A tale of two dragons: China and Taiwan's rising clout in Latin America

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A tale of two dragons: China and Taiwan's rising clout in Latin America

By Andrew Wight

Bogota: It’s October of 2017 and the crowd goes wild as the homeside scores against a baseball team from Taiwan in Managua, capital of Nicaragua, during a friendly game to inaugurate the city's brand new stadium.

But baseball, the national sport in both countries, isn’t the only tie between the two: Nicaragua is one of only 18 states in the whole world that still recognises the Taiwan-based government as separate from China.

The Taiwan-financed Dennis Martinez National Stadium, in Nicaragua.

The Taiwan-financed Dennis Martinez National Stadium, in Nicaragua. Credit: File

Against a backdrop of waning American soft power in South and Central America, Taiwan and China are using a mix of diplomacy and money to advance their agendas in the region.

For decades, Central American and Caribbean nations have been bastions of support for Taiwan, but in the last decade, several have changed sides.

In 2007, Costa Rica switched allegiance to China. Last year, Panama adopted the One China policy. This month alone, two more countries have followed: the Dominican Republic (just weeks after a port call by a flotilla of modern Taiwanese warships tried unsuccessfully to secure the friendship) and, on Thursday, Burkina Faso (following intense pressure from China on African countries to break with what it regards as a wayward province).

“China and Taiwan kind of had a truce up until the new president of Taiwan, Tsai Ing-wen, came into power in 2016. She did not capitulate to the Chinese attitude to interstrait relations,” says Sean Miner, associate director and China fellow at the Atlantic Council, a foreign relations think-tank based in Washington.

“[China] wanted overt statements saying [Tsai] wouldn’t pursue independence. She ruffled some feathers there.

Back in Nicaragua, the new Dennis Martinez National Stadium, reportedly built with the help of a $US30-35 million ($39-$46 million) donation from Taiwan, is a reminder of the diplomatic ties.

Monica Dehart, professor of anthropology at the University of Puget Sound, has studied China and Taiwan’s actions on the ground in Guatemala, Costa Rica and Nicaragua. She says what started out as pragmatic relationships have built up over time.

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“US funding comes with strings attached,” she said. “Taiwan offers flexible aid, rather than Chinese investment.

“I don’t think there’s a strong ideological or cultural link, either for the elites or the ordinary people, but Taiwan has been a good friend [to Central America].

“There are still Chinese companies in the countries that recognise Taiwan, but when they have a labour issue, it is harder to resolve without a [Chinese] embassy,” she said.

The Disney Wonder cruise ship sails toward the Cocoli Locks, part of the new Panama Canal expansion bankrolled by China.

The Disney Wonder cruise ship sails toward the Cocoli Locks, part of the new Panama Canal expansion bankrolled by China. Credit: AP

Where recognition changes, major infrastructure projects or new trade deals often emerge.

Panama switched allegiance to China in June 2017 and in the same week, China Landbridge announced it had started work on a $US1-billion new deepwater port at Margarita Island on the Caribbean side of the Panama Canal. China Landbridge hit Australian headlines in 2016 when it acquired a 99-year lease on the Port of Darwin for $506 million.

Costa Rica received a Friendship Bridge from Taiwan in 2003, but in 2007 dumped the island's loyalty in favour of China. Four years later, it 2011, it opened a new 35,000-seat national stadium, at the staggering price tag of $US100 million, reportedly paid for by Beijing.

In Chile, China last week spent $US4 billion to buy a 24 per cent stake in one of the world’s largest lithium producers, SQM. Lithium is key component in batteries that power electronics and electric vehicles.

Only an ambitious $US10 billion, 3755-kilometre "two-ocean railway" linking the Pacific and Atlantic Oceans via Peru, Bolivia and Brazil is taking time to come to fruition, after it was proposed as a more efficient logistics export link to China. As of last month, despite the backing of Chinese banks, only Bolivian President Evo Morales had committed to kickstarting the project next year.

