Latin America can learn valuable lessons from Pakistan’s recent experience with China, including how strategic interests dictate Chinese motives abroad; how Chinese-U.S. tensions give developing countries more bargaining power; and how developing countries can use the experience of other countries to devise their own paths forward.
To be clear, Pakistan and Latin America are very different cases. Latin American states are themselves vastly different from each other in many respects. However, highlighting these differences can clarify certain lessons.
Pakistan is a large country (with a population of 210 million) with a strong agricultural lineage and an economy centered on low value-added textile exports. In Latin America, the only comparable country in terms of size is Brazil, which also has a population around 210 million. The drop off is steep after that; Brazil has a larger population than the next three countries (Mexico, Colombia, Argentina) combined.
Latin America, though, does have some commonalities. Most important is its export structure, primarily concentrated in primary goods such as oil, copper and soy.
Pakistan and Latin America also share common historical elements of colonial rule and of being Cold War battlegrounds. Chinese finance is attractive to both for a number of reasons, including recent experiences with IMF lending (for most, though not all, of Latin America), political tensions with the U.S., and the desire to develop quickly through industrialization and infrastructure.
In Pakistan, the China-Pakistan Economic Corridor (CPEC), a proposed network of highways, power plants, and Special Economic Zones (SEZs), has engulfed the country’s politics, development trajectory, and popular attention. CPEC is thought to be worth somewhere in the range of $60 billion, a substantial sum for a country that has long faced obstacles in its efforts at development.
CPEC places Pakistan roughly equivalent in terms of Chinese lending to Venezuela, which has received $62.2 billion in the last decade. Pakistan’s experience with China provides an important lesson to countries such as (but not limited to) Brazil: recognize and leverage your strategic position.
China’s realpolitik
China, like any self-interested global power, acts in its own interests, and thus seeks to identify and secure strategic assets that will further its desires. In Pakistan, CPEC will provide a link from western China to the Gwadar port on the Arabian Sea, which will be leased to China for 40 years. Three key benefits will result for China: lowered dependence on shipping goods through the sensitive bottleneck of the Strait of Malacca, decreased transportation costs and shipping times for both imports and exports, and isolating rival India from the rest of the Asian continent through a ring of allies. In addition, the CPEC SEZs are expected to be tax havens for Chinese state firms, enabling China to create sheltered mini-economies on foreign soil (an approach China has already used in Africa).
As such, it is easy to see why China has labeled CPEC as the flagship venture in its Belt and Road Initiative (BRI), an ongoing multi trillion-dollar infrastructure initiative aimed at reshaping the landscape of the developing world to revolve around Beijing. Despite the risks inherent for Pakistan with CPEC—a recent study by the Center for Global Development listed Pakistan as having “high risk” for “debt distress” as the result of CPEC financing—CPEC provides a new opportunity to develop if done sensibly. One of those potential benefits is greater attention on gender-equal and environmentally sustainable industrial policy, as was highlighted at a recent Lahore School of Economics conference, and could ensure that all Pakistanis can reap the benefits of CPEC.
Because Pakistan is so strategic to China, Beijing is willing to devote large amounts of capital and attention to secure the outcomes it seeks. Latin American states can learn from this by leveraging their own qualities that are strategic to China. First and foremost, this means primary exports to fuel the BRI.
In Latin America, Chinese presence has been defined by infrastructure and energy projects; 90% of lending has gone to these sectors. Leading scholars have termed this engagement “Economic Statecraft,” because the profit motives involved, while not distinct from political gains that come along with this kind of lending, are the leading factor why China seeks Latin American partners.
Although any discussion of sustainable development in Venezuela is on pause while the country remains under Nicolás Maduro’s control, a future, less feckless government could dangle the world’s largest proven oil reserves to secure better terms from a Chinese government that still remains heavily reliant on oil imports. Brazil and Argentina are the world’s second and third-largest producers of soy, another key Chinese import. Argentina, Bolivia, and Chile contain significant lithium reserves, an important input into Chinese domestic industry. Finally, Peru seems primed to benefit economically from a proposed trans-continental railway as the last point of departure for Latin American goods en route to China; smaller countries like Ecuador, Nicaragua, and Costa Rica can also leverage their geographic abilities to cut costs for exports headed to China, following the example of Panama.
However, most experts agree that diversification away from commodities is crucial for Latin American development. This brings up another lesson that can be drawn from Pakistan: how to deal with the United States.
While the Pakistani-U.S. relationship is by no means sterling, China’s strengthened position in global political economy has given Pakistan increased bargaining power with both superpowers. “We don’t see a need to hold each relationship exclusive from the other,” Khawaja Muhammad Asif, the Pakistani Foreign Minister, told me in an interview. “We have been able to negotiate on the basis that both China and the U.S. need us to achieve their goals.”
If Latin American states play their cards right, they can leverage Washington’s growing worries about growing Chinese presence in the Western Hemisphere. This tension gives Latin American leaders the ability to demand, on their own terms, that both China and the U.S. look seriously at how to best help generate sustainable development for the region. They can translate China’s need for primary goods into better terms for credit (such as lower interest rates), mandated use of Latin American firms and workers in infrastructure development, and guarantees of parallel investments in education and health to accompany infrastructure investment. They can also pressure the U.S. to maintain its financial commitments to the region, change its current antagonistic position towards the region on migration, think about ways to provide infrastructure and other kinds of finance in order to genuinely aid Latin American development in a competitive way, as well as to seriously support efforts at regional integration.
If Washington fails to recognize the scale and clout of Chinese finance in Latin America, it risks ceding further influence in a region that has already begun to sharply shift course eastward. As long as the Trump administration remains narrowly focused on supply-side pressure, it loses the opportunity to see the very real and accessible demand-led opportunities available to simultaneously promote U.S. interests in the region and support and play an integral role in Latin American development, on Latin American terms.
Today, all the talk is of how the BRI represents China’s path towards global hegemony. However, as in Pakistan, Latin American countries can use China to chart new development futures of their own.
Max Nathanson is a graduate student in Oxford University’s Department of International Development. He is co-president of the Oxford Urbanists and was named a Global Shaper by the World Economic Forum in 2017.
The author would like to thank the Lahore School of Economics for its generous support in making participation in their annual conference possible.
