Chinese Influence in Central America: Part II

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We welcome you to the Greater Caribbean Monitor (GCaM). In this issue, you will find:

•Chinese Influence in Guatemala: A Chat with R. Evan Ellis (II)

•The Schism at the Heart of Spain’s Right

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•Chinese Influence in Guatemala: A Chat with R. Evan Ellis (II)
1,543 words | 7 minutes reading time

República recently spoke with Dr. Robert Evan Ellis, research professor at the U.S. Army War College and expert on Latin America. This is the second part of our interview Dr. Ellis. The first part was previously published in GCaM; the full interview is available in Spanish here.

When Latin American countries align with China, is it purely for economic gain, or is there an ideological dimension to this?

It is neither purely ideological nor purely economic. Sometimes people are not aware of the complexity of their motivations. Of course, there is a wide range of countries, from Chile and Uruguay to Venezuela and Cuba, that maintain relations with a combination of motives and, shall we say, styles.

Perhaps the most common approach in the region is to say: “We do not get involved in issues of great power competition; this is just about money and economic opportunity.” On many occasions, even in conservative countries like Ecuador, elites feel a certain attraction towards Chinese markets. [Banana magnate] Segundo Wong said something like: “If only every Chinese person ate an Ecuadorian banana once a week, Ecuador would be a fabulously wealthy country.”

Every country has [a multitude] of people thinking about the opportunities and dreaming of being a local partner of a Chinese [conglomerate] like Huawei or China Harbor. I have almost always seen that China enters and achieves its penetration of Latin American markets little by little, not falling like a parachutist, but through a sort of civil war [within local elites]. There are those who dream of becoming rich by associating with the Chinese and those who fear that they will not be able to compete with China.

And well, what about the ideological dimension? I remember that in 2006, it was joked that Evo Morales arrived in China, and in a politburo meeting, proclaimed himself a great admirer of Mao Zedong. And the joke, I think it was of Andrés Oppenheimer’s coining, was that the only admirer of Mao Zedong at that meeting was Evo Morales. So, there really are certain leaders in the region who think: “This money from China creates opportunities for me personally: to get rich, to stay in power, to no longer have to answer and bow my head before the Americans.” On the other hand, it allows them to have cooperation between, say, socialist countries.

But I see that this political orientation and the self-exclusion of working with the West and receiving Western investments gives itself over to a certain [ideological] path. And what sometimes happens is that as transparency, investor options, and bureaucratic experience in evaluating contracts with China are reduced, the chances are that these deals with China will not benefit the country, but only China and the leaders signing them. 

Is it possible for Latin America to balance its relations with the United States and China?

When leaders say they don’t want to get involved in great power competition, they think they can reap the benefits of doing business with China and manage the risks. They understand the risks. In the end, some pay off and others don’t. But sometimes not getting involved in “great power competition” is equivalent to giving up the duty to protect one’s own interests because if you mess with someone who is very predatory, perhaps you can win and perhaps you can’t. 

Sometimes [leaders] say: “It’s the gringos and their great power competition.” This serves as a psychological and political excuse to ignore real caution and pursue their own personal or corporate interests, saying that relations with China are “just business.” 

And sorry, sometimes I say bold things, but insisting that it’s just business is like saying, “We’re going to sleep with China, but without kissing.” But no, [relations with China] carry commitment and consequences. 

Central America’s trade with China is extremely asymmetrical, to China’s benefit. For Central America, what is the real benefit of free trade deals with China?

Let’s take the case of Costa Rica. Before the change in recognition, Costa Rica sold Intel chips to Lenovo. Initially, it seemed that Costa Rica was selling high value-added products, but Lenovo [acquired from IBM by China] imported Intel chips only until it decided to produce them in China. Thus, the Intel factory in Costa Rica was adversely affected.

