June 30th, 2012 | China Daily Strengthening solidarity
Expanding cooperation will enable Latin America and China to facilitate their common development
Relations between China and Latin America have entered a new period of strategic development, and China recently engaged in a new wave of diplomacy toward Latin America. President Hu Jintao attended the seventh G20 summit in Los Cabos, Mexico from June 18 to 19 and held bilateral talks with Mexican President Felipe Calderon. While from June 20 to 26, Premier Wen Jiabao attended the United Nations Conference on Sustainable Development in Rio de Janeiro, Brazil, and visited Uruguay, Argentina and Chile as well.
In a speech at the UN Economic Commission for Latin America and the Caribbean, Wen announced a series of new initiatives to further promote ties between China and Latin America.
Consultations between Chinese and Latin American leaders are on the rise and are helpful to promote the development of bilateral relations. Whether from the perspective of their growth potential, development momentum or their influence on the process of global governance reform, the level, depth and scope of cooperation between China and Latin American countries are growing.
At present, China has six strategic partners in Latin America.
China-Latin America trade and economic cooperation have already expanded from the traditional trade in commodities to investment, finance, energy and mining, infrastructure, agriculture, manufacturing, and high technology. Bilateral trade between China and Latin America increased to $241.5 billion in 2011, of which the trade volume with Brazil, Argentina, Chile and Uruguay accounted for 54.83 percent. China also made a $10.1 billion non-financial investment in Latin America in 2011, making the region the second-largest destination for Chinese foreign direct investment.
Still reeling from the effects of the European sovereign debt crisis, the recovery of the global economy remains weak. Facing shrinking external demand, trade with China and Chinese investment will be a strong driving force for continued growth in Latin America.
Financial cooperation is a new highlight in China-Latin America economic and trade cooperation. In addition to the interest-free concessional and commercial loans provided by Export-Import Bank of China, the China Development Bank signed a credit line agreement with about a dozen Latin American countries, covering more than 60 cooperation projects related to resource development and infrastructure construction.
China will initiate a cooperation fund between the two sides and Chinese financial institutions will contribute a first tranche of $5 billion to the fund. China welcomes the participation of Latin American and Caribbean countries in developing the fund for joint investment in manufacturing, high and new technologies, sustainable development and other fields.
The Chinese side will coordinate the efforts in setting up a special loan of $10 billion to facilitate cooperation in infrastructure development.
China is ready to discuss and sign currency swap agreements with more members of the UN Economic Commission for Latin America and the Caribbean. China has also proposed the launch of a special fund for China-Latin America agricultural cooperation and development.
Financial cooperation between China and Latin America should focus on sustainable development and serve the development and expansion of the real economy. Credit support by China is closely related with Latin America’s industrial policy, infrastructure construction and social development planning. Based on government credit and corporate business credit, China-Latin America financial cooperation is driven by a variety of forms, such as macroeconomic policy cooperation and coordination, resource development, trade cooperation, and infrastructure construction.
Financial cooperation between China and Latin America is fundamentally different from the multinational financial capital from Western countries that did so much damage to Latin American economies in the 1990s. Western capital only focused on buying local privatized state-owned assets, or aimed at gaining “interest arbitrage” in the financial markets. Their actions did not effectively promote development of the real economy and caused financial instability.
China-Latin America economic and trade relations are both complementary and competitive, but to sustain them both sides need to change their growth modes, carry out restructuring, and pursue the quality of their growth. China and Latin America can provide each other with favorable conditions for development and transformation.
The formation of a coherent, sustained development agenda with a political consensus is conducive to promoting the healthy development of China-Latin America economic and trade relations.
Political differences, the lack of long-term development planning and insufficient policy stability and continuity inside Latin America will cause some difficulties for bilateral cooperation. The most important thing is Latin American countries reach a solid political consensus on deepening China-Latin America economic and trade cooperation.
The author is an associate professor with the Institute of Latin American Studies under the Chinese Academy of Social Sciences, and now a visiting scholar in the Institute of Economic Research of the National Autonomous University of Mexico.
By Sun Hongbo