U.S. NATIONAL SECURITY IMPLICATIONS

OF CHINESE INVOLVEMENT IN LATIN AMERICA

R. Evan Ellis

June 2005

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iii

FOREWORD

 In this monograph, Dr. Evan Ellis seeks to do several things. He 

documents and examines the character of the new and increasing 

Chinese engagement in the Western Hemisphere. He then takes the 

analysis a step further by examining some of the potential dynamics 

of the Chinese engagement and its consequences for the long-term 

security interests of the United States. Dr. Ellis argues that China is 

both a significant competitor, and a potential partner of the United 

States in the region. Although he argues that China increasingly 

will vie with the United States for the hemisphere’s resources and 

political allegiances, he also notes that China’s growing dependence 

on its trade and investment in Latin America will give it security and 

stability interests that coincide with those of the United States. At the 

same time, the author warns that the combination of competition, 

trade, investment, political interests, and concomitant Chinese 

population increase in the region is likely to change the economic 

structure of the region in ways that could possibly sow the seeds for 

the next generation of political instability in Latin America. In any 

case, it is clear that Chinese engagement in the Western Hemisphere 

will challenge traditional notions of U.S. dominance in the area.

 By presenting this provocative analysis, the Strategic Studies 

Institute expects to contribute to the formulation of new thinking on 

how the United States can address the national security challenges 

that it presents, while also leveraging the possibilities that it presents 

for the long-term health and well-being of all the countries of the 

region.

DOUGLAS C. LOVELACE, JR.

Director

Strategic Studies Institute 
iv

BIOGRAPHICAL SKETCH OF THE AUTHOR

R. EVAN ELLIS is an associate with Booz, Allen & Hamilton, Inc., 

who focuses on defense transformation and Latin American security 

issues. Dr. Ellis’ work includes studies of political mobilization in 

Venezuela; analysis of democratic security and U.S. operations in 

Colombia; work on the 2003 and 2004 Joint Transformation Roadmaps 

and the 2003 and 2004 Naval Transformation Roadmaps; and an 

examination of the information warfare capabilities of organized 

crime in Colombia. As a practitioner of system dynamics, he has 

also played a role in a number of major defense system development 

efforts. His system dynamics work has also taken him into the arena 

of business strategic planning, naval systems engineering, nuclear 

materials management and computer network architecture analysis. 

His publications include “Latin and South America: A Case Study 

in Emergent Geopolitical Viruses,” “Organizational Learning 

Dominance: The Emerging Key to Success in the New Era of Warfare” 

and “Nodal Analysis and Its Role in Precision Strike.” Dr. Ellis holds 

a Ph.D. in political science with a comparative politics specialization 

in ethnic violence.
v

SUMMARY

 In this monograph, the author argues that China’s pursuit of longterm strategic objectives is leading the country to increase its presence 

in Latin America, with serious national security implications for the 

United States. Sustained Chinese economic growth requires ever 

greater quantities of basic commodities such as petroleum products, 

coal, iron and steel, and strategic minerals. As the new generation of 

Chinese leadership under Hu Jintao has moved away from the more 

cautious approach of his predecessor, Jiang Zemin, China has begun 

to aggressively court Latin America as its principal source of supply 

outside Asia. Figures from the Chinese National Statistics Office 

show that, for example, 77 percent of all Chinese foreign investment 

outside Asia in 2003 went to Latin America.

 The pattern of Chinese investment in countries such as Argentina, 

Brazil, and Chile suggests that the Asian giant is seeking to assure 

access to critical commodities by constructing vertically integrated 

supply networks over which it has leverage. China is purchasing 

interest in key Latin American suppliers such as the Canadian 

minerals firm Noranda, or the Argentine oil subsidiary PlusPetrol 

Norte. It is also building cooperative relationships with supplier 

governments such as the joint oil exploration and refinery construction deals signed with Venezuela and Brazil in 2004. Where 

necessary, China is also investing in the infrastructure of Latin 

American countries to help them more effectively bring their 

products to market.

 In addition to documenting China’s aggressive new posture in 

specific Latin American countries, this monograph argues that the 

expanded Chinese trade and investment presence in the region 

ultimately will give China a stake in the politics of the region and may 

tempt it to become involved in the region’s security affairs. Expanded 

Chinese trade and investment in Latin America, for example, will 

expand greatly the community of Chinese nationals in the region. The 

broadened community of Chinese nationals multiplies opportunities 

for incidents involving those nationals, while also expanding the 

community in China with an interest in the region. At the same 

time, significant Chinese investments in Latin American extractive 
vi

industries and increasing dependence on its production will cause 

the Chinese government to seek to deflect political movements in 

Latin American countries that could expropriate these investments 

or disrupt these resource flows.

 Ultimately, this monograph argues that Chinese engagement with 

Latin America will make the nation both a powerful competitor and 

a potential partner for the United States in the region. On one hand, 

China, with major investments in Latin America and dependence 

on its material flows, is likely to be a nation interested in reducing 

political instability, armed groups, and criminal activity in the region, 

rather than fueling radical populism and insurgency. On the other 

hand, the United States needs to consider to what degree it is willing 

to accept a China that has increasing leverage in Latin America 

through its investment and trade presence―and a growing interest 

in the political course of the region. Now, rather than later, is the 

time for the United States to begin seriously considering how to most 

constructively engage the Chinese in the Western Hemisphere.
1

U.S. NATIONAL SECURITY IMPLICATIONS

OF CHINESE INVOLVEMENT IN LATIN AMERICA

 The November 2004 Asia-Pacific Economic Cooperation (APEC) 

summit resounded with echoes of trouble for the United States in the 

Western Hemisphere. While the U.S. delegation quarreled with its 

Chilean hosts over security protocols, Chinese President Hu Jintao 

finalized $100 billion in investment commitments to the region.1

 While 

the U.S. delegation came to APEC talking about terrorism, deficits, 

and the North Korean nuclear program, the Chinese highlighted their 

potential as a new source of foreign investment and an enormous 

market for the types of commodities that Latin America has to sell.

The events of the APEC summit should serve as a wake-up 

call to U.S. policymakers whose resources and attention have been 

focused on more distant challenges. Chinese economic growth and 

resource needs have led the Asian giant to break with past precedent 

and pursue a policy of economic engagement with the Western 

Hemisphere that has significant national security implications for 

the United States. According to one report, “With frequent highlevel visits and billions of U.S. dollars worth of economic and trade 

cooperation, [ties between] China and Latin America have entered 

the ‘best period in history’.”2

 The underlying demographic and economic trends driving China’s 

engagement with Latin America are significant and enduring―

indicating that China’s increased presence in this hemisphere is likely 

to both endure and expand. This monograph explores these trends, 

their manifestations, and some of the dynamics through which they 

may impact the national security of the United States.

DRIVERS OF CHINESE TRADE AND INVESTMENT 

IN LATIN AMERICA

China’s engagement with Latin America is driven, in part, by needs 

stemming from the sustained rapid growth and development of the 

Chinese economy.3

 Reflecting a combination of population growth, 

industrialization, and modernization, between 1978 and 2002, China’s 

gross domestic product grew at an average rate of 9.4 percent.4

 In 
2

2003, despite predictions that such sustained high rates of growth 

were unsustainable, the Chinese economy grew by 9.7 percent.5

 The 

expansion of the Chinese economy currently accounts for 25 percent 

of all global economic growth.6

 According to state projections, the 

growth of the Chinese economy and its associated demand for raw 

materials is expected to continue.7 Moreover, because this growth is 

linked to a deliberate government plan to extend industrialization 

to the interior of the country,8 China’s demand for both energy and 

other material resources is likely to grow at levels equal to or greater 

than the rates of growth of its economy.9

 As China continues on its path of sustained, dramatic growth, 

the country’s resource needs are outstripping its ability to obtain 

these resources at home, or within Asia more broadly. In the energy 

sector, as an example, Chinese imports of crude oil increased almost 

40 percent during 2004.10 By 2025, if current trends continue, the 

Energy Information Agency (EIA) forecasts that China will import 

9.4 million barrels of oil per day. At the same time, Chinese attempts 

to secure sources of oil, including projects in the South China Sea as 

well as pipeline deals from Russian and Central Asian fields, have 

been beset by a series of difficulties. Growing demand is similarly 

exceeding domestic supply with respect to strategic minerals, even 

in sectors in which China has traditionally had a substantial domestic 

production capability.11 The current compound annual growth rate 

in Chinese demand for strategic minerals is 17 percent for copper, 15 

percent for zinc, and 20 percent for nickel.12 Reflecting these growth 

trends, Chinese imports have expanded accordingly. In 2003, Chinese 

imports of nickel doubled, while imports of soybean products 

increased by 70 percent.13 China also has become the world’s largest 

importer of iron ore, with its imports of this commodity increasing 

by 33 percent in 2003 alone.14 In 2002, China surpassed the United 

States to become the world’s largest consumer of copper. Such 

growing resource needs, in combination with problems in meeting 

them within Asia, increasingly creates a long-term imperative for 

China to look further abroad to secure long-term sources of supply.

In its ongoing search to secure strategic resources to sustain 

future growth, Latin America simply has too many commodities 

that China needs in quantities too large for the Asian giant to 

ignore. Although Latin American oil production is relatively modest 
3

compared to that of the Middle East, for example, the 5.5 percent of 

global production that it represents is still significant enough to merit 

China’s attention as part of a larger global strategy.15 Moreover, Latin 

America dominates the global market with respect to certain “niche” 

commodities of interest to China. Venezuela, for example, currently 

has the world’s largest proven reserves of the low-grade petroleum 

product ormulsión. Similarly, Chile is the world’s leading producer 

of copper, a strategic mineral identified by the Chinese state as an 

item in short supply.16 China currently purchases over $1 billion of 

its copper from Chile annually.17

In examining China’s aggressive new posture in Latin America 

as a response to the strategic imperatives of sustained growth and 

resource needs, it is also important to note the human leadership 

context through which these needs, and the alternatives for meeting 

them, are interpreted. The expansion of Chinese trade with and 

investment in Latin America coincides with the leadership transition 

from Jiang Zemin to Hu Jintao, with the 16th Congress of the 

Chinese Communist Party in November 2002 marking a particularly 

important milestone in this shift. Hu Jintao and his leadership 

team rose to power in a China no longer living in the ideological 

shadow of the Soviet Union, with a far larger economy than that 

of their predecessors, and with a generation of relative political 

stability. As such, the new Chinese leadership has interpreted the 

opportunities and risks represented by engagement in Latin America 

very differently than did its predecessors. As China scholar Murray 

Scot Tanner notes, “Hu Jintao is regarded as less concerned than his 

predecessor in avoiding actions that would offend the United States 

. . . particularly where it involves China’s ability to engage “thirdworld countries.”18

THE SHAPE OF CHINA’S NEW ENGAGEMENT 

IN LATIN AMERICA

While Latin America is not the only region in which China is 

developing its long-term resource strategy, it is currently the principal 

economic focus of China outside Asia. Moreover, as demonstrated at 

the November 2004 APEC summit in Santiago, Chile, China is now 

engaged in a course that demonstrates its willingness to significantly 

raise its visibility in the region. 
4

 In conjunction with his trip to the APEC summit, Hu Jintao 

signed 39 new cooperative agreements in a wide variety of fields19

and announced $100 billion in new Chinese investment initiatives 

in the region,20 including $30 billion for Chile, Argentina, and 

Brazil alone.21 The significant jump in Chinese investment in Latin 

America has two components. First, Chinese foreign investment 

globally has expanded tremendously in recent years as a function 

of a Chinese effort to “internationalize” key businesses. In 2004, 

Chinese companies invested $3.62 billion in nonfinancial sectors 

abroad, representing a 27 percent increase over the previous year.22

Second, and more importantly, Latin America is by far the central 

focus of the new foreign investment strategy. As shown in Figure 1, 

almost half of all Chinese direct investment abroad in 2004 went to 

Latin America, almost doubling the quantity of investment going to 

China’s neighboring states in its own region.23

0% 10% 20% 30% 40% 50% 60%

Latin 

America

Asia

Europe

All Other 

2004 

2003

49%

36%

29%

53%

16%

5%

6%

6%

Figure 1. Distribution of Chinese Foreign Investment.
5

 In parallel with the growth in Chinese investment, Chinese 

bilateral trade with Latin America has also increased dramatically 

over the past several years, although beginning from a relatively low 

base. Total Chinese bilateral trade with Latin America more than 

doubled, from $12.6 billion in 2001 to $26.8 billion in 2003.24 In the 

first 7 months of 2004, Chinese trade with Latin America expanded 

by 54.5 percent25 and is on track to reach $30 billion in 2004.26 A 

significant part of this increase in bilateral trade was produced by 

a major expansion of exports from Latin America to China. Latin 

American exports to China, largely in extractive sectors, increased 

by 73 percent in 2003 alone, to reach a level of $10.9 billion.27

 In this strategy, China is not simply looking to Latin America as 

a free-market vendor of ever increasing quantities of the strategic 

materials that it requires for economic growth. Rather, the Chinese 

are seeking to achieve assured sources of supply in Latin America 

through a strategy that focuses on securing the entire supply chain 

in critical industries. This strategy of “vertical integration” involves 

using strategic purchases and investments to ensure an acceptable 

amount of leverage over, and functionality of, all elements of the 

supply chain. Depending on the characteristics of the particular 

supply chain and the possibilities afforded by the situation, this may 

involve purchasing a stake in the key foreign industries to which 

it requires Chinese access―and even investing in the transportation 

infrastructure of the target country to facilitate bringing the product 

to market. Reflecting this strategy of “vertical integration” in strategic 

minerals, 52.8 percent of Chinese overseas investment in 2004 was 

concentrated in the mining sector.28

 The remainder of this section analyzes Chinese interests, patterns 

of trade, and major initiatives in select countries in the region, and 

illustrates the manner in which key Chinese trade and investment 

deals are consistent with the pursuit of a strategy of vertical 

integration in key resource sectors.