But if you look at all the other products, how much coffee did Costa Rica sell? How much fruit? I have conducted a study, and according to the International Monetary Fund, if one combines exports to Taiwan and China the year before, the year of, and the two years after the change of recognition, in almost all cases, there is no increase in exports, but rather a net drop in exports, because the subsidized Taiwan market was lost and [Latin American countries] proved unable to penetrate into the Chinese market beyond symbolic objects. Meanwhile, China expanded its market penetration.

If one reads everything written in Xinhua and China Daily, they talk about an “expansion in bilateral exchange,” but when looking at exports and imports, it is always imports from China that expand.

With free trade agreements, China sells dreams because the Chinese market has many non-tariff barriers. China is always interested in negotiating free trade agreements because it succeeds in opening the local market to its products and services, but these markets do not have the volume, knowledge, or competitiveness when shipping via containers. Their products are not very competitive for China.

In some cases, China does allow or facilitate imports from other countries. And this usually happens in certain contexts.

Firstly, when China really needs something, and this usually has to do with commodities—oil, iron ore, now lithium, etc.—at the lowest price point, that is, not the pigs, but the soybeans to feed the pigs. And if China has to obtain it, it prefers to do so through its own logistics company and its own mining company operating in the country, not by purchasing it directly from the exporter.

The second is when a political benefit is sought. For example, Costa Rica shifts [from Taiwan to China] and a delegation arrives with [then-president] Óscar Arias. In this delegation there are exporters of coffee, fruit, etc., all well connected with Arias. So China signs phytosanitary agreements that do not commit it to importing the products, but do commit it to creating a path to purchase the products in the future. In the press, it sounds good: “Look, the phytosanitary agreement; look at what could happen!” And sometimes they do, because it does not cost them anything to buy some coffee.

Therefore, China buys things it really needs and things with a strategic impact when courting allies.

Perhaps the other one is when China wants to have the best luxuries in the world. China perceives the world as an exotic place, in which China as the center of the universe—Zhōngguó—matters, hence Chile’s success with its table grapes and cherries. China can buy grapes from the Philippines, from Vietnam, without spending to import them in refrigerated containers or flights. But Chile has marketed its wines and grapes as luxury and prestige products, and the Chinese have a very elitist society when it comes to showing off their Izod and TAG Heuer items. Certain countries have managed to position their products as the finest in the world; another example would be Jamaica Blue Mountain coffee.

But then, what capacity does, for example, PROESA [El Salvador’s Export and Investment Promotion Agency] really have to represent Salvadoran products as the most elite products in the world? What capacity does it have to establish a national brand, to have people who speak Mandarin?

Initially, there was some logic to the agreements negotiated by Chile and Peru, but not with Costa Rica and now Nicaragua; with Honduras and El Salvador, we shall see. Nicaragua has not recovered even half of what it lost from Taiwan, despite its early harvest agreement with China.

In May, China blocked the entry of Guatemalan containers of coffee and macadamia nuts at Chinese ports. Is this part of a Chinese pressure strategy?

In 2010, something similar happened in Argentina. The Chinese were very upset because the Peronist Argentine government enacted many tariffs against Chinese dumping. In response, a large soybean buyer, China Oil and Foodstuffs Corporation (COFCO), suspended purchases from Argentina due to some impurities in its soybean recipe, something that has always been a problem.

It was a $2 billion business, so the Argentine foreign minister, Héctor Timerman, rushed to China. President Cristina Fernández, who had cancelled her visit in February 2010, quickly found the time to visit China.

The Chinese don’t say, “We're doing this to punish you, and you need to change.” These are not American-style sanctions because China always allows one to kowtow, or rather, “save face.”

The same thing happened in Australia. When Australia dared to investigate the Wuhan origins of COVID-19, China magically suspended purchases of agricultural goods. There is also a case in Britain.

There is even an antidumping case against Chinese steel in Chile. Curiously, the president of Fedefruta [the Federation of Chilean Fruit Producers] said that Chile was being too heavy-handed and should instead negotiate with the Chinese. Why is Fedefruta so worried, when it has nothing to do with steel? Because they understand very well that the Chinese way is to punish fruit, that is, to respond to tariffs on their steel by punishing Chilean fruit exporters.

