Workers work at a plant for environmental sanitation equipment manufacture in a China-Latin America indusry park in Tangshan, north China's Hebei Province on August 29, 2017. The industry park focuses on promoting China-Latin production capacity cooperation (XINHUA)
'The Belt and Road Initiative is rooted in the ancient Silk Road. It focuses on the Asian, European and African continents, but is open to all the other countries of the world. Every nation, from Asia, Europe, Africa and the Americas, can be an international partner of the Belt and Road Initiative." These were the words of Chinese President Xi Jinping, speaking at the opening ceremony of the Belt and Road Forum for International Cooperation in Beijing last year.
As an inclusive and open platform for cooperation, the Belt and Road Initiative includes regions and countries in different stages of development and the various, connected birthplaces of civilizations. Latin America, then, is an important aspect of this vision.
Last year's Belt and Road forum had attracted high officials from around 20 Latin American and Caribbean (LAC) countries, including Chilean President Michelle Bachelet and Argentine President Mauricio Macri .
During the event, LAC representatives expressed their hopes for greater synergy between regional development strategies and the Belt and Road Initiative, the construction of infrastructure in the Southern Hemisphere, and an increase in South-South cooperation. This suggests that the Belt and Road Initiative corresponds with the developmental needs of LAC countries, and echoes the voices elsewhere in the international community calling for enhanced connectivity and mutually beneficial cooperation.
China is also looking forward to seeing the LAC countries play an active role in the Belt and Road Initiative, strengthening the coordination of their respective economic policies and complementing each other's development strategies so that the dividends of this initiative can reach even more countries and regions of the world.
Enhancing cooperation with Latin America under the framework of the Belt and Road Initiative is of great importance to China. On January 22, while addressing the opening ceremony of the Second Ministerial Meeting of the Forum of China and Community of Latin American and Caribbean States (CELAC), Foreign Minister Wang Yi described how President Xi has often mentioned the transpacific maritime Silk Road which once connected China and the LAC countries, as well as the Spanish ships, often referred to as La Nao de China, which starting in the mid-16th century set out from Fujian before stopping off in Manila and sailing across the Pacific to deliver primarily Chinese goods to Acapulco in Mexico.
There is both a strong cause and a solid traditional foundation for China-LAC cooperation under the Belt and Road Initiative. To this end, Belt and Road cooperation will be the golden key that unlocks a brighter future for both sides.
Policy and connectivity
Coordination of policy provides an important guarantee for China-LAC cooperation under the Belt and Road Initiative as it contributes to political trust while synchronizing development strategies.
China had already established various high-level and wide-ranging policy coordination mechanisms with Latin America before the Belt and Road Initiative was put forward in 2013, such as the high-level coordination and cooperation commission, economy and trade consultation platform as well as the comprehensive strategic dialogue mechanism at the foreign minister level.
Policy coordination between the two sides should focus on enhancing the efficiency of existing mechanisms so as to align development strategies, plans and projects. Mutual and multilateral cooperation should also be promoted. The China-CELAC forum is conducive to enhancing cooperation between China and the Latin American region as a whole, but mutual cooperation between China and the individual states is also vital since projects are more often than not undertaken at a national level. The role of think tanks in policy communication will also be of great value in both China and Latin America.
Facilitating connectivity concentrates on the construction of infrastructure, which considering that China and Latin America are separated by the Pacific Ocean, focuses on connections via sea and air.
The appropriate modes of cooperation must be carefully considered in efforts to facilitate connectivity under the initiative of the 21st Century Maritime Silk Road. The building of infrastructure usually requires a lot of time, money and technology, and is consequently characterized by a relatively slow return on investment. Based on past experiences and the regional conditions of Latin America, public-private partnership and build-operate-transfer are suitable models for financing projects.
Another critical issue is how to minimize risk. Infrastructure projects are of vital importance to a region and nation, and so they are easily weaponized by political parties and interests groups. Guarding against potential interferences of this kind is an important step in project initiation.