Venezuela.

It can be argued that Venezuela is currently China’s principal 

strategic partner in Latin America, both in terms of the volume of 

investment, as well as in the nature of the relationship between 
6

the two countries.29 China currently has over $1.5 billion invested 

in Venezuela―prior to the recently announced $100 million in 

investment commitments, the largest investment position of any 

country in the region.30 Bilateral trade between China and Venezuela 

increased from $150 million in 2003 to $1.2 billion in 2004,31 and is 

anticipated to reach $3 billion in 2005, based on agreements signed 

during the state visit of Venezuela’s populist president Hugo Chávez 

Frias to China during the 2004 Christmas holiday,32 as well as a series 

of 19 cooperation accords signed between Venezuela and China in 

January 2005.33 These figures reflect growth in both imports and 

exports. Venezuelan imports from China grew by 120 percent over 

2004 to reach $560 million, while similarly growing oil exports have 

allowed Venezuela to maintain a net trade surplus.34

 The Chinese relationship with Venezuela reflects not only 

Chinese interest in Venezuelan resources, but also the receptivity of 

President Chávez. His interest in developing alternative markets for 

Venezuelan petroleum, and developing a hedge against U.S. influence 

in the region, make him a strong potential Chinese ally.35 In his highprofile state visit to China, Chávez signed a number of accords in 

which he committed Venezuela to put its petroleum production 

“at the disposition of the great Chinese fatherland.”36 On the other 

hand, he is also a potential threat to Chinese interests, insofar as his 

Bolivarian revolution and support for indigenous populism and antiglobalist causes could foment instability in China’s trading partners 

in Latin America, and undermine Chinese access to the resources of 

the region.

 China’s principal interest in Venezuela, based on trade and 

investment patterns, is petroleum products. Exports of Venezuelan 

petroleum products to China registered a 75 percent increase in 

2003,37 and a 25 percent increase in 2004, reaching a level of $640 

million.38 Although the volume of petroleum shipments from 

Venezuela to China is limited and there are restrictions on the size 

of tankers and cargo ships which can be sent through the Panama 

Canal, infrastructure projects are under consideration which could 

sidestep these constraints by using pipelines to carry the oil overland 

to Pacific ports―either across Colombia or Panama.

 As part of a series of accords signed during the state visit 

of Chávez to China in December 2004, and leveraging the close 
7

working relationship with the Chinese developed over recent years,39

Venezuela will give China access to 15 mature oil fields, with proven 

reserves of up to a billion barrels of oil, for Chinese firms to develop 

and exploit.40 As part of the accord, China will invest $350 million 

toward bringing these fields on line,41 and in exchange will be allowed 

to build refineries on Venezuelan territory to process the oil.42 The 

agreement will help the Venezuelan government to overcome the 

shortfalls in technical management that it created when it fired half 

of all workers in its state oil firm, Petroleos de Venezuela (PdVSA), 

following the December 2002-March 2003 national strike. By allowing 

the Chinese to directly develop these fields, Venezuela will be able 

to almost double its production despite a lack of internal technical 

capacity to do so, selling significant quantities of oil to China while 

still serving its traditional markets.

 As a compliment to its assistance to Venezuela in extracting its 

oil, China is also investing $60 million in a number of projects to help 

Venezuela extract its natural gas. 43 During a scheduled state visit at 

the end of January 2005, Chinese Vice-President Zeng Quinghong and 

senior directors of China National Petroleum Corporation (CNPC) 

will analyze the viability of even greater Chinese investment in the 

development of Venezuelan natural gas reserves.44

 A third significant element of Chinese engagement with 

Venezuela in the petroleum sector involves the Chinese purchase 

of Venezuelan ormulsión, and conversion of Chinese facilities to 

use it for the generation of electricity. Ormulsión is a low-grade, 

high-pollution content fuel oil traditionally given little or no value 

because of the lack of a global market for its use. In December 2001, 

CNPC and PdVSA established the joint venture Orifuels Sinoven, 

S.A (Sinovensa) and invested $330 million to develop a capability to 

produce 6.5 million metric tons of ormulsión per year by the end of 

2004. In conjunction with this effort, in November 2003 CNPC began 

constructing a special new type of power plant capable of burning 

ormulsión in the Guangdong province of China.45 Through a deal 

finalized in 2004, China’s commercial agent, Petrochina, a subsidiary 

of CNPC, is currently purchasing 1.5 millions of tons of orimulsión 

annually from Venezuela.46 By building the new power plant, China 

is able to make use of the Venezuelan ormulsión, which it is able to 
8

purchase at relatively low cost because of the lack of a global market. 

Moreover, Venezuela is China’s natural partner for the ormulsión 

deal, in that the Latin American country currently possesses the 

world’s largest proven ormulsión reserves―almost double those of 

Saudi Arabia, the next largest source.

 China is also helping Venezuela to extract its coal. At the end 

of 2004, China announced that it will invest in the development of 

mines in the Orinoco River Basin area in the south of the country.47

China Minmetal and the Venezuelan firm, Corpozulia, are slated to 

sign an agreement during the scheduled state visit of Chinese Vice 

President Zeng Quinghong at the end of January 2005 that would use 

Chinese investment to increase Venezuelan carbon production.48

 Beyond the domain of extractive industries, the ChineseVenezuelan partnership has extended to the agricultural sector, where 

Venezuelan interests in improving agricultural productivity coincide 

with Chinese interests in developing reliable, friendly suppliers of 

foodstuffs. As part of the accords reached between the two nations 

during the Christmas 2004 visit of Chávez to China, the Asian giant 

has agreed to provide Venezuela with agricultural machinery and 

credits for the nation to increase its food production.49

 In keeping with the vertically integrated strategy that China has 

pursued in other Latin American countries to secure access to sources 

of supply for strategic materials, China announced in December 2005 

that it will invest in the construction of a national railway line, helping 

Venezuela to transport raw materials and foodstuffs to market.50

 Finally, China is also helping Venezuela to develop its 

telecommunications industry, including assistance to Venezuela 

in access to space. As part of the series of accords reached during 

the Christmas 2004 visit of Hugo Chávez to China, the two nations 

announced that China will launch a telecommunications satellite 

for Venezuela, helping the nation become less dependent on U.S. 

telecommunications networks.51 The initiative built on broader 

discussions of how China could help Venezuela to develop and 

modernize its telecommunications infrastructure more broadly, 

including a December 2004 visit to Venezuela by Vice minister of 

the Chinese information ministry Lou Kinjian to discuss possible 

collaboration on telecommunication projects with the Venezuelan 

telecommunications firm, CVG Telecom.52
9

Chile.

Chile is strategically significant to China, not only as a supplier 

of copper and other minerals, but also in respect to its foodstuffs, 

and in terms of its commercially developed Pacific ports, which 

provide potential Chinese access to a number of Latin American 

markets. Bilateral trade between Chile and China in 2004 expanded 

more than 50 percent, to a level of $5.365 billion.53 Chilean exports to 

China reached $3 billion and could increase by $500 million during 

the coming year.54

 Key Chinese initiatives in Chile involve its copper and strategic 

materials industries, reflecting Chinese efforts to secure access to these 

minerals through purchasing an interest in key Chilean suppliers.55

Of these, China is particularly interested in Chilean copper, insofar 

as it is currently considered a “short supply” item by the Chinese 

government.56 Recent Chinese deals in the Chilean minerals sector 

reflect this attempt to acquire leverage at key points in the supply 

chain, including Chinese acquisition of a Canadian minerals firm, 

Noranda, and investment in the Chilean state copper firm, Coldeco. On 

September 24, 2004, the Chinese state firm, Minmetals, announced its 

entry into exclusive negotiations to purchase Noranda, a transaction 

of approximately $5 billion.57 Noranda is not only a major producer 

of Copper in Chile, but is also one of the world’s largest producers 

of nickel and zinc.58 In addition to the Noranda deal, Minmetals 

also recently signed an agreement with Coldeco valued at $1.93 

billion, assuring Chinese access to Chilean copper over the next 20 

years.59 The deal is the most recent in a series of initiatives involving 

Coldeco, including significant Chinese participation in an October 

2004 bond issue. Overall, Asian interests purchased 30 percent of a 

new bond issue released by Coldeco―representing the first time that 

Asian interests had participated in such a bond issue, and supplying 

it with $150 million in capital.60

 In addition to its role as a supplier of copper and other strategic 

materials, Chile is also emerging as a potentially significant exporter 

of foodstuffs to China. Chilean agricultural exports to China increased 

45 percent from January to September 2004 alone, with exports of 

$273 million in that period.61
10

Brazil.

 Brazil plays an important role in China’s relationship with Latin 

America. The nation is both a large, mature market for Chinese 

manufactured products, as well as a major supplier of soybeans, soy 

oil, iron ore, steel, and wood.62 In terms of specific countries, Chinese 

trade with Brazil increased from $1.84 billion in 1999 to $7.98 billion 

in 2003.63 In the first 11 months of 2004, China-Brazil bilateral trade 

expanded by 56.2 percent in relation to the same period in 2003, to 

reach a level of $11.3 billion, making Brazil China’s leading trade 

partner in Latin America by dollar value.64 In a November 2004 

interview, Chinese spokesman Yang Yang observed that cooperation 

between China and Brazil was advancing even more rapidly than 

that with Argentina because Brazil had clearly outlined specific areas 

of possible cooperation to the Chinese.65

 Brazilian diplomatic engagement with China has paralleled this 

increasing trade. In May 2004, Brazilian president Lula De Silva 

visited China, accompanied by business leaders.66 President Hu 

Jintao reciprocated with a high-profile visit to Brazil in conjunction 

with the November 2004 APEC summit.

 For Brazil, iron ore and associated products have been key items 

in its trade with China. Brazilian exports of iron registered the most 

significant expansion, increasing by 500 percent over the past year.67

During a state visit by President Hu Jintao to Brazil in November 

2004, the two nations announced that China will invest $10 billion in 

Brazil over the next 3 years, and that within this period, the nations 

expect bilateral trade to double to $20 billion per year.68

 In addition to iron, China is also very interested in Brazilian 

petroleum products. Key recent Chinese initiatives in this sector 

include Sinopec plans to construct a Trans-Brazilian gas pipeline 

and a Sinopec–Petrobras accord for joint oil exploration and 

refinery construction. In May 2004, Sinopec signed an accord with 

the Brazilian petroleum giant, Petrobras, to cooperate in the areas 

of exploration and refineries, and Petrobras anticipates doubling its 

exports of petroleum to China over the next year. The accord also 

encompassed the creation of infrastructure that would support these 

oil flows, including the construction of petroleum storage facilities in 
11

the Chinese port of Ningbo to receive Brazilian oil.69 The agreement 

came on top of a series of other recent deals strengthening the 

Brazilian-Chinese relationship in the petroleum sector, including 

Brazil’s selection of Sinopec, the second largest Chinese petroleum 

firm, to construct a gas pipeline that will span Brazil from north 

to south,70 as well as the opening of a branch office in Beijing by 

Petrobras.71

 In addition to iron and petroleum products, China is also interested 

in Brazilian foodstuffs, such as soy, beef, and chicken, reflecting the 

need by the Asian giant to supplement its small agricultural belt to 

feed its population.