Beijing's big goals

In 2015, delegates from 33 countries from the Community of Latin American and Caribbean States (CELAC) gathered in Beijing where they heard Chinese President Xi Jinping pledge $US250 billion in foreign direct investments in Latin America by the year 2025.

“Most leaders don’t say to a region, ‘I want companies from my country to invest in this region',’’ says Miner. But in China it happens.

According to an Atlantic Council report, Chinese foreign direct investments topped $US25 billion in Latin America’s oil and gas sector from 2004 to 2016, including mergers and acquisitions, joint ventures and some greenfield projects. As of 2018, China is halfway to reaching its goal, with more than $US100 billion invested in Latin America by Chinese state-owned enterprises.

Brazilian President Michel Temer is treated to a guard of honour in Beijing last year.

Brazilian President Michel Temer is treated to a guard of honour in Beijing last year.Credit: EPA/AP

The council also found that Chinese direct investment was highest in Brazil which attracted $US61 billion spread across 180 deals  from 2003-2016. Peru attracted $US18 billion across 16 deals. Argentina, Bolivia, Chile, Venezuela, Antigua, Jamaica, Guyana, Cuba and Colombia attracted upwards of $US1 billion each across the same time period.

Those deals, include infrastructure projects that aid China's imports, such as a port dedicated to soy in Brazil.

“What we are finding in Latin America is that previously they were taking the bauxite [aluminium ore] or iron ore and turning it into products higher up the chain," Miner says.

People work on the steel structure of the National Stadium, San Jose, Costa Rica.

People work on the steel structure of the National Stadium, San Jose, Costa Rica.Credit: Alamy

“South American countries are now going back down the value chain, and going back to exporting lightly processed raw materials to China.”

“This can be dangerous in the long term, as you’re not developing an economy based on manufacturing or services. Countries are then tied to commodity prices and the rate of Chinese growth.”

Miner pointed to Chinese Foreign Minister Wang Yi's invitation to Latin American countries to take part in the Belt and Road project as part of the strategy to tie economies together.

Wang emphasised projects to improve connectivity between land and sea, and cited the need to jointly build “logistic, electricity and information pathways".

Workers load soybeans imported from Brazil at a port in Nantong in east China's Jiangsu province last month.

Workers load soybeans imported from Brazil at a port in Nantong in east China's Jiangsu province last month.Credit: Chinatopix/AP

The so-called Santiago declaration, signed by China and CELAC delegates, also calls for bolstering trade and taking action on climate change.

“China is loading up many of these smaller countries with debt. If at some point they can’t pay, China will hold a tremendous amount of power over them,” Miner said.

Beating a retreat?

Fulton Armstrong, a senior faculty fellow at the Centre for Latin American and Latino Studies at American University, who worked as a senior official in the Clinton administration, says Latino hearts and minds have never been with China, given the proximity and influence of the United States.

One finding of a report by the Brookings Institution appears to support this. In their United Nations voting record from 2006 to 2015, countries from Latin America and the Caribbean were much more aligned politically with Washington than Beijing.

“It’s not that the Chinese have brilliantly found a way to suborn an entire hemisphere, it is that the US has withdrawn. The US now has a reputation as a less than trustworthy country. You can see it with the Paris Accord, you can see it with the Iran deal,” Armstrong says.

“We’ve moved off the playing field in a number of countries, so it’s very easy for [Beijing]. This isn’t the Chinese giving us a beating, this is the US giving itself a beating.”

Geoff Thale, vice-president of programs at the Washington Office on Latin America (WOLA), a think-tank focused on policy and development in Latin America, says that China’s goals are more commercial than hegemonic.

“They’re not trying to build security relations, or challenge the US through their relationships in the Western Hemisphere; they need the raw materials, and they’re willing to buy them,” he says.

“On the Latin American side, countries want positive relations with major commercial partners, and so recognising [Beijing's] sovereignty over Taiwan is, for most countries, a relatively easy and cost-free way to do that."

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