Why has China snubbed Cuba and Venezuela?
Jun 6th 2013, 23:50 by H.T. | MEXICO CITY
XI JINPING’S first visit to Latin America and the Caribbean as China’s president, from May 31st to June 6th, took him tantalisingly close to Beijing’s strongest ideological allies in the region, Cuba and Venezuela. Yet he steered clear of both of them. Instead of visiting Cuba, as his predecessor Hu Jintao did on his first presidential trip to the region, Mr Xi stopped off in an English-speaking Caribbean nation, Trinidad and Tobago, which (as if to rub it in) is only a short hop from Caracas. He then travelled to Costa Rica and Mexico (pictured)—two countries that are at least as much a part of America’s orbit as Cuba and Venezuela are part of the “Beijing Consensus”. Why this snub to two friendly nations that have been lavished with Chinese largesse in recent years, especially at a time when both are struggling to come to terms with the death in March of Hugo Chávez, the Cuba- and China-loving Venezuelan leader?
The short answer is: for simplicity’s sake. Visits to Cuba and Venezuela might well have raised distracting questions when Mr Xi meets Barack Obama in Southern California on June 7th, and neither socialist government was likely to express publicly any offence at being left off the itinerary. The beauty of having a chequebook as thick as China’s is that if you give your friends the cold shoulder, you can always mollify them with money. That may be why, on June 6th, Venezuela’s oil minister announced that he had secured an extra $4 billion from China to drill for oil, in addition to $35 billion already provided by Beijing. Not quite in the same league, but significant nonetheless, the Havana Times reported this week that China was also planning to invest in Cuban golf courses, the island’s latest fad.
However, as our story on Mr Xi’s visit to Latin America points out, he may have had other reasons for picking the destinations that he did. Firstly, he may be trying to respond to Mr Obama’s “pivot” to Asia by showing that China is developing its own sphere of influence in America’s backyard. China’s business relationship with Latin America gets less attention than its dealings with Africa, but in terms of investment, it is much bigger. According to Enrique Dussel, a China expert at Mexico’s National Autonomous University, Latin America and the Caribbean were collectively the second largest recipient of Chinese foreign direct investment between 2000-2011, after Hong Kong. In terms of funding, Kevin Gallagher of Boston University says China has provided more loans to Latin America since 2005 than the World Bank and the Inter-American Development Bank combined. The visits to Mexico and Costa Rica may also represent a pivot of sorts in terms of the type of economic relationship China has with Latin America. Up until now, China has hoovered up the region’s commodities, importing soya, copper, iron, oil and other raw materials, particularly from Brazil, Chile and Venezuela, while flooding the region with its manufactured goods. But its relations with Mexico, a rival in low-cost manufacturing, have been frosty: China accounts for only about 0.05% of Mexican foreign direct investment, and it exports ten times as much to Mexico as it imports.
But as wages in China have increased and high energy prices have raised the cost of shipping goods from China to America, Beijing may be looking for bases such as Mexico and Costa Rica where it can relocate Chinese factories and benefit from free-trade agreements with the United States. This idea thrills the Mexican government, but does it pose an immediate threat to Venezuela and Cuba? Probably not: China will continue to need their staunch ideological support over issues like Taiwan, for one thing. But it does suggest that China’s economic interest in the region is broadening, especially along the Pacific coast. If that proves to be the case, Cuba and Venezuela, deprived of the charismatic Chávez to court Beijing on their behalf, will have to work hard to stay relevant.