 In support of its interest in helping Brazil export products 

of interest, China has also made commitments to invest in the 

modernization of Brazilian transport infrastructure, including a 

potential investment of $4.82 billion to expand and modernize the 

Brazilian railway system.72

 Although not directly tied to Chinese resource needs, China and 

Brazil have also pursued significant cooperation in the aerospace 

arena. The two nations have jointly developed and launched two 

earth research satellites, with two more planned by 2008.73 The first 

satellite, the China-Brazil Earth Resources Satellite (CIBERS-1) was 

launched in October 1999, while the second was launched in late 2004. 

While CIBERS-1 was an environmental monitoring satellite that did 

not have significant military utility, it reportedly did assist China 

in developing real-time digital photo technology―thus increasing 

the capabilities of Chinese military imagery intelligence satellites. 

Moreover, by giving the Chinese access to Brazilian satellite tracking 

facilities, this space cooperation has arguably helped China to gain 

a more comprehensive picture of the flight paths of U.S. satellites.74

In addition to space cooperation, China also has established ties 

with Brazil’s leading aircraft manufacturer, Embraer. Pursuant to 

an agreement signed in December 2002 with significant technology 

transfer implications, Embraer established a production facility in 

the Chinese city of Harbin, and is currently producing mid-sized ERJ 

145 regional jets in the facility.75
12

Argentina.

As elsewhere in Latin America, Chinese trade with Argentina has 

increased significantly over the past several years. In 2003, bilateral 

Argentina-China trade reached $3.176 billion―an increase of 122 

percent over the previous year.76 Exports by Argentina to China 

alone increased by 143.4 percent to $2.56 billion, and are planned 

to increase to $7 billion over the next 5 years according to accords 

signed between the two nations during Hu Jintao’s visit to Argentina 

in November 2004.77

 As in Brazil, Argentine diplomatic engagement with China has 

paralleled the expansion of trade between the two nations and the 

growth in Chinese investment. In June 2004, Argentine President 

Nestor Kirchner visited China, accompanied by business leaders.78

As with Brazil, President Hu Jintao visited Argentina in conjunction 

with the November 2004 APEC summit, signing letters of intent for 

investments in Argentina that could be worth up to $20 billion.79

With this investment, President Kirchner is believed to be seeking a 

path to cover Argentina’s short-term debt payment obligations, and 

over the long term, to free Argentina from the policy oversight of the 

International Monetary Fund (IMF).80

 To a greater extent than elsewhere in Latin America, a number 

of factors have coincided to limit the growth of the China-Argentina 

economic relationship. These include the difficulty in moving goods 

from Argentina to Asian markets―either over the Andes, through 

the Panama Canal, or eastward via Atlantic routes. Limitations also 

include a strong local business lobby in Argentina, which has pressed 

the Argentine government for protection against Chinese products. 

Reflecting such pressures, in December 2004, for example, President 

Kirchner signed two decrees restricting imports of Chinese textile 

products to a level tied to previous year sales.81

 Current Chinese interest in specific Argentine industries revolves 

around the nation’s limited deposits of iron and petroleum―but also 

includes cooperation in nuclear energy and interest in the potential 

role of Argentina as a mature market for Chinese products. 

 The Argentine oil industry was one of the focuses of the package 

of investment commitments made by the Chinese at the November 
13

2004 APEC summit. Indeed, of the $20 billion in potential Chinese 

investments in Argentina over the next 10 years, $5 billion of these 

involved the exploration and production of petroleum products.82

Complementing and predating these commitments, the Chinese 

petroleum firm, Sonangol, is currently engaged in a joint venture 

with the new Argentine state energy firm, Energía Argentina SA 

(Enarsa), in which it has committed $4.82 billion to explore potential 

oil fields off the coast of Argentina, and to investigate secondary 

extraction of oil from mature oil wells.83

 With respect to Argentina’s modest iron ore industry, the Chinese 

firm, Ling Cheng, was awarded a contract in mid-2004 to reactivate 

a mineral field in Patagonia. The award is strategically significant 

insofar as the field represents the only proven iron deposits in 

Argentina.84

 As in Brazil, China’s approach to investment in Argentina has 

emphasized development of the nation’s transport infrastructure, as 

a compliment to investments in extractive industries. In Argentina, 

reflecting both the Chinese interest in extracting Argentine iron 

ore and the difficulties of transporting materials over the Andes 

mountains via the existing infrastructure, Chinese interest has 

focused on the development of the Argentine railway system.85

 Perhaps one of the most significant potential developments in the 

China-Argentina relationship comes in the area of nuclear power. 

China is currently exploring possible collaboration with Argentina on 

the development of a new fourth-generation nuclear reactor. Initial 

design work on the mid-size reactor has been done by the Argentine 

National Atomic Energy Commission (CONEA), in partnership with 

the firm, INVAP, as part of the Argentine Center for Nuclear Reactors 

project (CAREM). CAREM is currently exploring Chinese funding 

and collaboration on the construction of a 27 kilowatt prototype 

reactor, as the first step in the construction of a 300 megawatt design 

that could meet the power needs of small and mid-sized economies 

such as those found in Latin America.86

 In the area of space cooperation, China helped Argentina to 

develop and field its first surveillance satellite, SAC-C.87 Although 

Chinese support to Argentina in this area does not appear to be at 

the same level as its space cooperation with Brazil, the relationship 
14

remains strategically significant because of its technology transfer 

implications, and because of potential future Chinese access to 

Argentine space facilities.

Colombia.

Chinese engagement with Colombia has been limited, reflecting 

among other factors, the strong security and aid ties between 

Colombia and the United States. Indeed, it was significant that while 

President Hu Jintao visited Chile, Brazil, Argentina, and Cuba in 

conjunction with the APEC summit, the only stop of U.S. President 

George W. Bush in the region was a visit to his colleague, Alvaro 

Uribe, in Colombia.

 Although Chinese trade with Colombia is small, it is both 

expanding and touches upon strategically important industries. In 

terms of volume, Colombia-China bilateral trade grew by 60 percent 

over 2003.88

 One of the most strategically significant emerging relationships 

between Colombia and China involves petroleum products. 

Although China does not currently have a publicly acknowledged 

role in the deal, Colombia and Venezuela are currently engaged in 

engineering-level talks concerning the construction of a series of oil 

and gas pipelines that ultimately would allow Colombia to export 

significant quantities of these products to China via its Pacific ports. 

 With respect to oil, the Colombian oil firm, Ecopetrol, and the 

Venezuelan national oil company, PDVSA, began studies in 2002 

on the construction of a 1,100-1,300 km-long petroleum pipeline to 

carry Venezuelan oil from the Maracaibo region across Columbia 

to the Choco region of Colombia, and potentially to the Pacific port 

of Tribugal.89 The pipeline would thus facilitate the export of oil to 

the Western United States and Asian markets, including China.90

Commitment to the pipeline was a key element of recent summits 

between Chávez and Uribe, including meetings on July 14 and 

September 9, 2004,91 although recent statements by both governments 

have raised some doubts about the future of the deal. In conjunction 

with the pipeline, Colombia has discussed the construction of a future 

oil port on its Pacific Coast with the explicit purpose of refining and 
15

exporting petroleum products to China and other Asian markets.92

Such a pipeline would not only provide an outlet for Colombian oil 

sales to China, but would also significantly increase the viability 

of Venezuelan oil sales to China, given the inability of modern 

supertankers loading on Venezuela’s Atlantic coast to pass through 

the Panama Canal.

 As a compliment to an oil pipeline, Venezuela and Colombia are 

also planning construction of a 177 km-long natural gas pipeline

from the Guarija region of Colombia to the Lake Maracaibo area 

(Venezuela’s main oil producing region). Plans for the pipeline were 

included in a deal signed in the July 2004 summit between Venezuelan 

President Chávez and Colombian President Alvaro Uribe. When 

completed, the pipeline will have a capacity to transport 150-200 

million cubic feet of gas per day,93 and may eventually extend across 

Colombia to the Pacific Ocean at Puerto Ballena. As envisioned, 

the gas pipeline would initially export Colombian natural gas to 

Venezuela, but the flow would eventually be reversed as Colombian 

natural gas production declines and new Venezuelan natural gas 

resources are developed and come on line.

Peru/Ecuador.

In both Peru and Ecuador, as in other parts of Latin America, 

trade with China is increasing. In Ecuador, bilateral commerce with 

China doubled over the past 2 years, from $128.3 million in 2001 

to $267.7 million in 2003.94 With respect to Peru, exports to China 

increased by 190 percent, while imports from China during the 

same period increased by 200 percent.95 Following the November 

2004 APEC summit, for example, Chinese Vice-President Zeng 

Quinghong met with Peruvian Foreign Minister Rodriguez Cuadros 

to sign a number of accords committing the two nations to closer 

economic ties, a move which Peru hopes will increase its volume of 

trade with China. Zeng Quinghong subsequently traveled to Peru in 

January 2005, where he signed a series of eight cooperation accords, 

including a “partnership of all-around cooperation.”96

 Both Peru and Ecuador are of strategic importance to China, not 

only for the strategic resources that each country offers, but also 
16

because each possess Pacific ports which may play a role in shipping 

goods to China from other points of origin in Latin America. It is 

the role of these countries as potential transshipment points that 

makes the powerful indigenous movements in each country a 

particularly important strategic consideration. On the one hand, 

these indigenous movements could help bring pressure to bear in 

support of Chinese interests; China has a traditional link to such 

indigenous movements, and has long broadcast radio programming 

in Quecha. On the other hand, such movements could also play a 

role in destabilizing their respective countries or promulgating antiglobalist, isolationist ideologies which would deny China access to 

the region’s resources.

 Resources of particular interest to China in Peru and Ecuador 

itself include petroleum products, cement and iron. Chinese interest 

in the petroleum sector involves development of oil fields by Chinese 

firms, and an interest in the expansion of the pipeline infrastructure in 

those countries that would ultimately carry that oil from developed 

fields to Pacific ports.

 In December 2003, the Argentine firm, Pluspetrol, sold 45 percent 

of its stake in Pluspetrol Norte to China National Oil and Gas 

Exploration and Development Corporation (CNODC), an affiliate of 

CNPC. Pluspetrol Norte, which operates fields along Peru’s northern 

border with Ecuador, is the principal petroleum producer in Peru. 

The acquisition adds to the oil fields operated by CNPC subsidiary, 

Sapet, on the northern Pacific coast of Peru,97 and positions CNPC 

to participate in significant planned Pluspetrol oil ventures in 

Ecuador, Venezuela, and Colombia.98 Similarly, in November 2003, 

the Ecuadorian government released new solicitations for bids on 

four major oil fields: Auca, Shushufindi, Culebra-Yulebra, and Lago 

Agrio. Award of the contract to one of the two Chinese companies 

would significantly contribute to China’s access to oil, given 

Ecuador’s production of 500,000 barrels of oil per day tied to that 

nation’s Pacific ports.99

 Despite the current concentration of Chinese interest in the 

petroleum sector, however, the Chinese are also pursuing expanded 

ties in other domains, including cement and iron. Peru recently 

acknowledged China’s status as a “market economy,” impairing the 

ability of the nation to bring dumping charges against China in the 
17

World Trade Organization, in exchange for China’s agreement to 

approve Peru as a tourist destination for Chinese citizens―a move 

that Peru hopes will promote its tourism and other local industries 

in the coming years.100

Bolivia.

Bolivia is of strategic significance to China as a potential exporter 

of natural gas and strategic minerals, although these exports will 

depend on continuing Bolivian access to Peruvian or Chilean Pacific 

ports. Over the long term, the ability of Bolivia to export natural 

gas to China will depend on that nation’s resolution of its 1996 

hydrocarbons law, which is currently under revision in the Bolivian 

legislature, and which will ultimately condition the extent to which 

foreign firms participate in the development of this resource.