The Chinese are very adept at applying this type of pressure. They are not going to say: “Either you change your relations [with Taiwan], or you will never export a single coffee bean again.” But they cut their purchases and everyone understands why, even if they do not say it.

•The Schism at the Heart of Spain’s Right
681 words | 3 minutes reading time

Last week brought internal conflicts to the Spanish right, which should be understood as two opposing right-wing factions. Vox (right-wing) and the People’s Party (PP, center-right) will no longer share the regional governments of Castile and León, Aragón, Valencia, Murcia, and Extremadura. Vox also distanced itself from the PP in the Balearic Islands, where the PP governs has a minority government and relies on Vox’s confidence and supply in the regional legislature.

• Vox moved to the opposition due to an agreement between PP leader Alberto Núñez Feijóo and Spanish prime minister Pedro Sánchez, of the Spanish Socialist Workers' Party (PSOE, center-left). The pair agreed to distribute migrants arriving in the Canary Islands throughout Spain.

• Initially, the PP’s regional magnates opposed the nationwide distribution of migrants—most of them purporting to be unaccompanied minors, known as menas—but it is understood that the party’s central leadership forced them to comply.

• The PP has attempted to capitalize on what could be a political catastrophe. They boast of distancing themselves from the “populists” and insist that Vox has made a fool of itself, as the first phase of the “interregional solidarity program” involves the redistribution of only about 400 migrants.

Overview. There has always been a tense relationship between the PP and Vox, despite their theoretical ideological alignment. The PP, once the hegemonic party of the Spanish right, has gradually shifted towards the center. This change prompted the founders of Vox, including its leader Santiago Abascal, to leave the PP.

• The PP’s discomfort in treating Vox as an ally is evident. The five coalition governments were negotiated with great difficulty after the PP realized it was arithmetically impossible to govern alone.

• Tensions had been brewing between these two uneasy allies. Ultimately, Abascal and his National Executive Committee opted to break the coalition agreements, citing “Mr. Feijóo’s aggression,” referring to his decision to strike a deal with Sánchez, whom they simply label “the autocrat.”

• For Vox leaders, this was the final straw. It comes after the PP’s agreement with the PSOE at the end of June to renew the General Council of the Judiciary (CGPJ), whose appointment had been blocked for five years.

Between the Lines. Vox’s decision entails the loss of position and salaries for its regional councilors, as well as the likely unemployment of its regional advisors. The party views this as a necessary sacrifice; it claims that its conscience does not allow it to become a proponent of immigration.

• Vox has crossed the Rubicon. It may be right in doing so: in the 2010s, Spain had two alternative parties—Ciudadanos (center) and Podemos (left)—whose political luck seemed to end after allying with the two traditional parties, the PP and the PSOE.

• From a strategic—or perhaps cynical—perspective, Vox aims to demonstrate that it has an ideological backbone. Its firm stance against migration distinguishes it from the PP, which Vox no longer recognizes as an ally.

• Additionally, Vox seeks to project an image of dignity and purity that it believes is lacking in Spanish politics. It does not want to be seen as a party clinging on to power even when it is unable to implement its political program.

The Future. Internal conflicts within the Spanish right are, at least for now, good news for Sánchez, as there is no longer a united front against him. The PP has also sought to view this positively, having rid itself of what it deems an unseemly, extremist ally.

• However, this could pose a setback for the PP in the medium term, as it aims to recover the votes lost to Vox. These votes were once theirs, but part of the right-wing electorate no longer sees the PP as a viable option. As the campaign slogan goes: “Only Vox remains.”

• For Vox, which gained two additional seats in June’s European elections, this may be the only way to secure its political future. In opposition, it will not be burdened by any mistakes made by the PP.

• Regardless, the next Spanish elections are scheduled for 2027. While there are occasional rumors of early elections, Sánchez appears relatively comfortable in the Palace of Moncloa, despite presiding over a minority government. His electoral weariness benefits the right-wing parties.