Chinese Grand Strategy in Pacific Latin America

A couple of old articles that I missed.
From FT(november 2008):

When Hu Jintao, China’s president, touches down in Lima on Wednesday, he will be accompanied by the biggest delegation of this year’s Asia Pacific Economic Co-operation forum.
Twelve ministers and almost 600 business leaders and support staff are escorting the Chinese premier, who is poised to sign a bilateral trade agreement with Peru that could see China overtake the US as the Andean nation’s top trading partner.

The scale of China’s delegation underscores expectations in the region about China’s future role amid the global financial crisis.

“It is inevitable that China will become Peru’s number one trading partner,” says Juan F. Raffo, chair of Apec Business Advisory Council. “China now has 300m people that are comparable to US citizens in their consumption . . . that figure is growing. Their 1.3bn citizens, minus the elderly, are sooner or later going to jump the fence and consume at developed world levels.”
Luis Valdivieso, Peru’s finance minister, told the FT that China would be key in helping Peru to diversify its markets.
“We are very concerned about the recession that is going on in the US, Europe and the slowdown in Japan. So for us, China becomes an important partner,” he said. “The US will remain an important partner because we are also starting to implement a free-trade agreement with them. I think what is important is that we diversify.”

China already has significant investments in commodity-rich Peru, including Chinalco’s recent $2.2bn investment in the Toromocho copper mine, and in Chile, where it signed a trade agreement in 2005 (IbnBattuta: Last year, China supplanted the United States as Chile’s top trading partner. Analysts see a similar situation unfolding in Peru).

While China has been slow to pick up investment in Latin America compared with Africa, trade between Latin America and the Caribbean and China jumped 13-fold from 1995, to $110bn (€87bn, £74bn) in 2007.

En route to Peru, Mr Hu visited Cuba, where he signed an economic co-operation agreement, and Costa Rica, which is seeking a trade deal with China and entry to the Apec group.

China also last month joined the Inter-American Development Bank as a donor member, with $350m investment in financial development projects.

Mercedes Araoz, Peru’s trade and tourism minister, told the FT that Peru was “very close” to signing the China deal, and would announce the start of negotiations with South Korea this week.

Also from FT(september 2008):

"The secretive government agency that supervises China’s foreign exchange reserves used its funds to help convince Costa Rica to sever ties with Taiwan and establish relations with Beijing last year, according to documents obtained by the Financial Times.
The purchase of US-denominated Costa Rican government bonds by China’s State Administration of Foreign Exchange (Safe) is the clearest proof yet that Beijing regards its $1,800bn in foreign reserves – the world’s biggest – as a tool to advance its foreign policy goals, as well as a potential source of income.

“This is the first smoking gun that proves China uses its foreign exchange reserves for political purposes,” said Kerry Brown, senior fellow with the Asia programme at Chatham House in London.
“It raises questions about some of Safe’s other investments and will worry politicians and business people in places where Safe is taking stakes in high-profile companies.”

Encouraging the handful of countries that still recognise Taipei as the legitimate representative of the Chinese people to switch their allegiance is a key foreign policy objective for Beijing, which regards Taiwan as a renegade province.
China and Taiwan have for years used aid payments, infrastructure projects and the like as incentives for small countries like Costa Rica to take their side.
But Safe’s international profile is relatively new. In the past year, it has used a Hong Kong subsidiary to buy small stakes in publicly listed companies including BP, Total of France and at least three Australian banks.
Safe does not publicly disclose its investments and has refused in the past even to acknowledge the existence of its offshore subsidiaries. Safe and three of its offshore subsidiaries refused repeated requests for comment.
In January this year Safe bought $150m in US dollar-denominated bonds from the government of Costa Rica as part of an agreement signed last year under which the Central American nation cut diplomatic ties with Taiwan (after 63 years) and established relations with the People’s Republic of China.
The agreement, signed on June 1 2007 by Yang Jiechi, China’s foreign minister, and Bruno Stagno Ugarte, foreign minister of Costa Rica, explicitly links the foreign policy switch to China’s purchase of $300m in government bonds and a grant of $130m.
In an exchange of letters from January this year between Fang Shangpu, Safe’s deputy administrator, and Costa Rica’s finance minister, Safe promised to buy government bonds under the terms of the 2007 agreement, but included a clause demanding Costa Rica take “necessary measures to prevent the disclosure of the financial terms of this operation and of Safe as a purchaser of these bonds to the public”.
Costa Rican diplomats advised against keeping the terms secret, but the Chinese insisted, said people familiar with the matter.


The reality is that to some degree the fate of Latin America has been decoupled from the US,” Daniel Erickson, of the Inter-American Dialogue thinktank, told the AP. “Or at least it’s not as tightly entwined as it used to be.”