 China’s current trade and investment presence in Bolivia is 

modest. The most significant current initiative involves Chinese 

assistance to Bolivia in constructing a urea plant. In September 2004, 

the Chinese Lutianhua Group and the China Chengda Chemical 

Engineering Corporation announced a collaborative venture with 

the Bolivian LisaTum Par Group to build the plant in Bolivia. Under 

the agreement, 90 percent of the project will be developed by the two 

Chinese firms. The plant is foreseen to have an annual production 

capacity of 180,000 tons of synthetic ammonia and 300,000 tons of 

urea.101

Panama.

The primary strategic importance of Panama to China stems from 

the role of the Panama Canal and the complimentary infrastructure 

which facilitates the transfer of goods from the Atlantic to the Pacific 

Ocean. As a compliment to moving goods overland to Pacific ports, 

the canal plays a critical role in making economically viable the 

shipment of goods from Latin American economic ports.

 The most significant current initiative in Panama does not 

involve the canal itself, but a 20-mile long, multipurpose pipeline 

that was constructed 23 years ago,102 and follows a route parallel to 
18

the Canal. A project currently being contemplated with the support 

of Venezuela would increase the capacity of the pipeline to transfer 

oil from the Atlantic to the Pacific sides of the country from 100,000 

barrels of oil per day to 800,000 barrels per day.103 Such an expansion 

would facilitate and lower the cost of shipping oil from Venezuela 

to China by allowing the product to be loaded in Atlantic ports and 

transferred to the Pacific. As such, it would provide an alternative 

or compliment to the construction of a pipeline across Colombia to 

carry Venezuelan oil from the Maracaibo region to Pacific ports.

 No discussion of Chinese involvement in Panama would be 

complete without a discussion of its strategically important property 

holdings at Cristobal, Balboa, and Rodman Point. The Chinese 

shipping company, Hutchison-Whampoa, affiliated with the 

People’s Liberation Army, has 50-year leases on facilities at Cristobal 

and Balboa, and has recently been given an option on developing 

the former U.S. naval base at Rodman Point. The combination of 

the three holdings gives China visibility and some limited potential 

control over maritime traffic at both ends of the Panama Canal.104

Although the canal cannot be used for the transit of large aircraft 

carriers, supertankers, or vessels over 100,000 tons, some 670,000 

barrels of oil go through the canal each day, making it a critical 

maritime chokepoint in the Western hemisphere.105

Cuba.

Whether or not Chinese interest in Cuba is driven by the 

shared ideological roots of the two political systems, Chinese trade 

and investment in Cuba is growing significantly. Over the past 

year, bilateral Chinese-Cuban trade expanded 36 percent to $401 

million.106

 Following the November 2004 APEC conference and associated 

state visits to Brazil, Argentina, and Chile, President Hu Jintao also 

visited Cuba, where he signed 16 bilateral commercial accords, 

committing to more than $500 million in Chinese investment in 

Cuba.107 As part of the state visit, the two countries also conducted 

the first annual “Forum of Chinese-Cuban Investment,” with 400 

businessmen from both nations in attendance.108
19

Mexico.

Chinese trade with Mexico is significant and has been expanding 

at the same rapid rate as with other parts of Latin America. Between 

1998 and 2003, Mexican exports to China increased by 337 percent, 

while corresponding imports from China increased by 476 percent.109

In 2004, bilateral trade between China and Mexico was more than $7 

billion, representing a 44 percent increase over 2003.110 By contrast 

to other Latin American countries, however, Mexico has a trade 

deficit with China that is significant and growing. Mexican imports 

from China in 2003 were $9,298 million, compared to exports of $463 

million.111 Indeed, if the Mexican trade deficit with China was only 

half of this level, Latin America as a whole would register a positive 

balance of trade with the Asian giant.

 A study by BBVA suggests that, by contrast to other nations in 

Latin America, the structure of Mexican exports resemble that of 

China.112 Thus while the economies of many other nations in Latin 

America may be regarded as complimenting those of China, Mexico 

is more of a direct competitor―particularly in labor-intensive, lowvalue added manufacturing sectors. Perhaps reflecting the less 

complimentary nature of the economic relationship between the two 

countries, Chinese investment in Mexico has been relatively modest 

relative to other Latin American countries―$200 million in 2004, for 

example.

 Despite the current nature of the relationship in the short term, 

Mexico offers a number of attractions for China, including significant 

quantities of oil and other strategic materials, and a number of 

commercially developed Pacific ports. On the other hand, Mexico 

currently uses almost all of the oil that it produces, leaving little 

available for export. Moreover, Mexico’s proximity to the United 

States may make China wary of too aggressively pursuing investment 

there in the near term. Nonetheless, China has indicated interest in 

pursuing a relationship with Mexico in a number of important arenas, 

as reflected by inclusion of Mexico as the first stop in a high-profile 

five-nation Latin American and Caribbean tour made by Chinese 

Vice-President Zeng Quinghong in January-February 2005.113
20

Other Strategically Significant Trade and Investment Initiatives.

The concentration of Chinese trade and investment growth 

in the region has been in South America, despite significant 

petroleum and mineral resources in Latin American countries such 

as Mexico. Nonetheless, the Chinese presence in Central America 

and the Caribbean has been increasing as well. The expansion of 

trade and investment ties was the central theme, for example, of 

the China-Caribbean Economy and Trade Cooperation Forum, 

held on February 2, 2005 in Kingston, Jamaica.114 As part of the 

same trip, Chinese Vice-President Zeng Qinghong signed a series 

of agreements with Mexican President Vincente Fox, including the 

establishment of a team to promote trade and investment between 

the two countries.115 A recent report by the Spanish investment firm, 

La Caixa, cited excessive dependence on Chinese investment as one 

of the principal risks governing the economic growth of the region.116

Even in Guatemala, which historically has not had significant trade 

relationships with Asia, some 13 percent of the nation’s sugar exports 

in 2004 will go to China.117

 Chinese engagement with Latin America directly or indirectly 

requires reliance on the banking sector. As part of a vertically 

integrated strategy, presence in the banking sector is important for 

the receipt of payment, the transfer of funds, the granting of credit, 

and the conduct of commercial operations in general with a degree 

of security and confidentiality. Although only a modest step in 

this direction, on September 1, 2004, the Santander Group, a major 

multinational investment holding company in Latin America, signed 

an accord with the Bank of China to provide an array of common 

financial products and bank services to its clients.118 The agreement 

represents a significant step in the fledgling penetration of the region 

by Chinese financial entities, as a compliment to growing Chinese 

investment in the region.

INCREASING CHINESE NONECONOMIC 

ENGAGEMENT WITH LATIN AMERICA

China’s engagement with Latin America has not been limited to 

trade and investment, although Chinese economic needs arguably 
21

have been key drivers of the expanded relationship. In addition to 

trade and investment, China is stepping up its role in the region in a 

number of other ways, from participation in regional peacekeeping 

forces to expanded military ties.

An Expanded Voice and Presence in Regional Diplomacy.

In 2004, China sent a 125-man riot police detachment as part of 

the United Nations (UN) peacekeeping force in Haiti.119 Similarly, 

because Haiti is one of a small number of nations concentrated in 

Latin America which still grant diplomatic recognition to Taiwan, 

many U.S. analysts view China’s presence in the peacekeeping force 

as a part of its long-term strategy to convince these Latin American 

nations to withdraw their recognition of Taiwan. In this regard, it 

is significant that recent state visits by Chinese Vice-President Zeng 

Quinghong to Mexico, Peru, Venezuela, Trinidad and Tobago, and 

Jamaica each featured high-profile declarations by the leaders of 

those Latin American countries reiterating their support for a “OneChina” policy.120

 Chinese participation in the UN peacekeeping force in Haiti may 

also be interpreted as part of a more long-term strategy through which 

China is pursuing a greater diplomatic presence in the region, and an 

expanded voice in its politics. In March 2004, for example, China’s 

National People’s Congress signed a cooperation agreement with the 

multinational Latin American Parliament, and became an observer 

of the body. Senior Chinese legislators subsequently traveled to the 

Parliament’s home in Brasilia in January 2005 to meet with its president 

and “deepen political, economic and cultural cooperation between 

China and Latin American countries.”121 Similarly, during his visit 

to Latin America in January-February 2005, Chinese Vice-President 

Zeng Quinghong signed an agreement with the collective body of 

foreign ministers from Andean Community Countries (Ancom) 

promoting cooperation between China and Ancom, building on an 

agreement signed in 2000 to establish a “Political Consultation and 

Cooperation Mechanism” between the two sides.122 Although neither 

Ancom nor the Latin American Parliament has significant power as 

a decisionmaking body, such initiatives reflect important steps along 
22

the path that China began in the 1990s, when it was granted observer 

status in the Organization of American States (OAS), affording it a 

window on some of the critical diplomatic processes ongoing in the 

region, as well as an entrée into select OAS multinational activities.

 The Chinese also may be working to strengthen ties between 

the Communist Party and various radical, populist, or left-ofcenter movements in Latin America. In Venezuela, for example, the 

Communist Party of China (CPC) announced on December 20, 2004, 

that it was working to develop good party-to-party relations with 

the official Movement of the 5th Republic (MVR) party of Venezuela. 

The announcement was made during a meeting between delegates 

of the two parties in conjunction with the visit of President Chávez 

to Beijing.123 It is not yet clear whether the Chinese intend to use a 

similar approach in dealing with other socialist governments in the 

region, or radical parties such as the Movement Toward Socialism 

(MAS) in Bolivia, but given the current movement of Latin America 

toward the political left, such a strategy could significantly increase 

Chinese influence and involvement in the politics of the region.

An Expanded Chinese Military Role in Latin America.

In addition to expanded diplomatic presence in the region and 

expanded party-to-party relations, the Chinese also appear to be 

cautiously expanding their military presence and military ties. In 

the arena of direct military presence, for example, Cuba may have 

permitted Chinese operations at the former Soviet listening post 

at Lourdes, allowing China to collect signals intelligence on U.S. 

military satellite signals and other U.S. telecommunications. 124

 With respect to military-to-military ties, China has cautiously 

strengthened its relationships with a number of countries in 

recent years, including Venezuela, Ecuador, Bolivia, and Chile. In 

Venezuela, the joint intention to strengthen military to military ties 

was one of the elements of cooperation announced by the two nations 

following the 2004 trip by President Chávez to China. Strengthened 

Sino-Venezuelan military ties build on a modest foundation, 

including China’s previous sale of military transport aircraft and 

associated training to Venezuela.125 With respect to Ecuador, the two 
23

nations indicated a desire to strengthen their military ties during a 

visit of the Ecuadorian Joint Chief of Staff Victor Rosero with the 

Chinese People’s Liberation Army Chief of the General Staff Liang 

Guanglie.126 With respect to Bolivia, Bolivian Defense Minister 

Gonzalo Arredondo visited China in November 2004 to meet 

with Chinese Defense Minister Cao Gangchuan. In the meeting, 

the ministers acknowledged an increase in bilateral army-to-army 

exchanges and visits and other forms of cooperation.127 With respect 

to Chile, the two nations have a number of military-to-military ties, 

although balanced by similar ties to the United States, South Korea, 

Australia, and Japan. Sino-Chilean military-to-military ties include 

attendance by Chilean officers at the National Defense University 

of China (since 1997), Chinese representation at the Chilean War 

College (since 1997), visits by the Chinese naval commander to Chile 

in 2002 and by the Chilean naval commander to China in 2003, and 

multiple trips by the Chilean training ship, Esmeralda, to Chinese 

ports.128

IMPLICATIONS FOR THE REGION 

AND U.S. NATIONAL SECURITY

It is not necessary to postulate Chinese troops and bases in Latin 

America in order to conclude that an expanded Chinese presence in 

the region has enormous consequences for U.S. national security, and 

as such, warrants serious examination. During the past century, the 

U.S. military was deeply engaged in the politics of Asia, consistent 

with the view that such global engagement made our own hemisphere 

more secure. In the present century, by contrast, the United States 

repeatedly will be forced to choose how much Chinese engagement 

in our own hemisphere we can afford to ignore on the grounds that 

it does not constitute an “immediate threat.”

 In general, the Chinese presence in Latin America reflects 

significant erosion in the relative power and geopolitical position of 

the United States, and the advent of a new century in which the United 

States is preoccupied about Chinese adventurism in the Americas, 

balancing out traditional Chinese concerns about the U.S. presence 

in Asia. The dynamics and potential consequences of these trends 
24

range from economic damage to the United States to the potential 

for significant crises which, if mismanaged, could bring about direct 

conflict between the United States and China in this hemisphere.

