1. Win-Win Relations?: An Exploration Of China’s
Relationship With Latin America & The Caribbean
By
Todd Julie
For
Professor Abbas Gnamo
POL417
July 17, 2012

2. It is the job of this paper to examine the effects of China's increasing geopolitical and
economic interest in Latin America and the Caribbean and whether this interest
constitutes a win-win scenario. It will be seen that while the economic relationship is
problematic in many ways, China increases Latin American/Caribbean government
options and opportunities and in that sense can be considered a win-win. It must be
stressed that the relationship is much more complicated and significant for Latin America
and the Caribbean – the weaker of the two parties. Accordingly, this paper will examine
the issue primarily from the Latin American/Caribbean perspective. For China, the
relationship is a win if it gains access to natural resources, isolates Taiwan and does not
upset its important relationship with America. All these points will also appear
throughout the paper. To determine a win or loss for Latin America and the Caribbean,
we add a smaller social line of inquiry. It is difficult to assess the value of economic gain
without examining how that gain is distributed.
In its distribution of ‘winners and losers’ and in many other respects the China – Latin
American/Caribbean relationship is emblematic of the globalized context in which it
takes place. Chinese demand for natural resources privileges sectors that deliver those
resources and punishes manufacturers whose products compete with China’s own
imports. This encourages differentiation both between and within states. Chinese
influence may actually be detrimental to job growth in some cases, but it is a boon for
government coffers, consequent social programs, perhaps even the poor's cost of living.
Politically, the increasing relationship with China, relative to what it was just ten years
ago, can encourage overstatement of its present significance vis-à-vis the Latin

3. American/Caribbean relationship with the U.S. It is nonetheless true that China has
contributed to increased political independence, confidence and creativity.
One further note: this paper conflates, at times, the experiences of Latin America and the
Caribbean. While the difference, in relationship to China, between Latin
American/Caribbean states is significant, the difference between the two regions is
mainly one of scale. The Caribbean is a smaller exporter of resources to China but its
appeal for China is the same. Trends noted throughout the paper are generally applicable
to both regions, unless otherwise noted.
Economic
The rise of China effects the trade of these two regions (Latin America, the Caribbean)
both directly, through their own trade with China and indirectly, through China's impact
on their trade with third parties. With respect to direct trade with China, the Chinese
import primary resources like oil, minerals, etc. and export value-added industrial
products. Consequently, the China trade has been greatest with those countries whose
economies rely chiefly on export of primary resources: Brazil, Argentina, Peru,
Venezuela, etc1. While Central American countries like Mexico, who are exporters of
value-added industrial products have found themselves in a losing competition with
Chinese exports2. Jenkins & Edwards report this negative effect on manufactures is
1
Jenkins, R. & Edwards, C., How Does China’s Growth Affect Poverty Reduction In Asia And Latin
America? (Latin American/Caribbean And Asia/Pacific Economics & Business Association, Working
Paper No.34, Dec 2004), 14
2
Ibid., 17

4. particularly strong in Nicaragua and Bolivia, where domestic industries are weak3. In
fact, both Latin America4 and CARICOM, an association of Caribbean countries,
maintain trade deficits relative to China5. It must be said however, that in absolute terms,
most big Latin American and Caribbean countries have enjoyed overall increased terms
of trade since 2002, due to the combination of rising prices for primary commodities and
lowered pricing for many imported manufactures6.
The China trade can inhibit regional economic coherence in Latin America as well, by
encouraging production for export to China over intra-regional trade. Alternately, "China
is replacing Brazil as a supplier to other countries in the Americas"7 of cheap
manufactures8. On the world market, China's large purchases of raw materials drive up
the price of those materials. This represents a further indirect benefit to primary resource
exporters9, as well as a further negative effect on industrial manufacturers including those
in Central America, like Mexico, who must pay a higher price to import primary
resources from their neighbors.
The positive benefit to primary resource producers and negative effect on industrial
manufacturers takes place not only at the regional level, favoring one Latin American
3
Ibid., 3
4
Ibid., 246
5
Bernal, R.L. “The Dragon In The Caribbean: China-CARICOM Economic Relations” in The Round
Table, Vol.99, No.408 (June 2010): 285
6
Jenkins R., Peters, E.D., Moreira, M.M., “The Impact Of China On Latin America & the Caribbean” in
World Development Vol.36, No.2 (2008): 245
7
Li, H., “Red Star Over Latin America” in NACLA Report On The Americas, 40. 5 (Sep/Oct 2007): 23-27
8
Ibid., 23-27
9
Between 2001 and 2008 China spurred an international commodities boom. Jenkins, R., “China's Global
Expansion And Latin America” in Journal Of Latin American Studies, 42 (2010): 825 -

