Home » Featured

Jorge Heine – Marco Polo goes to South America One Belt, One Road due East

15 mayo 2017 No Comment

Marco Polo goes to South America One Belt, One Road due East

by Jorge Heine,Ambassador of Chile to the People’s Republic of China

Published in: http://www.chinainvestment.com.cn/type_hgzc_tzsj/7071.html

In 2016 Chile became the largest fruitexporter to China, with some US$ 1207 million dollars, an amount larger thanthat of equivalent exports from neighboring countries like Thailand or Vietnam,or than that of agricultural powerhouses like the United States or Australia.By value, one out of every four fruits imported by China ( at some US$ 5billion in 2016), hails from Chile. Though traditionally known in China for itswine, Chile is now becoming more and more popular among Chinese consumersbecause of its cherries, blueberries, kiwis, apples, grapes, prunes, avocadosand peaches, that can be found on supermarket shelves from Chengdu to Shanghai,and (increasingly) in e-commerce sites such as Taobao andJD.com. In the courseof twelve years, ever since the signing of Chile´s FTA with China in 2005,Chilean fruit exports to China increased by 240 times, from US$ 5 milliondollars to the current figure. With a growing Chinese middle-class eager for ahealthier, higher-quality diet, all projections indicate that the fresh fruitmarket will continue to expand at high rates.

Yes, Chile is already the largest fruitexporter in the Southern Hemisphere.  Ithas considerable comparative advantages for that, including its Mediterranean climate,a plague-and-disease-free environment ensured by its finis terrae condition andnatural geographic barriers ( like the Andes mountains, the Pacific Ocean andthe Atacama Desert), as well as some four decades of experience in exportingfresh fruit to all corners of the world. Still, it is remarkable that Chinaimports more fresh fruit, by definition a highly perishable and fragileproduct, from the nation that is farthest away from it on the globe, than fromany other. If anything, it shows that, while we may not be living at “the endof history”, as Francis Fukuyama famously argued after the end of the Cold War,we may well be at “the end of geography” as we have known it, with advances intransportation and telecommunication technology shrinking the world into theproverbial global village—something for which we have the modern container and cold-chainfacilities to thank.

This is especially apparent in the case ofrelations between Latin America and Asia, continents that for much of thetwentieth century interacted little, but that in the new century have witnesseda veritable flourishing of trade and investment flows, something in which Chinahas led the way. Whereas total trade between China and Latin America onlyamounted to a paltry US$ 10 billion in 2000, this figure grew exponentially toUS$ 267 billion in 2013, a growth of 2600% in 13 years. As a result of that,for Brazil, Chile and Peru, China is now their # 1 trading partner, and formany other Latin American countries it is the second largest. For a regionwhich had for most of its history looked to North America and Western Europe asits main trade, investment and diplomatic partners, this is a major shift, onethat is still being internalized and assimilated. One reason Latin America managedto handle the effects of the 2008-2009 financial crisis so effectively is duetoits burgeoning trade with Asia ( and ,chiefly, with China). This allowed itto increase considerably its exports, pay down its foreign debt and buttress itforeign exchange reserves, thus being in a strong  financialposition to withstand the rippleeffects of the Wall Street-induced recession.

That said, it is also true that the end ofthe commodities super-cycle has brought that burgeoning expansion of Sino-LACtrade to a screeching halt, and even to a slight downturn—by 2016,that trade reached some US$ 230 billion, still a very large figure, but onethat reflects a static, rather than a dynamic trade environment across thePacific. The ripple effects of this have been felt across South America, as anumber of countries experiment negative growth. This is aggravated by the factthat global trade as a share of world output is also going down. Whereas formuch of the past two decades trade grew at twice the rate of global GDP, it isnow only growing at half of it.

The purpose of this brief note is toexamine how China´s One Belt, One Road (OBOR) initiative can help to reversethis situation and bring back to the fore the dynamism that characterizedtrans-Pacific trade in the first decade of the new century. It will do so bylooking first at how OBOR is seen from Latin America and what its potential forthe region entails ; it will then examine its significance for South America;it then looks at the case of Chile, a regional pioneer in relations with China,and the country most dependent on trade with China (with one fourth of itsexports going to the latter ), but one where, paradoxically, Chinese investmenthas lagged behind that in several of its neighbors ; some concluding remarksput OBOR and its significance for Latin America in perspective.

OBOR beyond Eurasia

One the face of it, OBOR, albeit a centralplank in Chinese foreign policy, has little to do with Latin America. Launchedby President Xi Jinping in 2013, it has been anchored in two pillars—the SilkRoad Economic Belt and the 21st Century Maritime Silk Road—aimed atrevitalizing and infusing with new vigor relations between Asia and Europe. Byland and by sea, and harking back to the days of the original Silk Roadtraversed by Marco Polo from Venice all the way to today´s Hangzhou, it isdesigned to fulfill a number of objectives. Through investment in railroads,highways, ports, tunnels and bridges, it would facilitate commerce and the flowof goods and people from Central and Western China through Central Asia all theway to Eastern and Western Europe. In so doing it would foster economic growthin the provinces of China that lagged behind the high rates seen in the coastaland Eastern areas. It would also bring into the wider circuits of internationaltrade the former Soviet republics of Central Asia, now part of the Commonwealthof Independent States (CIS), many of them landlocked and still not fullyintegrated into the world economy.