 Some of the most immediate consequences of the current Chinese 

engagement in Latin America involve the economic security of the 

United States and the livelihood of U.S. citizens. To the extent that 

Latin American countries sign free trade agreements both with 

China and with the United States, American markets will become 

increasingly open to duty free Chinese products―something that 

China has never been able to obtain through direct negotiations with 

the United States.129 The free trade accord that Chile has negotiated 

with the United States, for example, in combination with the one that 

Chile is currently negotiating with China, raises the possibility that 

Chile (or other Latin American nations pursuing similar agreements) 

could be used as a “pass through,” country, by which Chinese goods 

were sold without tariffs to U.S. markets. Although the U.S.-led 

initiative for a Free Trade Area of the Americas (FTAA) is currently 

experiencing difficulties, its achievement would compound U.S. 

vulnerability to this Chinese competition.

Chinese Interests in Regional Stability.

China’s interest in securing access to the resources of Latin 

America through trade and investment give it a vested interest in the 

stability of the region. On its face, such interest is counterintuitive; 

given China’s traditional alignment with anti-status quo thirdworld movements, constructing a secure supply chain requires 

governments that are stable enough to extract, process, transport, 

and export those goods that China requires to fuel its economic 

expansion. The vested Chinese interest in stable, export-oriented 

Latin American governments has the potential to create a number of 

policy contradictions or dilemmas. For example, China has a vested 

interest in leveraging and deepening its relationship with the populist 

Chávez regime in Venezuela both because of Chávez’s ideological 

sympathy with China, and because of Venezuelan petroleum 

products and other resources. But China also has an interest in access 

to the resources of Bolivia, Peru, and Ecuador. Thus attempts by the 
25

Chávez regime to spread its Bolivarian revolution to these countries 

by promoting radical indigenous movements ultimately could cause 

China to begin to see Chávez as a net liability to its interests in the 

region.

 With the exception of pointedly anti-U.S. regimes such as 

Venezuela and Cuba, Chinese interests in access to the region for 

trade may ironically compliment U.S. interests and create short-term 

opportunities for the United States and China to work together to 

strengthen government structures and promote regional stability 

and political institutionalization. This could, for example, include 

strengthening of government institutions in Peru and Ecuador, both 

of which possess oil resources and Pacific ports.130 In both countries, 

the political leadership is politically marginalized, including a strong 

challenge from a powerful indigenous faction in Ecuador.131 Similarly, 

China arguably has a vested interest in the emergence of a stable and 

politically moderate Bolivia that could resolve its territorial disputes 

with Chile and Peru, and increase exports of its natural gas resources 

through Pacific ports in one of those two countries.132

Chinese interest in promoting regional stability may ultimately 

extend to Colombia as well. Although Colombia is closely tied to the 

United States through the aid that it receives to fight insurgent and 

paramilitary groups and narcotics, it is willing to construct a pipeline 

and a refinery to facilitate the export of the region’s oil to the Pacific 

for potential sale to China. To the extent that the Guarija-Maracaibo 

and Maracaibo-Puerto de Tribugal pipelines become reality, for 

example, China could develop a vested interest in working with the 

Colombians to prevent violence against them―just as the United 

States provided security assistance to help the Colombians protect 

the Caño-Limon-Covenas pipeline in Arauca state. 

 While China may actively support stability and market economies 

in the countries of the region, such support does not imply that 

China will abandon its traditional role as an ally of indigenous, 

leftist, or anti-globalist movements in the region, including terrorists 

or movements seeking to subvert regional governments. Such ties 

will remain valuable to China as a means of channeling the efforts of 

such groups away from actions that would harm Chinese investment 

interests. At the same time, such ties could also be used to bring 
26

pressure on regional governments through selective action or the 

threat thereof, as part of a larger strategy of negotiation between 

China and those governments.

The Key Role of Latin American Countries with Pacific Ports.

As foreshadowed in the previous section, the importance of 

Pacific ports for trade flows with Latin America is likely to make 

China particularly focused on its relationships with the countries 

that have them. Because Pacific ports are a key enabler for the timely 

and economically viable flow of goods between the two continents, 

China is likely to be particularly interested in the politics, stability, 

infrastructure, and business environment of those countries which 

have such ports. 

 As a nation with both strategic minerals of interest and a number 

of high-volume commercialized Pacific ports, Chile, in particular, is 

likely to emerge as a key player in China’s engagement with Latin 

America. Total Chilean exports to China in 2003 were $1.85 billion, 

representing more than a quarter of all Latin American exports to that 

country.133 These exports included approximately $1 billion in annual 

exports of the key strategic metal, copper. Chile’s dominance of South 

America’s Pacific coastline, in combination with its established trade 

relationships with China and its multiple commercial deepwater 

ports, make that nation the logical gateway to the sea for commerce 

with much of the rest of Latin America. As the Chilean newspaper, 

El Mercurio, put it, Chile is “a bridge to the huge world of the AsiaPacific.”134

 With the meeting between Chilean President Richard Lagos and 

Chinese President Hu Jintao at the APEC summit in November 2004, 

the two countries officially began negotiation of a free trade pact 

which would position the nation even more clearly as the emerging 

commercial hub for Latin American trade with China.135 Chile 

arguably would welcome expanded trade ties with Asia insofar as 

Asia would counterbalance the United States as an export market for 

the Southern Core Common Market Customs Union (MERCOSUR), 

thus increasing the independence of the South American trade block 

and increasing Chile’s profile as its dominant player and key trade 
27

conduit. Leading Chilean businessmen such as Sebastián Piñera of 

LAN speak openly of China as a “third major partner, united through 

the instrumentality of the APEC forum.”136 On the other hand, China 

probably has fewer direct means to intervene in Chilean politics than 

it has to shape other nations in Latin America. Chile is Latin America’s 

strongest economy and most stable political system, and lacks a 

significant indigenous movement of leftist radicals that could be 

used to foment instability. As manifested in the Chile-Bolivia border 

dispute, however, Chile’s need to import energy is its Achilles’ heel, 

and has been used by both Bolivia and Argentina to exert diplomatic 

leverage. China’s future strategy in Chile consequently might be 

shaped by helping Chile to attain access to foreign oil and natural 

gas or reciprocally, by leveraging states such as a radicalized Bolivia 

to pressure the nation.

 In addition to Chile, China’s interest in nations with Pacific ports 

is likely to focus its attention on the politics of Ecuador, Peru, and 

Colombia, although such a level of interest may not be apparent 

at the present time. China thus may have particular interest in 

Colombia’s success against sources of destabilization such as the 

Fuerzas Armadas Revolucionarios de Colombia (FARC), the Ejército 

Liberación Nacional (ELN), and sundry guerrilla and narcotrafficking 

groups. Similarly, China may have particular interest in channeling 

the rise of indigenous groups in Ecuador and Peru to preclude them 

from impairing that nation’s commerce.

Adverse Economic and Political Impacts 

of Chinese Engagement for the Region.

As discussed previously, China has an interest in the economic 

stability of the region; however, over the long term, the nature of its 

engagement there is likely to affect the economic structure in such 

a way that it will generate significant economic displacement and 

foment political unrest in the constituent states. Although important 

differences exist between the economic structures of China and 

Latin America, China fundamentally competes in the same market 

for low-end manufactured goods as does Latin America.137 Chinese 

labor is currently much cheaper than that in most of Latin America. 
28

One recent study by the U.S. International Trade Commission, for 

example, found that the productivity of labor in Caribbean Basin 

countries was only 50 percent of the productivity of Chinese labor.138

Another found that Chinese labor was, on average, one-quarter the 

price of that of Latin America.139 In combination with its reduction of 

shipping costs through the use of economies of scale and relatively 

greater port efficiency,140 China is effectively able to underprice 

factories operating in Latin America. Largely as a result of such 

factors, more than 300 companies moved production from México to 

China over the past year, contributing to that nation’s loss of more 

than 200,000 employees in the Maquiladora sector.141

 Aggravating the ability of Chinese manufacturing to underprice 

its Latin American counterparts, a number of Latin American nations 

are moving toward lowered trade barriers with China. In conjunction 

with the APEC summit in November 2004, for example, Brazil, 

Argentina, Chile, and Peru officially recognized China’s status as a 

“Market Economy,”142 hampering their ability to bring antidumping 

charges against Chinese companies and otherwise protect local 

markets against an influx of Chinese goods. Similarly, in the textile 

industry, quotas are slated to end January 1, 2005, and experts are 

predicting an invasion of Chinese textiles into Latin America.143

 If Latin America continues to lower protectionist barriers in the 

face of China’s ability to underprice Latin America in manufacturing, 

it is likely that Chinese competition will damage the Latin American 

manufacturing sector badly, even while Latin American extractive 

industries and foodstuffs experience a boom to support the Chinese 

market. In such a scenario, trade with China may tend to shift the 

economic structure of Latin America from manufacturing toward 

extractive industries and basic foodstuffs.144 The loss of jobs due 

to this economic shift is likely to be particularly acute insofar as 

Chinese competition is greatest in those sectors which are most 

labor intensive. The textile industry is an often-cited example where, 

according to one source, with the liberalization of trade barriers, 

China may capture up to 85 percent of global manufacturing, putting 

at risk some 226,000 Latin American Maquiladora workers currently 

in this sector.145

 The adverse impact of competition with China on local economies 

is likely to generate a political backlash from the industries and trade 
29

associations who stand the most to lose. Ecuador, for example, has 

been considering the passage of new legislation which would make it 

significantly more difficult for Chinese investors to enter the country 

and compete against local businesses.146 In short, the economic 

displacement that Chinese engagement with Latin America will 

cause is likely to fuel a wave of protectionist or populist politics which 

will threaten what will be, by then, significant sunk investments and 

established trade relationships.

 The political response in Latin America may be exacerbated 

further by the nature of Chinese investment. Unlike many Western 

companies in the 20th century which made large direct investments in 

Latin American factories and infrastructure projects, Latin American 

experts fear that the promised Chinese investment is likely to come 

in the form of low interest rate loans tied to the use of Chinese firms 

to do the work. In the words of a former senior Argentine official, 

“We would remain indebted for decades and decades to pay back 

loans tied to direct awards to foreign corporations chosen by mere 

government functionaries . . . when other businesses could have 

done the same job on better terms.”147

 Ironically, as China increasingly invests in and purchases 

strategic materials from Latin America, while simultaneously using 

the region as an export market for its manufactured goods, the 

nation may create a neoimperialistic dynamic in the hemisphere, 

albeit one with the consequences displaced onto the United States. 

Argentina, for example, increasingly is looking to China to help 

finance its foreign debt payments and secure independence from 

the IMF, while simultaneously passing “antidumping laws” and 

erecting protectionist barriers against Chinese merchandise.148 In 

previous decades, dependence on Western capital was a key vehicle 

in forcing Latin American nations to accept neoliberal economic 

policies and free trade, limiting the degree to which they could 

buy social peace with state institutions and government largesse. 

As China’s position as a key investor and export market for Latin 

America grows, the region similarly will become increasingly hard 

pressed to sustain policies that discriminate against Chinese imports. 

Through this self-reinforcing cycle, greater trade with China may 

thus erode mechanisms of institutional resistance, accelerating 
30

and deepening that trade relationship. To the degree that such a 

deepening displaces Latin American manufacturing industries with 

less labor intensive extractive industries, however, increasing trade 

with China could reduce the number of jobs in the region and deepen 

poverty. To the extent that extractive industries traditionally involve 

major concessionary arrangements with governments and major 

capital investments, by fueling the growth of such industry in Latin 

America, socialist China ironically could deepen the corruption and 

class disparities that traditionally have plagued the region. In short, it 

is possible that heightened Chinese trade will produce a region with 

more poverty, corruption, crime, political chaos, and indigenous 

populism. Furthermore, the direct effect of these job losses, and the 

indirect effects of the political chaos that it could spawn, will probably 

be increased migration within countries, and from the South to the 

United States and other destinations.

Expanded Presence of Chinese Nationals in the Region.

As trade ties expand in the region, the physical presence of 

Chinese nationals is also likely to expand, particularly in areas which 

compound other challenges that the United States faces in the region. 