5. state over another, but within these states as well. A country that draws most of its GDP
from primary resource exports will see that sector's share of the national GDP increase as
cheaper Chinese manufactures beat out similar domestic manufactures. Further, within
the primary resource sector, production is increasingly centered on the handful of
commodities that China imports in large quantities. This is known as export
specialization. The phenomenon can have a negative impact on small-holder farmers
(bought up by commercial agri-business) as well as domestic market access to a wider
variety of crops and materials whose production is displaced by the conversion to mass
production of a few staple crops for export. For example, "The extension of Soya
cultivation in South America has been blamed for the destruction of forests and the
displacement of labour as Soya replaces other more labour-intensive crops"10.
The changing relationship of Latin American and Caribbean countries with the American
market is the most obvious example of China's indirect impact on those regions' trade
with third party states. China's own export trade in industrial manufactures will tend to
displace similar products offered by Latin American countries on the world market. Rhys
Jenkins cites an analysis by Brazilian economist Jorge Chami Batista that asserts the
share of 18 countries in Latin America of the U.S import market was down 9% in the 5
years after China's ascension to the WTO (in 2001) from what it would have been had
China's share not increased in that period11. It seems the only choice available to Latin
America and the Caribbean is to avoid competition with Chinese exports and take
advantage of Chinese appetite for primary resource imports as much as possible.
10
Jenkins & Edwards, How Does China’s Growth Affect Poverty Reduction In Asia And Latin America?,
15
11
Jenkins, China's Global Expansion And Latin America, 820

6. However, Jenkins & Edwards qualify this by speculating that Mexico and other Central
American manufacturers may be able to retain their comparative advantage in certain
industrial sectors, due to their close proximity to the American market12.
Social
Economic and political gain must be translated into improved living standards and
prospects for the mass of the Latin American and Caribbean citizenry to be considered
truly beneficial. Does the relationship with China increase the living standards of
everyday Latin Americans and Caribbeans? Jenkins & Edwards examine China's effect
on poverty in Latin America in their report, How Does The Rise Of China Affect Poverty
Reduction In Asia, Africa And Latin America? They are careful to stress the need for
further inquiry and research and their findings are somewhat mixed. They point out that
Latin American exports to China are mainly in "non labour-intensive agricultural
products and extractive products (timber, minerals and petroleum)"13 that require a
limited amount of unskilled labour (limited job creation) and are potentially harmful to
communities living in the extraction zones. As a result, any social benefit to the poor in
these export industries, to the extent it takes place, will be in the form of government
revenue, taxed from these industries and spent on pro-poor social programs.
Draibe & Riesco describe how, since the turn of the new century, Latin American
governments have been re-introducing orthodox "ground rents" in primary resource
12
Jenkins & Edwards, How Does China’s Growth Affect Poverty Reduction In Asia And Latin America?,
19
13
Jenkins & Edwards, How Does China’s Growth Affect Poverty Reduction In Asia And Latin America?, 2

7. industries. Ground rents are basically taxes on natural resource extraction14. The United
Nations sponsored book in which their chapter appears documents the increasing trend in
Latin America towards innovative, progressive social welfare programs. Whether or not
the recent implementation of these programs bares any direct relationship to the
concurrent rise in trade with China, the appropriation of larger ground rents in primary
industries exporting to China certainly helps pay for them. Government assistance aside,
there is also a potential benefit for the poor in lowered prices on certain goods, now
imported from China. This potential benefit to the consumer may offset the cost to
domestic producers in aforementioned countries like Nicaragua and Bolivia to some
extent15.
Political
The political aspect of China's increasing relations with Latin America and the Caribbean
are potentially the most positive. Here increased relations with China are viewed as a
potential counterbalance to the influence of the United States. Jenkins highlights four
important questions that need to be asked to evaluate this proposition: “First, how will
the rise of China affect US hegemony in the region? Closely related to this is the effect of
Latin America’s growing relationship with China on the autonomy and bargaining power
of the Latin American states internationally, and particularly in relation to the United
States. Third, what are the implications of Latin Americas growing relations with China
14
Draibe, S.M., Riesco, M., “Latin America: A New Developmental Welfare State In The Making” in
Riesco (Ed.) Latin America: A New Developmental Welfare State In The Making, UNRISD Social Policy In
A Development Context Series, Palgrave Macmillan, 2007: 66-67
15
Jenkins & Edwards, How Does China’s Growth Affect Poverty Reduction In Asia And Latin America?,
26

