Why are Latin American workers so strikingly unproductive?

China’s economic activities in Latin America are changing. Its focus on gaining access to the hemisphere’s natural resources, which drove its investments during the first decade and a half of the century, has expanded to a portfolio that includes renewable energy generation, telecommunications, electricity distribution, and even ridesharing companies.

“China’s economy is changing because it’s currently in decline,” Joseph Humire, executive director of U.S. think tank Center for a Secure Free Society, told Diálogo on June 4. “Today, as its economy declines, China seeks to raise funds for its defense industry, which is on the rise relative to other sectors.”

Old trick

China’s direct investment would not necessarily be aimed at industrializing the countries of the region, but rather at obtaining direct access to their raw materials, Chile’s Diario Financiero reported.

“Transactions in recent years show a growing orientation toward domestic markets […],” Enrique Dussel Peters, researcher and coordinator of the Chinese investment database compiled by the Latin American and Caribbean Academic Network on China, told Bloomberg. “The old Chinese investment logic of buying mines for the minerals and ports and railroads to transport them now works alongside another motivation: finding new, less developed markets in which to grow.”

“China’s access to Latin America’s resources comes at the cost of loss of sovereignty,” Humire added. “China isn’t only interested, for example, in a mining concession, but in the land where the mine produces.”

Exploiting vulnerabilities

A recent example of this strategy was evidenced during an Argentine delegation’s tour to China. At a June 1 meeting in Beijing, China’s top advisor in Latin America, Qiu Xiaoqi, shared with Argentine Economy Minister Sergio Massa his country’s strategic aspirations. “China wants to be Argentina’s complementary partner,” he said, Argentine news site Infobae reported, listing the South American country’s advantages that China is carefully monitoring to strengthen its presence in Latin America to obtain energy, food, minerals, and technology.

In the case of Panama, China’s Ambassador Wei Qiang has repeatedly reiterated his country’s special interest in sectors such as energy, mining, natural resources, and trade.

“China is developing an aggressive investment policy in key places in the Panamanian economy,” Euclides Tapia, a senior lecturer at the University of Panama’s School of International Relations, told the BBC on May 31. “It fundamentally takes advantage of Panama’s geographic position as a node in the global trading system.”

Honduras is yet another case, which is receiving Chinese investment for a hydroelectric dam and to explore railroad and port projects. In March, a heavily indebted Honduras cited “financial pressures” in its decision to establish formal diplomatic ties with China and break those with Taiwan.

“What is being sought through the relationship with China is investment to overcome the country’s challenges,” Honduran Secretary of State Rodolfo Pastor de María y Campos told The New York Times. The country carries a debt of more than $20 billion. Honduran Foreign Minister Eduardo Enrique Reina added that it was about “pragmatism, not ideology,” Reuters reported.

Dozens of countries are facing economic instability and even collapse under the weight of hundreds of billions of dollars in foreign loans, many of them from the world’s largest and most ruthless government lender: China, Infobae reported.

Transparency framework

“More and more countries are in dire financial straits,” said Brad Parks, executive director of the AidData research lab at the College of William & Mary, which uncovered thousands of secret Chinese loans, Infobae reported. “Somehow China manages to do all of this out of public view […], so unless people understand how China lends, how their lending practices work, we’re never going to solve these crises.”

The U.S. argument is that it is better to do business from the perspective of transparency, within the framework of rule of law, and a level playing field, allowing good options on contracts that actually work, Evan Ellis, a research fellow in Latin American studies at the U.S. Army War College’s Strategic Studies Institute, told the BBC.

“The attitude that countries with an appetite for Chinese investment should take is to diversify economically,” Humire said. “That way you don’t hand over all the concessions and all the debt to China, otherwise it means handing over your country.”

 

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