The broader aim of OBOR, of course, isnothing if not ambitious: none other than recreating Eurasia, through suchhigh-visibility projects as a high-speed, bullet train from Beijing to Moscowthat would cut the time of the legendary Trans-Siberian Railroad service fromseven days to three, and otherwise bring the world´s fastest-growing and mostdynamic area, i.e., East Asia, much closer to the world´s largest market. i.e.,that of the European Union. Free trade agreements between China and thecountries along the New Silk Road, although still merely a possibility, mightadd further impetus to such a far-reaching venture.

At first, OBOR was greeted by theinternational community with a certain degree of curiosity, albeit one temperedby a healthy doses of skepticism. The project was so ambitious that for someWestern observers it had a certain element of “pie in the sky” to it. At a timeof world-wide belt-tightening and budget-cutting, where were the resources forsuch an enormous, transcontinental project going to come from? Moreover, evenif the resources were to be generated, which institutions would be able to dothe follow-up and follow-through needed to implement the various parts andcomponents of such a monumental undertaking?

Yet, in the course of the past three years,that initial skepticism has been replaced by genuine interest and a sense thatthis is something that is actually going to happen—in fact ishappening. The establishment of the US$ 40 billion dollar Silk Road Fund ; thatof the Beijing-based Asian Investment and Infrastructure Bank (AIIB), with acapitalization of US$ 100 billion dollars; and that of the related,Shanghai-based New Development Bank ( the so-called “BRICS Bank”), with anequivalent amount of capital, have all been milestones in the unfolding of thebuild-up towards OBOR. The same goes for the now regularly scheduled freighttrain service from Chengdu and Xian to Warsaw and Budapest, massively cuttingtransport time.

The original rationale behind the foundingof the AIIB was the ostensible need of US$ 8 trillion dollars of investment inAsia´s infrastructure in the course of the coming decade, something that thelimited budgets of the World Bank and the Asian Development Bank would beunable to meet. Even with the AIIB in the mix, the amount is of such magnitudethat it will be difficult, if not impossible, to achieve, but at least theexistence of another IFI, specifically tasked with targeting Asiainfrastructure projects, is a step in the right direction. The same goes forthe Silk Road Fund.

In the course of the past year, however,the need to give a further impetus to international trade and connectivity hasbecome, if anything, even more apparent. The upsurge of protectionism andisolationism in some countries of the North Atlantic has put an additionalpremium on facilitating free trade across the world and keeping the momentum ofglobalization, a process that has done so much to lift so many people out ofpoverty in the Global South. At the same time, OBOR, part and parcel of abroader Chinese foreign policy design that emphasizes cooperation ininfrastructure development not just in Asia, but also in Africa and in LatinAmerica, has come to be seen as relevant beyond Eurasia.


South America and the Asia-Pacific

In this context, it must be kept in mindthat a key challenge for LAC is to increase productivity. The vast spaces ofSouth America need to be interconnected, something that is especially valid forthe Atlantic and the Pacific coasts, that are in urgent need of bi-oceaniccorridors that facilitate logistics and transport. Similarly to China, in SouthAmerica it is the coastal regions that are the most developed, whereas theinterior has been mostly left behind. Chinese technology, be it in railways,construction,telecommunications or energy, can help to overcome this. In thecourse of the past decade China´s vast landmass and its huge population havebeen much more fully integrated through bullet trains and mobile telephony.Something similar can be done with the vast spaces of South America’s interiorand other parts of the region.

In one of those curious coincidences ofhistory, China´s own needs at this stage complement very much those of LatinAmerica. As China transitions from its condition as a (mostly) FDI- recipientcountry to one where ODI becomes more prominent, with excess capacity in itsconstruction industries and with companies flush with cash at a time when thereturn on domestic investment in China has fallen, China is looking foropportunities to deploy these assets. OBOR is one of the most visibleexpressions of this—thus its relevance for LAC.

Greater investment flows in both directionsacross the Pacific and joint ventures between Chinese and Latin Americancompanies would also help to change the First World-Third World type of tradepattern extant at present, and in which (more in the case of South America thanin Mexico and Central America), the region sells mostly natural resources andvarious raw materials to China in exchange for consumer goods and industrialinputs, something untenable in the long run.


Chile and China in perspective

China is often described as one of the mainbeneficiaries of globalization, as, over the past four decades, it grew atdouble-digit rates, lifted 700 million people from poverty and is now the world´ssecond largest economy, with a GDP of US$ 11 trillion. While much smaller,Chile is often described as another of those beneficiaries. For much of the1990-2010 period it grew at an annual average of 5%, balancing economic growthwith inclusive social policies and political stability, and achieving a percapita income of US$ 15,000, the highest in Latin America and  double that of China.

