Leaders from the 33 member states of the Comunidad de Estados Latinoamericanos y Caribeños (CELAC, a 33-member block of all independent nations of the Americas, excluding Canada and the US) met with Chinese leaders in Beijing on January 8th and 9th for the first CELAC-China Forum. The meeting confirmed a growing interest in closer ties between China and Latin America, and points to a deepening of bilateral trade and investment flows going forwards.
The two-day meeting was co-chaired by China's foreign minister, Wang Yi, and Costa Rica's foreign minister, Manuel González Sanz, as Costa Rica is pro tempore president of CELAC. Together, the two sides agreed on three major documents: regulations on the forum, a five-year co-operation plan and the Beijing Declaration. These agreements include various measures to boost co-operation among the group's governments and private sectors.
Boosting trade and investment
Over the next five years (2015-19), China will invite 1,000 leaders from CELAC member states to visit China. Similarly, both sides will aim to achieve US$500bn in bilateral trade (in 2013 bilateral trade totalled around half of this figure), while also increasing investment to around US$250bn. As part of this effort, China has vowed to invest in infrastructure projects in the region, and to provide 6,000 government scholarships for CELAC members, while also increasing Mandarin-language programmes in primary and secondary schools in member countries. Members also agreed to boost co-operation between civil authorities and that the next forum would be held in Chile in 2018.
Increased financing needs
Chinese influence in the region has grown tremendously in the past decade as the Asian giant has sought an ever greater share of the region's natural resources, with bilateral trade growing by a factor of 22 between 2000 and 2013. In many countries, China has eclipsed the US as the largest trading partner. Similarly, over the past decade Chinese state financial institutions have disbursed around US$100bn in trade credits and investment to Latin American countries. According to Inter-American Dialogue, a US-based think tank, 54.4% of this money was spent on infrastructure, 26.3% on energy, 12.6% on other and 5.1% on mining. Around half of the money (US$50.6bn) went towards Venezuela, with repayment partially financed through oil exports. Similar agreements were made with Ecuador. Other large recipients include Argentina (shut out of international capital markets since its default in 2001) and Brazil.
The forum comes at a time of slower growth amid declining commodity prices in Latin America, owing in part to reduced Chinese demand. Particularly hard-hit are China's largest clients, such as Ecuador and Venezuela, who have seen shortfalls as the price of oil has fallen by more than half since the middle of 2014. This makes the announcement of increased financing particularly welcome in these countries, which also announced that they had received billion-dollar investments from China during the forum.
However, also important are the announced investments in infrastructure development and education, which could help to boost Latin America's competitiveness. The announced scholarships and increased meetings between China and CELAC governments are also good news, as they will increase connectedness and intercultural understanding, which are currently lacking but are necessary to build lasting ties. Although the announcement of improved diplomatic and trade ties between the CELAC countries and China is nothing new-and in the past has failed to materialise-the dedication to the meeting shows a commitment from both sides to nurturing an intra-regional relationship.
China's growing interest in Latin American markets, and its increased assertiveness in searching for market opportunities and natural resources in what has traditionally been seen as the US's backyard, coupled with Latin America's interest in diversifying its trade and investment ties to less traditional partners in a more complicated external environment, suggest that bilateral relations will continue to deepen moving forwards.