8. for democracy in the region? Finally, will China's influence strengthen the role of the
state in Latin America's economies and lead to a shift away from neo-liberalism in the
region?”16.
In regards to the first two questions about China's influence on Latin America's
relationship with the U.S., Jenkins points out that China's own relationship with the U.S.
is much more important to them than Latin America17. The Chinese are unlikely to
jeopardize that relationship for Latin America's sake. Further, despite increasing
economic and political relations, the U.S and Europe remain the dominant powers in the
Latin American/Caribbean region18. In some cases China's presence has actually led to
increased ties with the U.S. This is true of the Dominican Republic and Central
American countries that feel more threatened by China, for the economic reasons stated
earlier in the section on economy. The DR-CAFTA trade agreement was signed with
America by these countries, in an attempt to prevent further loss of American market
share19. Bernal says China's presence may also reinvigorate U.S. and European interest in
CARICOM countries, which has been in decline since the end of the Cold War20.
Nonetheless, the presence of a second (or third if you count Europe) major player in the
region cannot help but grant increased latitude to individual states, even if its only a
binary choice between the two major players.
The Question of what influence China has had on the quality of democracy in Latin
16
Jenkins, China's Global Expansion And Latin America” in Journal Of Latin American Studies, 828-829
17
Ibid., 830
18
Ibid., 830
19
Ibid., 832
20
Bernal, The Dragon In The Caribbean: China-CARICOM Economic Relations, 297

9. America and the Caribbean is a complicated one. It is important to note that unlike in the
West European and North American experience, the goals of democratization and
development have not been mutually reinforcing in Latin America21. Munk explains
how, in Latin America, countries participating in the global economy "have been more
economically dynamic"22 but have experienced higher levels of inequality. Whereas
countries that have opted out or at least thumbed their nose to a significant degree at the
global economy have experienced greater equality but poorer economic performance.
Furthermore, in Latin America the leaders who have traditionally striven for greater
equality have been those who also strive to concentrate power, leading (according to
Munk) to an erosion of democracy23. China’s own success seems to validate these
leaders. Raul Castro, Hugo Chavez and Argentina's Nestor Kirchner have all expressed
admiration for China's "market socialism" - a model for rapid growth under an
authoritarian regime24.
Certainly the China-Latin America connection has created solidarity in opposition to past
Neo-liberal policies, what is sometimes called "The Washington Consensus”. "The
Beijing consensus" or "East-Asian model" and Latin American "neo-structuralism" draw
strength and legitimacy from their ideological convergence25. China's success provides an
example separate from the neo-liberal reforms urged by the West in earlier periods. Li
points out that "Chinese foreign aid and loan programs attach no conditions except that
21
Munk, G.L., “Democracy And Development In A Globalized World: Thinking About Latin America
From Within” in Studies In Comparative International Development (2009): 351
22
Ibid., 352
23
Ibid., 352
24
Li, H., “Red Star Over Latin America” in NACLA Report On The Americas, 40. 5 (Sep/Oct 2007): 23-27
25
Gore, C., “The Rise And Fall Of The Washington Consensus As A Paradigm For Developing Countries”
in World Development, Vol.28, No.5 (2000): 800