Feasibility research must also be carefully undertaken before starting a project. Infrastructure projects are expensive, and their commercial value and profitability are vital issues which should not be overlooked. Thorough investigation into the practicalities and the proper handling of the relationship between countries and commercial profits are necessary to avoid incidents akin to the shutdown of Venezuela's high-speed railway project following the country's economy collapse, a project which was undertaken by a Chinese company.
Ensuring unimpeded trade is also an important part of the Belt and Road Initiative. Trade and investment are the impetus for China-Latin America relations, with the trade volume between the two regions reaching $63.2 billion in 2017, 20 times the $12.6 billion registered in 2000. Chinese investment in Latin America has also increased, standing at $207.15 billion by the end of 2016, 15.3 percent of China's total investment worldwide.
In order to better enable trade between China and Latin America, it is necessary to understand the bilateral nature of their economic and trade relations. China's comparative advantage is its manufacturing capability, and Latin America's strength lies in an abundance of natural resources. The respective advantages offered by both parties have laid the foundation for complementarity and provides further impetus for bilateral trade.
However, many countries in the region are not satisfied with the current system of trade between China and Latin America. They believe that this model cannot help the LAC countries improve their industrial structures, but instead fuels commoditization, leaving Latin America keen to move into manufacturing themselves.
In reality, however, the economic relationship between China and the LAC allows the latter to benefit from its intrinsic conditions, to obtain more revenue from exports and to diversify its foreign economic relations. Nonetheless, China should make an effort to satisfy these demands by further opening its market to more goods imported from the region.
In order to promote cooperation in investment, LAC countries should make efforts to improve the unsatisfactory local business environment according to the findings of a recent World Bank report. Chinese enterprises should not only remain alert to host countries' risks but also better shoulder the social responsibilities of investment there. More Latin American investment should also be welcomed and encouraged in China.
Financial integration is another critical aspect of facilitating connectivity and unimpeded trade.
The enhancement of financial integration also corresponds with the "1+3+6" framework for cooperation laid out by President Xi in his keynote speech at the China-LAC summit held in Brasilia in 2014. In this concept, "1" refers to the establishment of the China-Latin American Countries and Caribbean States Cooperation Plan (2015-2019) with the aim of achieving inclusive growth and sustainable development. "3" represents the three driving forces for cooperation: trade, investment and finance. "6" refers to boosting China-Latin America industry connection with energy and resources, infrastructure construction, agriculture, manufacturing, scientific and technological innovation, and information technologies as cooperation priorities.
Financial integration between China and Latin America has already borne fruit. The Sino-Latin American Production Capacity Cooperation Investment Fund and the China-LAC Cooperation Fund have been playing an instrumental role in providing the necessary capital for economic development. The People's Bank of China has signed currency swap agreements with central banks in Brazil, Argentina, Suriname and Chile. The Chilean branch of the China Construction Bank and the Argentine branch of the Industrial and Commercial Bank of China have been appointed as renminbi clearing banks. In addition, a number of commercial Chinese banks have opened branches in Latin America.
Efforts to improve financial integration should see the security, liquidity and profitability of China's capital ensured, and inclusive finance should be developed to allow more small and medium enterprises to enjoy the benefits generated through financial cooperation. More focus must also be placed on intensifying cooperation with development banks in Latin America.
Bonds between peoples provide the social basis for the Belt and Road Initiative. Although cultural and interpersonal exchanges have accelerated over the past two decades, mutual understanding is still insufficient and lags behind the comparatively close bonds in economic cooperation and trade. Distance, politics, culture, language, thinking and behavior all have a major part to play in this regard.
Yet despite their differences, neither side has a justifiable reason to hold back. Instead, the peoples of both regions should make full use of the historical opportunity presented by the maritime Silk Road in the 21st century, and should adopt measures to improve intercultural understanding.
Through innovation China and Latin America can diversify their means of cultural exchange with publicity campaigns, utilizing the opportunities brought about by globalization and the rapid development of the Internet. Tourism must also be keenly developed as a way of sharing experiences of local life and culture.
In order to enhance a mutual understanding between peoples, countries should seek to popularize the results of academic research, making it easier for the public in both places to acquire knowledge related to China and Latin America.
The author is a professor at Shanghai University and the City University of Macau
Copyedited by Laurence Coulton
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