The Erosion of US Dominance in Latin America

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On November 30, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned China National Electronics Import & Export Corporation (CEIEC) – a state-owned company specializing in engineering and defence electronics – for having provided technological support to Venezuelan President Nicolas Maduro’s administration. The CEIEC has been supporting the state firm National Anonymous Telephone Company of Venezuela (CANTV), the main Internet service provider in the country.

In a language characteristic of imperialist America, the press release pertaining to CEIEC has hubristically criticized “Maduro regime’s efforts to undermine democracy in Venezuela.” Neatly forgetting the US role in imposing murderous sanctions on the Venezuelan masses and supporting a bloody, coup-mongering opposition, Treasury Secretary Steven Mnuchin hypocritically added, “The United States will not hesitate to target anyone helping to suppress the democratic will of the Venezuelan people and others around the world.”

Criticizing US sanctions against CEIEC, Venezuelan Foreign Affairs Minister Jorge Arreaza has said, “We denounce the US government’s coercive measures which were imposed to affect projects in favor of the Venezuelan people ahead of the parliamentary elections.” In a press briefing, Chinese Foreign Ministry spokesperson Hua Chunying also denounced the sanctions, stating, “China supports Venezuelan efforts to defend its sovereignty and is opposed to abusing international sanctions.”

China in Latin America

Washington’s growing concern about the global multipolarization unleashed by China’s rise is one the primary explanations behind the enforcement of new sanctions. China has been making inroads in Latin America, implicitly challenging the unipolar hegemony of the American Empire and its Monroe Doctrine. In the late 1990s, total trade (imports plus exports) between China and Latin America was approximately US$5-8B a year. Bilateral trade grew dramatically from the turn of the century, reaching more than US$255B in 2014. Between 1999 and 2014, Chinese imports from Latin America increased more than forty fold, and exports to the region more than twenty-five fold.

Unlike the US imperialist trade paradigm, which penetrates sensitive economic sectors like agriculture, imports from China have not generated mass dislocation of local producers. These imports are mainly found in high-technology sectors where large-scale domestic production is absent. Therefore, increased imports from China are not necessarily negative for all producers. Imports of low-cost Chinese inputs or capital goods can help reduce production costs and increase profitability for local producers. Such transactions may also involve technology transfer.

Growing trade with China has positively impacted Latin American manufacturing through technology transfer and the establishment of beneficial economic links. Official Chinese documents identify technology transfer and research and development (R&D) as important areas for cooperation between China and Latin America. China’s 2016 Policy Paper refers to “the expansion of cooperation with Latin American and Caribbean countries in high-tech fields such as information industry, civil aviation, civil nuclear industry and new energy, as well as to build more joint laboratories, R&D centres and high-tech parks.”

The China and Community of Latin American and Caribbean States (CELAC) Forum Cooperation Plan, adopted in Beijing in 2015, also stresses the centrality of R&D in trade relations, talking about the need to “Promote the development and demonstration of modern agricultural technologies and strengthen countries’ collaboration in R&D, as well as investment and development zones to advance agricultural technological innovation and increase agricultural production and processing capacity and international competitiveness of both sides.”

The Latin American Left

Left-wing governments in Latin America have seen expanding relations with China as a way of enlarging policy space: it makes them less vulnerable to the conditionalities of the Washington Consensus and enables them to pursue alternative social policies free from external pressures. To take one example, in Ecuador, when the National Assembly passed a law in 2010 which required the renegotiation of contracts with transnational corporations in the oil industry, Chinese companies proved more willing than Western ones to accept the new terms of trade.

In Bolivia, a joint venture between China’s Jungie Mining and the Alto Canutillos mining cooperative found during consultations that the local community in Tacobamba was opposed to the opening of a tin-processing plant near the mine and the firm agreed to locate on a site 25 miles away, avoiding potential conflict. This type of cooperative attitude respects the social bases of socialist organizations and contributes towards their political consolidation.

In Venezuela, the Chavista government has used Chinese loans to finance its social programmes which would not have been possible had they needed to raise funds on international capital markets. In a situation where the imperialist belligerence of the US government and the financial markets’ disapproval of Venezuela’s socialist policies led to very poor international credit ratings, borrowing from China was an attractive way for the government to fund its economic program.

In 2007, the China Development Bank (CDB) made its first loan of $4B to Venezuela’s Heavy Fund. The fund was supplemented by further CDB loans in 2009 and 2013; the repayment of these loans required the supply of 330,000 barrels of oil a day. In 2010, a second fund, the Large Volume, was created with a 10-year loan from CDB. The loans were used to fund infrastructure projects, housing developments, and imports of consumer goods from China. In Venezuela, a loan by the Industrial and Commercial Bank of China (ICBC) in 2012 was used for 20,000 units of social housing. By 2016, China had loaned Venezuela a total of over $60B.

Chinese lending to Latin America is not restricted to Venezuela. Those countries in the region that have defaulted on debts in the recent past, such as Argentina and Ecuador and, therefore, find it difficult to access international capital markets or can only do so at very high interest rates, have also benefitted from no-strings-attached Chinese loans. Since the debt crisis of the 1980s, Latin American countries have sought to avoid fiscal deficits in order to maintain their credit ratings, which significantly reduces government expenditure. The availability of Chinese funds – which are provided without imposing macroeconomic conditions on the recipient – enabled the leftist regimes of Ecuador and Argentina to increase social expenditure.

At its peak in 2010, Chinese lending to Latin America was considerably greater than that of either the World Bank or the Inter-American Development Bank (IADB), while China’s Exim Bank has lent more than four times as much as the US Exim Bank in Latin America since 2005. Chinese loans to Latin America were dominated by one country, Venezuela, which received more than half of the total loans identified by Inter-American Dialogue since 2005; and four countries together, Venezuela, Brazil, Argentina, and Ecuador, accounted for 95% of the total.

With the help of China, Latin American governments have been creating alternative institutions to confront the hegemonic tools of imperialism. Through the erosion of US dominance and the establishment of post-hegemonic initiatives of international cooperation, a road has been paved for the development of socialism. In contrast to imperialism, multipolar world politics respects the sovereignty of countries in the Global South and allows them to pursue their own economic policies. With the rise of China, such a global framework of non-interference has begun replacing imperialism.

Yanis Iqbal  is a student and journalist

Originally published in The Canada Files



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