In conjunction with the APEC summit, China added Argentina and 

Brazil to its list of approved tourist destinations.149 Mexico and Peru 

subsequently were given “Approved Destination Status” (ADS) in 

January 2005.150 This change is particularly significant insofar as it 

is estimated that 28.5 million trips abroad were made by Chinese 

citizens in 2004,151 and it is estimated that within 15 years, some 100 

million Chinese tourists will be traveling throughout the world.152

To the extent that China adds specific Latin American countries to 

its list of approved travel destinations, the region could be impacted 

significantly by this private and business tourism. 

 In addition to tourism, the number of Chinese living and doing 

business in Latin America also is expanding rapidly, albeit from a 

low level. For example, 130,000 Chinese nationals currently live in 

Venezuela.153 In the wake of increasing violence against Chinese 

nationals in Venezuela in recent years, including election-related 

violence against Chinese supermarkets in the state of Carobobo, China 

has initiated a system of monitoring and protection for its citizens 
31

living in that country.154 Although the Chinese population in South 

America is currently miniscule, the rate of increase is significant. 

Ecuador, for example, currently has only 5,004 Chinese nationals 

registered in the country under permanent or semi-permanent visas, 

yet the number entering the country jumped by more than a third 

from the level of the prior year.155 The pattern and implications of 

Chinese immigration are also a matter of concern. For example, 

15,000 Chinese currently reside in Ciudad del Este, Paraguay,156 part 

of the “Triple Frontier” region that has been an area of particular 

concern for its potential ties to international terrorist networks.

 With increased human contacts, it is likely that Chinese and Latin 

American criminal and terrorist organizations will interact in ways 

difficult to anticipate, and often outside the knowledge or control of 

the Chinese state.157 Such relationships might include strengthened 

ties between Chinese triads, such as the Fu Chin, and Latin American 

organized crime158―including trafficking in both drugs and human 

beings―producing new patterns of collaboration and competition. 

Logical areas where networks may either cross-over or fight include 

the interaction between the Colombian kidnapping industry and 

Asian personnel trafficking, as well as the competing heroin industries 

of the Andes and the Golden Triangle. It is also unclear whether 

the infusion of Chinese capital will help to rationalize, or will only 

exacerbate, the corruption, particularism, and lack of transparency 

evident in some Latin American financial systems.

 As China becomes increasingly involved in the region, it is also 

likely that such presence will create new perceived national interests 

to be protected. It is not clear, for example, how China would react 

to escalating kidnapping of its business and government personnel 

in Colombia or to a failed state of the future such as Bolivia, where 

it is trying to operate strategically important petroleum and mineral 

extraction concessions. Reaction by the Chinese state to increasing 

violence against its nationals in Venezuela during recent years, for 

example, is a sign that the dynamics stemming from the heightened 

profile of the Chinese population and interests in Latin America are 

already beginning. Similarly, it is not clear how China will react to 

guerilla violence that cuts important oil flows, or radical political 

change resulting in the nationalization and seizure of assets owned 

in part by the Chinese state or affiliated business interests.
32

 Over the coming years, it is also likely that specific events within 

China and on the world stage will generate imperatives that may 

cause China to change its approach toward the region, or rapidly 

deepen its level of interest in difficult to anticipate ways. China is, 

for example, currently experiencing its worst drought since 1951. 

The lack of water is anticipated to impact domestic food production 

severely, reducing the nation’s harvest by 510,000 metric tons this 

year alone.159 Furthermore, the lower water table has begun to 

impair the generation of hydroelectric power.160 The consequence of 

both these phenomena is likely to be a sharp rise in China’s imports 

of foodstuffs and fossil fuels for power generation, beyond the 

expansion predicted from economic growth alone, and with it, 

potentially heightened interest in Latin American sources of 

supply.

 Ultimately, increasing Chinese involvement in the hemisphere is 

likely to give rise to a number of strategic dilemmas for the United 

States. Given the position of power that the United States currently 

has in the region, such dilemmas as outlined above easily may be 

circumvented as they develop, yet may be much graver if they 

manifest themselves as a crisis. What is required is identification in 

advance of what some of the futures might be; what concrete steps 

the United States can take to position itself in response to these 

developments; and what the advantages, disadvantages, and risks 

are of a particular course of action.

CONCLUSION

Chinese pursuit of its national interests in Latin America may 

unfold in a number of ways, depending on assumptions concerning 

key factors such as actual levels of Chinese economic growth and 

industrialization during the coming decades. The particular course 

taken by Latin America’s current array of indigenous movements, 

socialist governments, and radical populist leaders, as well as the 

way in which they interact, may create particular crises in particular 

countries at particular times. Although certain scenarios are more 

likely or more grave than others, decisionmakers responsible for 

managing U.S. policy in Latin America need to map out the principal 
33

scenarios and begin thinking through the merits and consequences 

of alternative responses, so as to avoid falling victim to strategic 

surprise when such events occur.

 In whatever manner the topic is studied, the long-term trends 

driving an increased Chinese presence in Latin America are not 

likely to abate. The U.S. position in Latin America is currently strong, 

and the Chinese trade and investment presence is relatively limited. 

Yet, an examination of China’s strategic aims in the region and the 

potential for increased Chinese influence in the Western Hemisphere 

remains an important task.

ENDNOTES

1. As a caveat, the investment commitments are “letters of intent,” representing 

only very preliminary commitments. “Magic, or Realism?” The Economist, January 

1, 2005, p. 25.

2. “China-Latin America Ties Enter ‘Best Period of History’: Experts,” www.

chinaview.cn, December 27 2004.

3. By contrast to China in the 1970s and 1980s, industrialization and economic 

modernization, rather than population growth, is the key to increasing Chinese 

resource demands. China’s current population growth rate is only .73 percent and 

falling―although even this modest rate will add more than 131 million people 

to the nation between 2004 and 2025. This is calculated based on the “Medium 

Growth Variant” scenario, in which population growth rate in China falls from .63 

percent per year in 2005 to .22 percent per year in 2025. United Nations Population 

Division, “World Population Prospects: The 2002 Revision. World Population 

Database,” United Nations, 2003.

4. Jorge Blázquez-Lidoy, Javier Rodríguez, and Javier Santiso, “Angel or Devil? 

Chinese Trade Impacts on Latin American Emerging Markets,” unpublished 

paper, November 2004. See also Domingo Fontiveros, “Bonanza Petroleras BIS,” 

El Universal, Caracas, October 3, 2004.

 5. Katherine Bauerle Ewert, “China, la niña bonita del baile,” El Mercurio, 

Santiago, November 14, 2004. See also “Efectos de un TLC con China,” El Mercurio, 

Santiago, December 12, 2004.

 6. Luz María Astorga, “Qué gana Chile con el APEC?” El Mercurio, Santiago, 

November 12, 2004.

7. Business Report, October 7, 2004, http://www.busrep.co.za/index.php?fSectionI

d=&fArticleId=2210339.

8. The most significant two Chinese growth corridors are currently the Pearl 

River Delta, centered on China’s southern Guangdong province, and Shanghai and 
34

the Yangtze River Delta. Exports from Guangdong, as an indicator of production, 

have doubled in the past 5 years, while those of the “greater Shanghai” region 

have almost quadrupled in the same period. “String of Pearls,” The Economist, 

November 20, 2004, p. 44.

9. Some 800 million Chinese currently are counted among the economically 

marginalized “peasantry,” indicating that a modest but widespread improvement 

in their lifestyles could represent a dramatic expansion in Chinese economic 

growth. See Ewert. Along these lines, it is of interest to note that in the first half 

of 2003, car sales in China grew by 82 percent relative to their level at the same 

period in 2002, suggesting that changes in the lifestyles of Chinese will continue to 

create structural increases in demand for energy. See “La energía y el aumento de 

demanda,” La Nacion Line, Buenos Aires, December 7, 2004.

10. Luis Xavier Grisanti, “China en el cono sur,” El Universal.com, Caracas, 

November 25, 2004. See also China’s Oil Imports to Increase,” Big News Network.

com, November 24, 2004.

11. In the words of Vice President of the Canadian Asia Pacific Foundation Yuen 

Pau Woo, explaining Chinese investment initiatives announced in conjunction with 

the November 2004 APEC summit, “China has come to Latin America to assure its 

supply of energy and gain international recognition.” Fernando Gualdoni, “China 

‘conquista’ América Latina,” El País, Madrid, November 21, 2004, p. 3.

12. “China Minmetals’ Proposals for Noranda,” Fact Sheet, Noranda Comporate 

Website, www.noranda.com.

13. Javier Santiso, “Angel or Devil? Chinese Impact on Latin America,” 

Unpublished presentation for the Organisation for Economic Cooperation and 

Development (OECD), Paris, January 21, 2005.

14. “An MBendi Profile: China–-Mining: Iron Ore Mining―Overview,” MBendi, 

September 30, 2004, Internet document, http://www.mbendi.co.za/indy/ming/iron/as/

cj/p0005.htm.

15. Internacional Energy Agency, Monthly Oil Survey, June 2004, p. 10. The 

figure actually underestimates the significance of Latin American production 

because it does not include oil produced for domestic consumption but does 

include oil products processed and re-exported by other countries.

16. “China’s Nonferrous Wheel of Fortune,” Asia Times online, Atimes.com, 

August 22, 2001.

17. This figure represents total Chilean exports of copper to China in 2000. See 

“China Challenges U.S. in Latin America,” Miami Herald, Miami, April 15, 2001.

18. See Murray Scot Tanner, “Hu Jintao as China’s Emerging National Security 

Leader,” in Civil-Military Change in China: Elites, Institutes, and Ideas After the 16th 

Party Congress, Andrew Scobell and Larry Wortzel, eds, Carlisle Barracks, PA: U.S. 

Army War College Strategic Studies Institute, September 2004, p. 59.
35

 19. “China avanza en asociaciones con Latinoamérica,” El Universal.com, 

Caracas, December 3, 2004.

 20. Luis Xavier Grisanti, “China en el cono sur,” El Universal.com, Caracas, 

November 25, 2004.

 21. Alejandro Rebossio, “Pekín invierte a ritmo de salsa,” El Pais, Madrid, 

November 21, 2004, p. 8. See also “China reitera en Chile promesas de fuertes 

inversiones in América Latina,” El Pais, Madrid, November 21, 2004, p. 1.

22. “China Invests $37b Overseas,” China Daily, February 8, 2005. See also 

“Half of China’s Overseas Investment Falls in Latin America,” People’s Daily 

Online, January 7, 2005.

23. 2004 figures are based on data from the period January-November, as 

reported by the Chinese Ministry of Commerce, ibid. See also “Chinese Overseas 

Investment Hit 1.8 bln U.S. Dollars from Jan. to Nov.,” People’s Daily Online, January 

6, 2005. Similarly, 2003 data show China investing more than $1 billion in Latin 

America in 2003, representing over 77 percent of all of its investments outside 

Asia. “China refuerza lazos con América Latina,” El País, Madrid, November 21, 

2004, p. 1B.

24. This trade includes $11.8 billion in exports to China and $14.92 billion in 

imports from China. “China-Latin America Ties Enter ‘Best Period of History’: 

Experts,” China View, www.chinaview.cn, December 27, 2004. See also “China, Chile 

Launch FTA Talks,” China View, www.chinaview.cn, January 25, 2005.

25. “China-Latin America Ties Enter ‘Best Period of History’: Experts.”

26. Marco Arauz Ortega, “China quiere estar más próxima a América Latina,” 

Elcomercio.com, Quito, October 26, 2004. Similarly, 2001 statistics show that 

although exports to China were a meager $5 billion, or 1.5 percent of the region’s 

total exports, the figure reflected a jump of 74 percent between 1999-2000, and a 

28 percent increase from 2000-2001. World Trade Organization, International Trade 

Statistics 2002, p. 56.

 27. “BBVA: China es un ‘ángel comercial’ para América Latina,” El Universal.

com, Caracas, December 14, 2004.

28. CBS News, February 7, 2005.

29. Based on figures from January-November 2004, Brazil currently has the 

highest volume of trade with China, followed by Argentina, Mexico, and Chile. 

“Brazil is China’s Main Regional Trade Partner,” MercoPress, Montevideo, http://

www.mercopress.com, January 10, 2005.

 30. Yolanda Ojeda Reyes, “Ciudanos Chinos Reciben Protección,” El Universal, 

Caracas, November 11, 2004. See also “Chávez viajará a China el próximo 23 y 24 

de diciembre,” El Universal.com, Caracas, November 13, 2004.

