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Panama's place on the Silk Road and the break with Taiwan of new countries on area place Chinese interests on the doorstep of the United States.

  • U.S. alert for the Chinese management of terminals on both sides of the Panama Canal, of a possible port in El Salvador and of the space station opened in Patagonia.

  • Beijing maintains its support for Maduro with a new US$5 billion credit , the implementation of the Carnet de la Patria for social control and the sending of a hospital ship.

  • Chinese financial financial aid to Latin America exceeds $140 billion since 2005; some 150 infrastructure projects have been signed, half are underway in 2018

project Chinese port terminal at one of the Panama Canal mouths

project Chinese port terminal at one of the mouths of the Panama Canal

report SRA 2019 / Jimena Villacorta[PDF Version].

The People's Republic of China strengthened its relationship with Latin America in 2018, especially with Central America. While its level of official lending decreased in the last two years, Beijing developed other actions in the region and especially improved its strategic position in Central America, to the concern of the United States.

Throughout 2018 two new countries ceased their diplomatic recognition of Taiwan to move to full relations with China. The Dominican Republic, a country integrated into some of the Central American agreements, did so in May, and El Salvador did so in August. Panama took the step the previous year, in June 2017 (and Costa Rica in 2007). While this leaves Taiwan still with four partners in Central America (of the 18 countries that continue to recognize Taiwan worldwide, four are in the American isthmus-Guatemala, Honduras, Nicaragua, and Belize; and four others are in the Caribbean: Haiti and three micro-states), China already has sufficient space for its logistical operations.

Panama has become an interesting goal for Beijing. At the beginning of 2018 Panama received the designation of most favored nation by China, and in December Xi Jinping made the first visit of a Chinese president to the country. In the framework of that visit, Beijing announced that there are 20 Chinese companies carrying out operations in Panamanian territory, such as the construction of maritime terminals on both sides of the interoceanic canal, of which China is the world's second largest customer (30.7% of all traffic), after the United States. There are also another 70 companies installed in the Colon Free Zone, of which China is the main provider. Panama is a fundamental piece for the purpose suggested by the Chinese authorities to extend to Latin America the maritime route of the New Silk Road, for which both countries signed a memorandum, the first for that purpose in the region.

US Alert

China's loans to Latin America

Beijing's influence in Panama has generated suspicions in Washington. In February 2018, Admiral Kurt Tidd, head of the US Southern Command, already indicated in his appearance before the Senate the concern about the Chinese positioning in the Canal environment. In September, the US called for consultations with the chargé d'affaires of its Panamanian embassy to analyze that activity, and in October the US Secretary of State, Mike Pompeo, expressed his concern in a visit to the country. In February 2019, Admiral Craig Faller, the new head of the Southern Command, insisted before the Senate on how "particularly worrisome" is "China's effort to exercise control over infrastructures core topic associated with the Panama Canal". Faller also warned about China's construction of ports on the Latin American coast. "In the future," the admiral said, "China could use its control of deepwater ports in the Western Hemisphere to enhance its global operational position."

Precisely one of the ports that China could take control of was the subject of discussion political in El Salvador, where the government of the Farabundo Marti National Liberation Front (FMLN) promoted in July 2018 a law to designate the area around the port of La Union, in the Gulf of Fonseca, as a special economic zone. The US ambassador in El Salvador welcomed the initiative, warning that the interest shown by China towards La Unión, recognized by the Salvadoran authorities, could result in the use of the facilities as a Chinese military base.

The increase in China's activity in Latin America in 2018 was matched, as can be seen, with a parallel increase in alerts from the US. Another such signal was regarding the space tracking and observation station built and managed by China in Argentine Patagonia, to which in February the head of the Southern Command referred to in the framework of his visit to Capitol Hill. The fear is that, being managed by a business under the Chinese Army, the station could have a military use, although the Argentine government has requested Beijing's commitment that this will not happen.

Loans and Venezuela

In the financial chapter, China granted a total of 7.7 billion dollars in credits to the region in 2018, which represented a slight increase compared to 2017, after two years of decreases, although far from the amount of the exercises with the highest volume, from agreement with the China-Latin America financialdatabase of Inter-American Dialogue. Since 2005, Chinese direct investment has amounted to $141 billion, most of it coming from the development Bank of China (CDB) and almost half of it destined for Venezuela ($67.2 billion). Of the 7.7 billion granted in 2018, 5 billion corresponded to Venezuela, which thus obtained a attendance that since 2007 began it only lacked in 2008 and 2017.

If initially the investment was more aimed at the extractive industry, over time China has also been entering the infrastructure sector. Some 150 transport infrastructure projects have been signed since 2002, of which almost half had been started by 2018.

The special financial linkage with Caracas, basically in exchange for oil in the future, has led Beijing to act in defense of the government of Nicolás Maduro. In addition to denying recognition of the designation of Juan Guaidó as president in charge of the country, China denied in March 2019 the visa to the representative appointed by Guaidó in the directory of the Inter-American Bank of development (IDB), an entity that for the first time was going to hold its annual meeting on Chinese territory. This was seen as China's first intervention in American regional politics, using the growing weight of its credits and investments in various countries.

China has expressed its support to Maduro in different ways. In 2018, details of the technological financial aid provided by the Chinese telecommunications giant ZTE to develop the Carnet de la Patria promoted by the Venezuelan government, in an implementation that seeks social control, became known.

There was also support for the Chavista regime with the dispatch of a hospital ship to Venezuela in September 2018. The Peace Ark spent a week in Venezuelan waters, a month after the Pentagon announced that it was scheduling to send the Comfort, a ship with several operating rooms and other medical facilities, to Colombia to treat Venezuelans who had fled the humanitarian crisis in the neighboring country.

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