A key source of that growth has been itsexports, which grew by a factor of nine from 1990 to 2007—from US$ 9billion to US$ 81 billion. Chile´s highly successful export-led developmentmodel is based on a number of key elements : 1) the signing of Free Trade Agreements (FTAs) with the world´s mainmarkets ( in fact, Chile is the country with the highest number of FTAs, 25with a total of 64 countries), which allow it duty-free access to countriesthat represent 80 per cent of the world´s GDP; and 2) the notion of “globalizationas Asianization”—that is, an early realization ( as far back as the early nineties),that the most dynamic part of the world economy was going to be in Asia, andthat that was where Chilean diplomacy and international trade policy had toplace its bets. Thus, by 2009, half of Chilean exports went to Asia and threeof Chile´s top ten export markets were in Asia—with China rankingfirst at 23.1 percent ;Japan third, with 9.1 percent, and South Korea sixth,with 5.9 percent.

In 2016, bilateral trade between Chile andChina reached US$ 31 billion, making China Chile’s # 1 trading partner andChile China´s third largest trading partner in Latin America. One reason forthis huge volume of trade ( higher than that of China with many of itsneighboring countries, some of them much bigger than Chile ) is the FTA signedin 2005, and which has led to a four-fold increase in trade in twelve years,and whose deepening ( and thus move from goods to include services as well) isbeing negotiated in 2017.

Yet, as mentioned above, this flourishingof bilateral trade has not led to an equivalent increase in Chinese investmentin Chile, which is still quite limited. There are many reasons for this, andthey need not detain us here . Yet, as might be expected from an open economythat has traditionally attracted a considerable amount of FDI from Europe,North America, Japan and Australia, and is ranked as one of mostbusiness-friendly in the region, there are many opportunities for Chinesecompanies to invest in Chile. This is especially true of the infrastructure andenergy fields, though mining, agribusiness and the hospitality industry arealso significant areas of interest. The establishment of the China ConstructionBank in Chile, which opened for business in Santiago in April 2016, with amandate for acting as the clearing bank for all RMB operations in LatinAmerica, should facilitate this.

In terms of OBOR, however, perhaps the mostrelevant project pertaining to Chile may well be the proposed trans-Pacific,fiber optic Internet cable mooted in January of 2016 by Chile´s then Vice Ministerof Telecommunications, Pedro Huichalaf, during an official visit to China. Thisled to the signing of an MOU with his counterpart at the National Developmentand Reform Commission (NDRC), in which both governments committed to considerthe issue further and undertake the necessary feasibility studies, somethingpresently being put into place. At 19,000 km, this would be one of the longestsuch Internet cables.

The logic here is straight forward : in thenew century, as important as physical connectivity is the digital one. Data isthe new gold. And as any look at the world map of Internet cables (whichtransmit 90 percent of the world´s Internet traffic) will reveal that, althoughthere are fifty such cables crossing the North Atlantic, there is none connectingAsia with South America. The net result is that data flow between both regionsis painfully slow, as voice and data have to be routed via North America .


By way of conclusion

In this perspective, OBOR reaches waybeyond its already ambitious Eurasian span. As part of China´s broader approachto international cooperation, it reflects a certain view of how to provide anadded impetus to development, one that puts infrastructure and logisticsfacilitation at center stage, thus spurring foreign trade and exchanges. In thepast decades, IFIs have made poverty reduction a key concern. While no doubt akey priority, it is one that needs to be balanced by one that considers thesupply side of economic activity and employment creation, in turn key tools forthat very poverty reduction. China´s own experience is that the creation of amodern infrastructure network is a vital component of economic growth.

The development of a similar network inSouth America, whose Southern Cone already provides about one fourth of all thefood China imports, would be highly beneficial, reducing the costs oftrans-Pacific trade and giving a further impetus to China-LAC exchanges, at atime when it is badly needed. More and more, the competitiveness of products inthe global market is determined not so much by the tariffs and customs dutiesthey are subjected to ( which are being lowered across the board  in many cases), but by the amount of time ittakes to get them to market in the right condition. Transport and logistics, andthe associated infrastructure conditions, are thus central.

It is often said that a significantobstacle to enhanced ties between Latin America and the world´s most dynamicregion, East Asia, is sheer distance. Yet, as Chile´s fresh fruit exports to China(and to many of China´s neighboring countries) shows, distance need not be aninsurmountable barrier. In the key challenge to bring the region and the world´sfastest growing markets ever closer, OBOR in its broader sense has thepotential to play a central role.


文|贺乔治(Jorge Heine)智利共和国驻华大使   翻译|王晓波
























从一带一路的层面看,与智利最相关的项目应当是2016年时任智利电信部副部长Pedro Huichalaf 在对中国进行访问时提出的跨太平洋光纤互联网电缆。当时他与中国国家发改委(NDRC)的相关领导签署了一份谅解备忘录,双方政府都承诺要进一步考虑这个项目,并展开必要的可行性研究,现在这方面的工作正在进行中。这一电缆长达19000公里,建成后将是同类互联网电缆中最长的一条。





Comments are closed.