early May, and he sent Vice President Biden to Brazil, Colombia, and Trinidad at the end of the month. 

Perhaps it is just a coincidence that the leaders’ trips virtually paralleled one another; both governments have de-emphasized any sort of competition for influence in the region and downplayed broader political implications for China’s continued quest for commercial connection. Nonetheless, there is a sense in some quarters of Washington that the United States has taken Latin America and the Caribbean for granted for too long, and that China’s emergence as a global power potentially threatens US influence, at least at the margins. No longer can the United States treat the region as a “backyard,” as the Secretary of State so inelegantly put it recently. Latin America and the Caribbean today have greater options and the strengthened confidence and capacity to pursue them. As the Prime Minister of Dominica, Roosevelt Skerrit, told China’s CCTV English service recently, the perception in the Caribbean is that the United States doesn't listen to regional requests and priorities, and this has provided an opening to explore and pursue relationships with other nations. This means that for perhaps the first time in history, the United States must now actively contend for the Americas. It is incumbent on Washington to put forward an agenda of growth, development, and political vision which the region finds compelling and worthy of partnership.

China’s relationship with Latin America and the Caribbean is expanding exponentially. Since 2003, when China’s economic relationship with Latin America and the Caribbean began in earnest, trade and investment have exploded. This has been based primarily on China’s global quest for the commodities that have fueled growth even during the global economic downturn beginning in 2008. Arguably, this economic relationship played a significant part in keeping commodities exporting nations of the Western Hemisphere out of recession and has underwritten regional growth, particularly in South America. But the nature of this relationship is primarily economic and commercial, part of China’s broader “going out” strategy to lock in commodities wherever they are found globally. To this point, it has not appeared to be an effort by China to project power into Latin America or even to lend support to governments of one ideology or another. China has developed strong economic relationships with nations from across the political spectrum, from Chile and Colombia on the right to Brazil and Peru in the center to Argentina and Venezuela on the left.

The exception may be the Caribbean Basin, due to the continued recognition of Taiwan by several nations located there. China’s economic diplomacy is apparent, centering on infrastructure and public works projects that serve as a constant reminder of Chinese largesse. Costa Rica’s transfer of recognition from Taiwan to China in 2007, for example, arguably paved the way for Xi’s recent visit and his promise of a refinery and $400 million for road construction. 

Nonetheless, there is a potential downside to China’s economic engagement in Latin America and the Caribbean, particularly if it removes the urgency for continued reforms, underwrites populist political projects, or builds dependence over time on one sector—commodities—liable to soften at some point. As well, Chinese business practices in Latin America and the Caribbean have not always been consistent with regional expectations. Job creation on the local economy, labor and environmental standards, and anti-corruption and the rule of law are all areas in which Chinese investors have struggled to understand and abide by local norms.    

In some ways, China’s economic engagement has therefore reduced the leverage that the United States and institutions such as the IMF and World Bank have in encouraging regional reforms. Some observers who want to limit the regional profile of the United States applaud this emerging reality.  But it remains to be seen whether the growth path that the region has enjoyed for the past decade is sustainable, and what the fall back options will be for those countries that have put off necessary reforms and pursued an overtly populist, anti-U.S. policy. 

Increased Chinese engagement and reduced U.S. leverage does not necessarily mean that a rivalry between great powers is developing. It is conceivable that it could, particularly if China faces a situation whereby its investments begin to sour due to government actions including expropriations and Beijing seeks to project force into the region to discourage such steps. Such an outcome appears to be unlikely in the current environment. At the same time, Latin America and the Caribbean are not immune from a growing concern about cyber-based threats, at least some of which appear to be emanating from China. This is one particular area where greater attention must be paid. 

With this in mind, the summit between Obama and Xi could usefully discuss each of their respective recent visits to the region, both encouraging commercial engagement based on standard and appropriate practices while also laying a marker in terms of security and cyber affairs. Such discussions, should they occur, would make an important and lasting contribution to the regional debate.