 31. “MPC: Comercio China-Venezuela alcancará 2.500 millones dólares en 

2007,” El Universal.com, Caracas, December 24, 2004. 
36

32. “Venezuelan President Wraps Up China Tour,” People’s Daily Online, 

December 27, 2004. See also “Chávez regresó a Venezuela y calificó de exitosa su 

gira a China,” El Universal.com, Caracas, December 27, 2004.

33. “Venezuela, China Sign 19 Cooperation Accords,” People’s Daily Online, 

January 30, 2005.

 34. “MPC: Comercio China-Venezuela alcanzará 2.500 millones dólares en 

2007,” El Universal.com, Caracas, December 24, 2004.

35. In the meeting, Chávez was widely quoted as declaring, “I have felt like a 

Maoist since my childhood.” See “Detalles de la tercera visita al gigante asiático,” 

El Universal.com, Caracas, December 26, 2004.

 36. “Chávez ofrece Petróleo a China,” El Universal.com, Caracas, December 24, 

2004.

 37. “BBVA: China es un ‘ángel comercial’ para América Latina.” 

 38. “MPC: Comercio China-Venezuela alcanzará 2.500 millones dólares en 

2007.”

39. Since 1997, China National Petroleum Corporation has been developing 

Venezuelan oil fields in two blocks: the Intercampo block on Maracaibo Lake and 

the Caracoles block on the East Venezuela Basin. In 2001, Venezuela and China 

signed a memorandum of understanding facilitating cooperation and technology 

transfer in oil exploration and petrochemical engineering. The agreement included 

a 3-year arrangement for the supply of Venezuela crude to China, as well as an 

accord between the Instituto Nacional de Geología y Minería de Venezuela and the 

Office of Geological Investigations of China to develop advanced oil and minerals 

exploration technologies in China. See Maria Velez de Berliner, “Asia and Latin 

America: What the Future Holds,” Regional Focus, May 22, 2003. See also Stanislav 

Lunev, “China’s Growing Penetration of Latin America,” NewsMax.com, May 17, 

2001.

 40. “Chávez ofrece petróleo a China,” El Universal.com, Caracas, December 

24, 2004, See also “China to Further Energy Cooperation with Venezuela: FM 

Spokesman,” People’s Daily Online, December 17 2004.

41. Fabiola Sanchez, “Chávez Predicts Energy Deals with China to Boost Trade 

to $3 Billion,” Boston Globe, Boston, December 28, 2004.

42. ”Venezuela Agrees to Export Oil and Gas to China,” New York Times, 

December 28, 2004.

43. Fabiola Sanchez, “Chávez Predicts Energy Délas with China to Boost Trade 

to $3 billion,” Boston Globe, Boston, December 28, 2004.

 44. “Chávez concluyó ‘Exitosa’ gira a China antes de lo pautado,” El Universal.

com, Caracas, December 26, 2004.

 45. Venezuela, EIA Country Analysis Brief, June 2004, http://www.eia.doe.gov/

emeu/cabs/venez.html.
37

 46. “Chávez ofrece petróleo a China,” El Universal.com, Caracas, December 24, 

2004. Key players include Petrochina and the PdVSA subsidiary, Bitor. See “Chinos 

y Coreanos dispuestos a pagar más por ormulsión,” El Universal.com, October 5, 

2004. Overall Chinese investment in Venezuela, principally in its oil sector, is 

estimated to be more than $1 billion. Cynthia Watson, “A Warming Friendship: 

Part II of a Two Part Series on China, Taiwan, and Latin America,” China Brief, 

The Jamestown Foundation, 2004.

 47. “MPC: Comercio China-Venezuela alcanzará 2.500 millones dólares en 

2007.”

 48. “Chávez concluyó ‘Exitosa’ gira a China antes de lo pautado,” El Universal.

com, Caracas, December 26, 2004.

49. Dutch assistance includes $40 million in agricultural credits promised 

by China during the state visit of Hugo Chávez to the Asian country during the 

Christmas 2004 holiday. Ibid.

 50. “MPC: Comercio China-Venezuela alcanzará 2.500 millones dólares en 

2007.” 

 51. Ibid. See also Sanchez.

 52. “Delegación China visita Venezuela para negociar acuerdos,” El Universal.

com, Caracas, December 12, 2004. See also “MPC: Comercio China-Venezuela 

alcanzará 2.500 millones dólares en 2007.”

53. “China, Chile launch FTA talks,” China View, www.chinaview.cn, January 

25, 2005, See also “Brazil is China’s Main Regional Trade Partner,” Mercopress, 

Montevideo, January 10, 2004.

 54. Efectos de un TLC con China,” El Mercurio, Santiago, December 12, 2004.

55. Delamer, Goldstein, and Porn, p. 88.

 56. Christián Rodríguez and Juan Metiches, “El impacto en Chile del alza de 

tasas de interés en China,” El Mercurio, Santiago, October 29, 2004. Currently, 50 

percent of all copper produced by Chile is exported to Asia. See Christian Viancos, 

“Asia aparece como inversionista para las empresas chilenas,” El Mercurio, 

Santiago, November 2, 2004.

 57. Luz María Astorga, “Qué gana Chile con el APEC?” El Mercurio, Santiago, 

November 12, 2004.

58. “China Minmetals’ Proposals for Noranda,” Fact Sheet, Noranda Comporate 

Website, www.noranda.com.

 59. Alejandro Rebossio, “Pekín invierte a ritmo de salsa,” El País, Madrid, 

November 21, 2004, p. 8. See also Marco Arauz Ortega, “China quiere estar más 

próxima a América Latina,” El Commercio, Quito, October 26, 2004. It is also relevant 

that 16 percent of all Chilean copper exports currently go to China. See Christián 

Rodríguez and Juan Metiches, “El impacto en Chile del alza de tasas de interés en 

China.”
38

 60. Christian Viancos, “Asia aparece como inversionista para las empresas 

chilenas,” El Mercurio, Santiago, November 2, 2004.

 61. “Más envois a China,” El Mercurio, Santiago, November 22, 2004.

 62. Blázquez-Lidoy, Rodriguez, and Santiso.

 63. Alejandro Rebossio, “Pekín invierte a ritmo de salsa,” El País, Madrid, 

November 21, 2004, p. 8. See also “Chinese President Hu Jintao Present at the 

Closing Ceremony of China-Brazil Seminar on Trade and Economic Cooperation,” 

Ministry of Commerce of the People’s Republic of China, November 19, 2004. See also 

“Sino-Brazil Ties Enter a New Era,” People’s Daily On Line, November 11, 2004. 

See also Todd Benson, “China Fuels Brazil’s Dream of Being a Steel Power,” New 

York Times, May 21, 2004. See also Guillermo R. Delamer, Jorge Eduardo Malena 

Goldstein, and Gabriela E. Porn, “Chinese Interests in Latin America,” in Latin 

American Security Challenges: A Collaborative Inquiry from North to South, Newport 

Papers #21, Paul D. Taylor, ed., Newport, RI: U.S. Naval War College, Newport, 

RI, 2004, p. 88. The trade figure includes an increase of 80 percent over 2003 alone, 

concentrated in expanded exports of iron and soy products, “BBVA: China es un 

‘ángel comercial’ para América Latina,” El Universal.com, Caracas, December 14, 

2004.

64. “Brazil is China’s main regional trade partner,” Mercopress, Montevideo, 

http://www.mercopress.com, January 10, 2004.

65. “La cooperación con Brasil marcha más rápido,” La Nación Line, Buenos 

Aires, November 9, 2004.

66. “China-Latin America Ties Enter ‘Best Period of History’: Experts,” www.

chinaview.cn, December 27, 2004.

 67. Rebossio, p. 8.

 68. “Presidente de china pasea por brasilia,” El Universal.com, Caracas, 

November 13, 2004.

 69. “Brasil aumentaría exportaciones crudo a China,” El Universal, Caracas, 

November 5, 2004.

 70. Rebossio, p. 8.

 71. Marco Kamiya, “China y las estrategias de Latinoamérica,” El Mercurio, 

Santiago, November 5, 2004.

 72. Rebossio, p. 8.

 73. “Sino-Brazil Ties Enter a New Era,” People’s Daily On Line, November 11, 

2004.

74. “China Challenges U.S. in Latin America,” Miami Herald, April 15, 2001. 

See also Delamer, Goldstein, and Porn, p. 89. Cynthia Watson notes that the 

space launch facilities available through a partnership with Brazil may also be 

a particular attraction. See Cynthia Watson, “A Warming Friendship: Part II of a 

Two Part Series on China, Taiwan, and Latin America,” China Brief, The Jamestown 

Foundation, 2004.
39

75. “Chinese Get Brazilian Plane Built in China,” Brazzil Magazine, www.

brazzilmag.com, February 8, 2005.

76. “Latin American Ambassadors on Chinese President’s Upcoming Tour,” 

People’s Daily On Line, November 11, 2004.

77. “Magic, or Realism?” The Economist, January 1, 2005, p. 25.

78. “China-Latin America Ties Enter ‘Best Period of History’: Experts.”

79. Luis Xavier Grisanti, “China en el cono sur,” El Universal.com, Caracas, 

November 25, 2004. See also Rebossio, p. 8. See also Santiago Estrella, Elcomercio.

com, Lima, November 5, 2004, Internet document, http://69.65.159.34. The total 

quantity of potential investment discussed has been up to $20 billion, although 

both Chinese and Argentine spokesmen have discounted this high figure. See

“China insiste en bajar tono de las expectivas,” La Nación Line, Buenos Aires, 

Internet document, www.lanacion.com.ar, November 9, 2004.

 80. Santiago Estrella, Elcomercio.com, November 5, 2004, Internet document, 

http://69.65.159.34. See also Rebossio, p. 8.

81. The decrees restrict imports of Chinese textile products to an increase of 7.5 

percent, and ready-made garments to an increase of 6 percent over total imports 

of similar products in the previous year. “Argentina Imposes Quotas on Chinese 

Textile Imports,” People’s Daily Online, December 17, 2004.

82. Luis Xavier Grisanti, “China en el cono sur,” El Universal.com, Caracas, 

November 25, 2004. See also Rebossio, p. 8. See also Estrella. The total quantity of 

potential investment discussed has been up to $20 billion, although both Chinese 

and Argentine spokesmen have discounted this high figure. See “China insiste en 

bajar tono de las expectivas,” La Nación Line, Buenos Aires, Internet document, 

www.lanacion.com.ar, November 9, 2004.

 83. Rebossio, p. 8.

 84. Ibid.

 85. Ibid.

 86. “Argentina explorá cooperación con China en material nuclear,” El 

Universal.com, Caracas, October 23, 2004.

 87. Ibid.

 88. “BBVA: China es un ‘ángel comercial’ para América Latina,” El Universal.

com, Caracas, December 14, 2004.

89. The most recent press statements refer to the pipeline ending in the Choco 

region. “Chávez ofrece petróleo a China,” El Universal.com, Caracas, December 24, 

2004. A number of routes have been discussed, including ending the pipeline at 

the Colombian port of Tribugal. “Presentan Plan para Vender Hidrocarburos A 

Través Colombia,” El Universal.com, Caracas, October 9, 2004. See also “Chávez 

y Uribe hablarán hoy de energía e integración en Cartagena,” Elnacional.com, 

Caracas, November 9, 2004.
40

 90. “Presentan Plan para Vender Hidrocarburos A Través Colombia,” El 

Universal.com, Caracas, October 9, 2004. See also “Chávez y Uribe hablarán hoy de 

energía e integración en Cartagena,” Elnacional.com, Caracas, Internet document, 

November 9, 2004.

 91. “Chávez y Uribe hablarán hoy de energía e integración en Cartagena.” 

 92. Robin Nieto, “Venezuela Signs $100 Million Gas Pipeline Deal with 

Colombia,” Venezuelanalysis.com, July 15, 2004.

 93. “La Respuesta de Hugo,” El Universal.com, Caracas, October 10, 2004. See

also Venezuela, EIA Country Analysis Brief, June 2004, http://www.eia.doe.gov/emeu/

cabs/venez.html.

 94. “La oferta de bienes de China crece en el país,” Elcomercio.com, Quito, 

October 27, 2004.

95. Santiso.

96. “Peru-China Relations in Best Period of Time: Peruvian President,” People’s 

Daily Online, January 28, 2005. See also “Peru, China to Establish Partnership of 

All-around Cooperation,” People’s Daily Online, January 27, 2005.