10. recipient countries must recognize the People's Republic as the sole legitimate
government of China”26. This is quite different from “the famous structural adjustment of
neo-liberalism"27. Brazilian President "Lula" has crafted an assertive foreign policy that
in some ways parallels China's, seeking to unify the opposition of poor and
underdeveloped countries to the Washington Consensus and to push for better terms of
trade for the Southern Hemisphere. While the Chinese government apparently has no
interest in challenging the U.S., multi-polarity is identified by the PRC as the ideal
condition for China 's "peaceful rise"28. In this vein China is pleased to see these regions
exhibit more independence from the U.S.29. Indeed, China has voted with the
"developing nations" in the U.N 95% of the time30. So while China’s influence may lead
to economic differentiation between states, it encourages regional political unity.
In understanding the political relationship between China and Latin America and the
Caribbean, it is useful to keep China’s own objectives in mind. These objectives are two-
fold: to increase its role as a world power and to convince countries in these regions to
renounce their support for Taiwan31. While some commentators maintain China's interest
in Latin America and the Caribbean is primarily economic32, Bernal considers the
Chinese interest, in the Caribbean at least, to be motivated primarily by political
26
Li, Red Star Over Latin America, 23-27
27
Ibid., 23-27
28
Cheng, J.Y.S., “Latin America In China’s Contemporary Foreign Policy” in Journal Of Contemporary
Asia, Vol.36, No.4 (2006), 505
29
“The Chinese media are pleased to report that on issues relating to Iraq, WTO and negotiations on the
FTAA, many Latin American Countries are willing to oppose the U.S. position”. Ibid., 510
30
Li, Red Star Over Latin America, 23-27
31
Ibid., 290
32
Horta, L., “A Brave New World: China Embraces The Caribbean” in Defense And Security Analysis,
Vool.25, No.4 (2009): 430

11. objectives33. He points out that the amount of trade China does with the Caribbean is
miniscule compared to its concerns in other parts of the world. However, over half the
countries that maintain diplomatic support for Taiwan are located in the Latin American
or Caribbean regions34. Cheng predicts this will be a source of friction in ongoing
relations35 but adds that China “realizes that Latin America has no strategic interests in
the Asia-Pacific region, and they therefore are more tolerant of the formal and informal
ties between Latin American countries and Taiwan”36
In this paper we have seen that while the relationship with China is an economic boon for
Latin America and the Caribbean in absolute terms, it privileges non-labour intensive
resource sectors over indigenous manufacturing sectors. In doing so it encourages export
specialization that narrows the selection of goods produced and available in the domestic
market and threatens to cut out small-holder farmers. It also creates differentiation at the
regional, state and sectoral level. However, scholars are quick to point out that increased
social welfare spending by Latin American governments due to increased ground rents,
along with a potentially lower cost of living due to cheaper Chinese goods available in
the market, may offset the losses mentioned above to some degree. Politically, the
Chinese connection is more exclusively positive. The emergence of China gives Latin
American/Caribbean leaders greater flexibility in determining their own policies, even if
the determination ends up being to move further into the U.S. orbit (as in the case of
Central America). However, China’s existence as a symbol of economic success outside
33
Bernal, The Dragon In The Caribbean: China-CARICOM Economic Relations, 291
34
Jenkins, Peters & Moreira, The Impact Of China On Latin America & The Caribbean, 237
35
Cheng, Latin America In China’s Contemporary Foreign Policy, 523-524
36
Ibid,, 525

12. the western democratic, multi-party political system, supported by some leaders in the
Latin America/Caribbean region can be uncomfortable to some western scholars.

13. Bibliography
1. Bernal, R.L. “The Dragon In The Caribbean: China-CARICOM Economic
Relations” in The Round Table, Vol.99, No.408, 2010
2. Cheng, J.Y.S., “Latin America In China’s Contemporary Foreign Policy” in
Journal Of Contemporary Asia, Vol.36, No.4, 2006
3. Draibe, S.M., Riesco, M., “Latin America: A New Developmental Welfare State
In The Making” in Riesco (Ed.) Latin America: A New Developmental Welfare
State In The Making, UNRISD Social Policy In A Development Context Series,
Palgrave Macmillan, 2007
4. Gore, C., “The Rise And Fall Of The Washington Consensus As A Paradigm For
Developing Countries” in World Development, Vol.28, No.5, 2000
5. Horta, L., “A Brave New World: China Embraces The Caribbean” in Defense
And Security Analysis, Vool.25, No.4, 2009
6. Jenkins, R., “China's Global Expansion And Latin America” in Journal Of Latin
American Studies, 42, 2010
7. Jenkins, R. & Edwards, C., How Does China’s Growth Affect Poverty Reduction
In Asia And Latin America? (Latin American/Caribbean And Asia/Pacific
Economics & Business Association, Working Paper No.34, 2004
8. Jenkins R., Peters, E.D., Moreira, M.M., “The Impact Of China On Latin America
& the Caribbean” in World Development Vol.36, No.2, 2008
9. Li, H., “Red Star Over Latin America” in NACLA Report On The Americas, 40. 5,
2007
10. Munk, G.L., “Democracy And Development In A Globalized World: Thinking
About Latin America From Within” in Studies In Comparative International
Development, 2009