China joins Inter-American Development Bank
By Chris Kraul
The Los Angeles Times
October 24, 2008
http://www.latimes.com/news/nationworld/world/la-fg-chilatin24-2008oct24,0,2483629.storyReporting from Bogota, Colombia -- In the latest sign of China's
increasing economic stake and political muscle in Latin America, the
Asian giant is joining a Washington-based international bank that
finances development projects throughout the region.
China's membership in the Inter-American Development Bank, announced
Thursday, is expected to increase the nation's profile and influence
in a part of the world that historically has been under the sway of
the United States.
China will invest $350 million in the bank and assume a role in its
socially conscious projects, including efforts to mitigate poverty and
global warming and to provide potable water, infrastructure
improvements and micro-credit, bank President Luis Alberto Moreno said
in an interview.
Analysts saw the move as providing the Chinese with a new forum to
meet Latin American decision-makers and improve Beijing's image in the
region.
Analyst Gary Hufbauer, senior fellow at the Peterson Institute for
International Economics in Washington, said the Chinese could be
seeking to outflank the United States in its own backyard.
"The U.S. is well prepared to meet Chinese challenges in the Taiwan
Strait or the high seas," Hufbauer said. "It is poorly prepared to
grapple with Chinese financial diplomacy, both because 'our'
institutions -- the International Monetary Fund and the World Bank --
are small potatoes compared to the Chinese war chest, and because
Americans don't think of national security in financial terms."
The importance of Latin America and the Caribbean to China is evident
in growing trade, which has jumped thirteenfold since 1995, to $110
billion last year.
The Asian nation is now the region's second leading trade partner,
after the United States.
Over the same period, U.S. trade with Latin America grew more slowly
from a larger base. Trade between the two reached $588.4 billion in
2007, up from $201 billion in 1995.
"Membership in the
is only one indicator of Beijing's
pocketbook diplomacy," Hufbauer said.
"China has already been at work in Africa and Asia, and the global
financial crisis will create abundant vineyards for future pickings."
China has announced plans to set up a sovereign fund to invest $200
billon in projects abroad, and Latin America could receive a
significant share.
At the 2004 Asia-Pacific Economic Cooperation summit in Chile, China
promised to invest $100 billion in Latin America over the next decade.
After a slow start, Chinese money is starting to flow to projects such
as a $3-billion steel factory going up near Rio de Janeiro, the
largest single Chinese project in the region.
China has also established a multibillion-dollar social investment
fund with leftist Venezuelan President Hugo Chavez, with whom it is
about to launch a communications satellite.
China has looked increasingly to Latin America, which is rich in soy,
wheat, corn, iron ore, copper and oil, for commodities to help expand
its industrial base and provide for its increasingly affluent citizens.
Beijing has acquired oil assets in Ecuador, paying $1.4 billion in
2006, and bought a stake in an oil production company in Colombia.
China typically stays out of politics in countries where it invests.
"They aren't converting anyone to communism because they don't believe
in it themselves," said University of Miami professor Michael Connolly.
But China does have an agenda in Latin America, said Evan Ellis at the
consulting firm Booz Allen Hamilton in Arlington, Va.
China is irked by the diplomatic recognition of Taiwan by 12 Central
American and Caribbean nations, he said, and could use the bank forum
to lobby against such diplomacy.
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