97. “Peru, EIA Country Analysis Brief,” May 2004, http://www.eia.doe.gov/emeu/

cabs/peru.html.

 98. “Pluspetrol quiere invertir en Venezuela,” Descifrado, descifrado@hispanicn

ewspress.com, February 2, 2004.

99. “Ecuador,” EIA Country Analysis Brief, February 2004, http://www.eia.doe.

gov/emeu/cabs/ecuador.html.

100. Peru officially gained status as an “Approved Destination” for Chinese 

tourists in January 2005. See “Mexico, Peru Become Tourism Destination for 

Chinese Citizens,” People’s Daily Online, January 31, 2005. See also “Aseguran 

que este año llegada de turistas aumentó en 25,9 percent,” ElComercio.com, Quito, 

December 15, 2004; “China to Promote Ties with Latin America, Vice President,” 

People’s Daily Online, English edition, December 13, 2004; “Peruvian Production 

Minister Visits China for Economic Cooperation,” People’s Daily Online, December 

12, 2004.

101. “Sichuan Urea Firm to Build JV in Bolivia,” People’s Daily Online, September 

10, 2004.

102. “Chávez ofrece petróleo a China,” El Universal.com, Caracas, December 

24, 2004. See also ”Venezuela Agrees to Export Oil and Gas to China,” New York 

Times, December 28, 2004.

103. Yolanda Ojeda Reyes, “Aspiran Abaratar Envío de Crudo a China,” El 

Universal.com, Caracas, December 30, 2004.

104. Delamer, Goldstein, and Porn, p. 95. See also China’s New Role in Latin 

America, WorldNetDaily.com, Stratfor, May 10, 2001.
41

105. According to one report, China may further be maintaining submarines off 

of Cristobal and Balboa to help to keep it open, or to deny it to others, as desired.

 106. “Hu da espaldarazo a Castro con promesa de nuevas inversiones,” El 

Mercurio, Santiago, November 24, 2004.

 107. Ibid.

 108. “Presidente Chino llega mañana a Cuba,” El universal.com, Caracas, 

November 21, 2004.

 109. Santiso.

110. “China-Mexico Trade Cooperation has Broad Prospect: Vice President,” 

People’s Daily Online, January 25, 2005.

111. Santiso.

112. Blazquez-Lidoy, Rodríguez, and Santiso. See also Santiso.

113. “China-Mexico Trade Cooperation has Broad Prospect: Vice President.” 

114. “China, Mexico to Further Promote Ties,” People’s Daily Online, January 

25, 2005.

115. Ibid. See also “China, Mexico Sign 7 Cooperation Accords,” People’s Daily 

Online, January 25, 2005.

 116. “Economías de América Latina experimentan mejor comportamiento,” 

El Universal.com, Caracas, October 20, 2004. This concern is also reflected in the 

analyses of a number of key Wall Street analysts. See “Analistas prevén buen 

desempeño económico en América Latina para 2005,” Eluniversal.com, Caracas, 

November 22, 2004.

 117. Juan Carlos Llorca, “Recomiendan abrir en China oficinas comerciales,” 

ElPerioódico, Guatemala, Internet document, redaccion@elperiodico.com.gt, November 

9, 2004.

 118. “Grupo Santander y Bank of China firman acuerdo,” Descifrado, descifrad

o@hispanicnewspress.com, September 2, 2004.

 119. See, for example, “Policía China en Haití,” Tiempos del Mundo, October 7, 

2004, p. 9. The article notes that the Chinese deployment may have been, in part, 

a strategic move to pressure Haiti to abandon its recognition of Taiwan. Similarly, 

Cynthia Watson notes that if the concentration of states in Latin America still 

recognizing Taiwan were to change their policies, “Taiwan’s position of claiming 

a sovereign state status would deteriorate dramatically.” Cynthia Watson, “Adios 

Taiwan, Hola Beijing: Taiwan’s Relations with Latin America,” China Brief, The 

Jamestown Foundation, 2004. 

120. See “Peru, China to Establish Partnership of All-around Cooperation.” 

See also “Peru-China Relations in Best Period of Time: Peruvian President”; 

“China-Mexico Trade Cooperation has Broad Prospect: Vice-President”; “China, 

Venezuela Should Expand Cooperation: Vice President,” People’s Daily Online, 

January 30, 2005; “Trinidad and Tobago Recognizes China’s Full Market Economy 

Status,” People’s Daily Online, February 1, 2005.
42

121. “China, Latin America to further Enhance Legislative Cooperation,” 

People’s Daily Online, January 27, 2005.

122. “China, Andean Community to Promote Cooperation,” People’s Daily 

Online, January 28, 2005.

123. “CPC Willing to Promote Development of China-Venezuela Relations: 

Senior Official,” People’s Daily Online, December 20, 2004.

124. “China Challenges U.S. in Latin America,” Miami Herald, April 15, 2001. 

Delamer, et al., contest this position, however, arguing that there are no credible 

sources to confirm that China is actually collecting signal intelligence at Lourdes, 

and that the original Russian sources of this information may have ulterior motives. 

Delamer, Goldstein, and Porn, p. 95. See also “Russia Warily Finesses China Ties,” 

Stratfor.com, www.cdi.org/russia/216-10.cfm, July 24, 2002. 

125. “China Challenges U.S. in Latin America.”

126. “China, Ecuador Vow to Further Military Ties,” People’s Daily Online, 

December 2, 2004.

127. Chinese, Bolivian DMs Confer in Beijing,” People’s Daily Online, November 

2, 2004.

128. Miguel A. Vergara Villalobos, “La Marina de Chile se proyecta al Pacífico,” 

El Mercurio, Santiago, November 12, 2004.

 129. See Fernando Gualdoni, “China ‘conquista’ América Latina,” El País, 

Madrid, p. 3.

130. See Cynthia Watson, “A Warming Friendship: Part II of a Two Part Series 

on China, Taiwan, and Latin America,” China Brief, The Jamestown Foundation, 

2004. Watson notes, however, that Ecuador has moved cautiously, motivated in 

part by concern over dependence on Chinese investment.

131. Ecuadoran President Lucio Gutierrez is politically marginalized, and the 

country faces both a powerful indigenous movement and spillover effects from 

the Colombian civil war. Attention to the impact of the Colombian civil war on 

Ecuador has grown over the past year as the Colombian army has implemented 

Plan Patriota in neighboring Putumayo and Nariño states.

132. The plan to export Bolivian gas through the Chilean port at Arica was 

so politically explosive that it prompted a series of riots and the downfall of the 

previous government of Gonzalo Sanchez de Lozada.

 133. “Chile y China listos para TLC,” El Mercurio, Santiago, October 30, 2004.

 134. “APEC en Chile,” El Mercurio, Santiago, November 24, 2004.

135. China and Chile officially launched negotiations to establish a free trade 

area between the two countries on January 25, 2005. See “China, Chile launch 

FTA talks,” China View, www.chinaview.cn, January 25, 2005. See also Alejandro 

Rebossio, “Pekín invierte a ritmo de salsa,” El País, Madrid, November 21, 2004, p. 

8; “China reitera en Chile promesas de fuertes inversiones in América Latina,” El 
43

País, Madrid, November 21, 2004, p. 1; “Mandatario chino optimista por TLC,” El 

Mercurio, Santiago, November 14, 2004; Chile y China listos para TLC, El Mercurio, 

Santiago, October 30, 2004.

 136. M. De Los Ángeles Naudon D, “Qué esperan los empresarios chilenos de 

la cumbre?” El Mercurio, Santiago, November 9, 2004.

137. See Marco Kamiya, “China y las estrategias de Latinoamérica,” El Mercurio, 

Santiago, November 5, 2004. See also Delamer, Goldstein, and Porn, p. 89.

138. Pablo Rodas Martini, “Criticas a la maquila regional,” ElPerioódico, 

Guatemala, Internet document, redaccion@elperiodico.com.gt, August 2, 2004.

 139. Blazquez-Lidoy, Rodriguez, and Santiso, “Angel or Devil? Chinese Trade 

Impact on Latin American Emerging Markets.” 

140. Blazquez-Lidoy, et al., argue that Latin American ports are perceived as 

relatively inefficient and plagued with significant customs delays and infiltration 

by organized crime. They go on to argue that such efficiency issues are a major 

factor in overall shipping costs. See Blazquez-Lidoy, et al. See also A. Deardoff, 

“Local Comparative Advantage: Trade Costs and the Pattern of Trade,” University 

of Michigan Gerald Ford School of Public Policy, Discusión Paper, No. 500, http://

www.fordschool.umich.edu/rsie/workingpapers/Papers476-500/r500.pdf, February 2004.

141. Andreas Oppenheimer, “El temor al Made in China, un impulse para el 

ALCA,” Miami Herald.

142. “25 Countries Recognize China’s Market Economy Status,” People’s Daily 

Online, December 9, 2004.

 143. See “China avanza en asociaciones con Latinoamérica,” El Universal.com, 

Caracas, December 3, 2004. Ecuador is another nation in which specialization of 

trade that disadvantages Latin American manufacturing is emerging. Ecuadorian 

exports to China are currently only a tenth of imports from China, with the vast 

majority of those exports concentrated in the petroleum sector. In 2003, Ecuador 

exported $13.5 million in goods to China, from a total of $267.7 million in bilateral 

trade. Exports were concentrated in crude oil, fuel oil, bananas, plastics, and ivory 

palm oil. Of the $500 million in Chinese investment currently in Ecuador, the vast 

majority is in the petroleum sector. “La oferta de bienes de China crece en el país,” 

Elcomercio.com, Quito, October 27, 2004.

144. The ultimate outcome of these new trade patterns are far from certain. As 

Delamer, et al., point out, the introduction of China into the WTO will force the 

nation to open up its markets to a wide variety of products from Latin America, as 

well. Delamer, Goldstein, and Porn, p. 90.

145. Daniel H. Rosen, “How China is Eating Mexico’s Lunch,” The International 

Economy, p. 24.

146. The proposed legislation would increase the fee charged for an investment 

visa from $1,400 to $20,000, and would raise the quantity of investment required 

from $2,400 to $30,000. “Cada vez entran más chinos al país,” Elcomercio.com, 

Quito, October 28, 2004.
44

 147. “Magic, or Realism?” The Economist, January 1, 2005, p. 26.

 148. “La controversia por el antidumping,” La Nación Line, Buenos Aires, 

Internet document, www.lanacion.com.ar, November 9, 2004.

 149. Alejandro Rebossio, “Pekín invierte a ritmo de salsa,” El País, Madrid, 

November 21, 2004, p. 8.

150. “Mexico, Peru Become Tourism Destination for Chinese Citizens.” 

151. Ibid.

 152. Carola Zúñiga, “Chile pide a China comenzar en enero con primera ronda 

de TLC,” El Mercurio, November 26, 2004; Juan Carlos Llorca, “Recomiendan 

abrir en China oficinas comerciales,” ElPerioódico, Guatemala, Internet document, 

redaccion@elperiodico.com.gt, November 9, 2004. See also “Los turistas chinos se 

multiplican por todo el planeta,” El Universal.com, Caracas, November 11, 2004.

 153. Yolanda Ojeda Reyes, “Ciudanos Chinos Reciben Protección,” El Universal, 

Caracas, November 11, 2004.

 154. Pekín pide que se protejan derechos ciudadanos chinos en Venezuela,” 

El Universal.com. Caracas, Internet document, November 9, 2004. See also Reyes, 

“Ciudanos Chinos Reciben Protección.” 

 155. “Cada vez entran más chinos al país,” Elcomercio.com, Quito, October 28, 

2004.

156. Delamer, Goldstein, and Porn, p. 93.

157. Delamer, et al., write that Chinese mafias operating in the region allegedly 

carry out operations with an Islamic terrorist group, Gamaa Islamiya. Delamer, 

Goldstein, and Porn, p. 94. See also Roberto Godoy, “Triple Border Area Monitored 

during the Past 20 Years,” O Estado de São Paolo, November 11, 2001.

158. Delamer, et al., note that Fu Chin, a triad with ethnic and geographic ties 

to the Fujian province of Southern China, is currently one of the most powerful 

Chinese organized crime groups operating in the region, with a focus on illegal 

immigration. Delamer, Goldstein, and Porn, p. 91.

 159. “El Sur de China atraviesa por la peor escasez de agua desde 1951,” El 

Nacional.com, Caracas, November 11, 2004.

 160. Ibid.