Engaging the Dragon- LAC at APEC

The Asia-Pacific Economic Cooperation (APEC) is a forum established in 1989 that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region. The 22nd APEC Economic Leaders' Meeting took place this year in Beijing, China on November 11, as leaders from member economies gathered to exchange in-depth views on the topic of co-building the future-oriented Asia-Pacific partnership and jointly discuss major plans on regional economic cooperation. Mexico, Chile, and Peru were the sole representatives from Latin America. Beyond seeking to deepen trade links with Asia, the leaders of Chile, Peru and Mexico used their time in Beijing to push for greater Chinese investment in their countries. Peruvian President Ollanta Humala met with Chinese President Xi, and the two leaders reportedly signed a memorandum supporting the creation of a trilateral group

with Brazil to plan the construction of a rail link between Peru and Brazil. In addition, the Peruvian President put social inclusion and sustainable development at the center of his APEC CEO Summit address, noting the importance of public-private partnerships to reduce inequality.

Chilean President Michelle Bachelet also held a bilateral sit-down with President Xi, and while Bachelet left China empty handed in terms of signed agreements, she made her objectives clear: “We have a high level of trade, but we have not made any progress in investments,” she said at a meeting with Chinese Prime Minister Li Keqiang. Both Xi and Bachelet nonetheless expressed confidence that the establishment of a Chilean branch of the China Construction Bank next year will spur future Chinese investment in Chile.

Mexican President Enrique Peña Nieto arrived in China later than planned due to nationwide protests taking place over the disappearance of 43 students in the state of Guerrero. The president defended his decision to travel by saying that it would be “irresponsible” not to attend, as it would mean that Mexico would not participate in events “that have an impact in driving our country’s economy and generating jobs.” The visit also comes days after the Mexican government cancelled a multi-billion-dollar deal with the Chinese to build a high-speed railway amid concerns about the bidding process, although despite the controversy, the Chinese leader and Mexican President Enrique Peña Nieto signed 14 separate agreements and investment contracts. Peña Nieto also announced plans to create a joint fund between three Chinese companies and the Mexican oil company Pemex with the goal of raising up to 5 billion USD for energy projects in Mexico.

The interactions of the three member states from Latin America with China at the summit seemed to demonstrate China’s growing role in the region. The relationship between China and Latin America is largely economic, and it is clear that these Latin American countries value their trade and investment opportunities with China. It is important, however, to keep in mind that despite the rosy outlook suggested by the signing of various deals during the summit, the implementation and execution of the agreements is another issue entirely. For example, the Free Trade Agreement between China and Peru has allowed bilateral trade to increase a by a wide margin, but conditions are far from satisfactory. Peru has openly voiced that it wants to expand and diversify their exports, selling more fruit, crafts, fishing and medicinal products to the Chinese market. The transfer of Chinese technology is of particular importance for small Peruvian companies to increase their production capacity, and in general, China’s size and economic importance often times gives it greater leverage over the smaller countries in Latin America,  creating skewed negotiations that often favor China.

Another peculiar point of interest during the summit was the fact that China and the United States were pushing separate trade deals. China promoted the Free Trade Area of the Asia Pacific (FTAAP), while the United States endorsed the Trans-Pacific Partnership (TPP), which excludes China but includes all three APEC member states from Latin America. The TPP agreement is considered Washington's "pivot" towards Asia, ensuring continued US influence in the region in response to growing Chinese power. Despite the involvement of all three Latin American member states in the TPP agreement, all three leaders still backed the Chinese-led proposal for FTAAP. Both the U.S. and China are extremely important trading partners for the Latin American nations, and it seems that neither relationship can be compromised. The trilateral relationship between the U.S., China, and Latin America requires a delicate balance, and it remains to be seen what measures the U.S. will take as China becomes more involved in Latin America, a region traditionally considered to be the U.S.’s “backyard”.

While the APEC summit has highlighted the economic opportunities that exist between Latin America and China, Latin American countries will still need to tread carefully as they tango with the dragon. Continued open dialogue will most likely aid in the process of strengthening economic cooperation as both regions look towards more sustainable growth in the future.