Chinese firms must tailor LAC projects to local needs

Mexico held its presidential election on July 1, and the left leaning candidate Andres Manuel Lopez Obrador was elected. Lopez Obrador has expressed his willingness to explore cooperation opportunities with other big powers such as Russia and China to reduce dependence on NAFTA.

Russia, after many years of retreat, has returned to Latin America and the Caribbean (LAC) in recent years. As major players in the international arena, China and Russia have and will continue to carry out cooperation in the region, based on their own approach.

Russia historically had a presence in the LAC, while China has kept more of a low profile. Russia has had more geopolitical interests, such as building close ties with Cuba.

China has focused on economic and trade cooperation, and Chinese companies have built several large-scale projects in the LAC, such as dams on the Santa Cruz River and railways in Argentina, as well as the Coca Codo Sinclair hydropower station in Ecuador. With its abundant resources, South America can carry out larger projects. The ties between China and the Caribbean countries are concentrated in cultural fields, and economic cooperation is limited to small and mediumsize enterprises, such as tourism projects in the Bahamas and low-income housing in Grenada. The projects China has been involved in show that it has no geopolitical aims in the region, and that it is not trying to provoke the US.

The road to economic cooperation between China and Latin American countries has been somewhat bumpy. When they first came to the LAC, Chinese companies applied the old cooperation model, which worked well in Africa. But the situation is quite different in Latin America. The well-structured legal systems, the powerful labor unions and the presence of other countries were new to Chinese investors. This has taken its toll on Chinese companies and slowed down their progress.

The Chinese companies did not fully recognize the crucial role played by Latin American labor unions in social and political engagement. In some LAC countries, especially Brazil and Chile, the labor laws require companies to hire a certain percentage of local workers. And some Caribbean countries’ unions have agitated against using workers from China, which Chinese companies were not prepared for. Communication and cultural barriers appeared when dealing with local workers, sometimes leading to slow progress.

As cooperation between China and the LAC region deepens, it is inevitable that Chinese companies will step into other countries’ “territory.” The halted railway project in Mexico is one example of the difficulties that can occur. Cooperation with Venezuela has also had its problems, with some talking about the “China threat.”

But the problems also show that China-LAC cooperation is reaching a deeper level. While keeping up the momentum, China will also have to learn from other countries’ experience. Japan, for instance, has dabbled in the LAC since the 1970s. Now Japanese communities are deeply rooted in local society and have become a strong force in many sectors, such as automobiles and railways.

China would do well to work together with other countries. Instead of working alone, jointly developing projects with EU and US companies could benefit all parties. Chinese companies need to tailor the projects to local needs and explore new types of projects.

The LAC has developed ties with the US, European countries, Japan and India. In this context, China is a late-comer, so it will have to broaden the range of products and types of cooperation.

However, the timing might be promising. LAC economies are sluggish at the moment, with low growth, and even negative growth. Major powers outside the region are

also caught up in their own problems. Local government officials, entrepreneurs and researchers have shown interest in China’s Belt and Road (B&R) initiative. But, at the same time, they have many questions about it as well.

China will have to answer the questions properly to help potential LAC partners understand the B&R projects. This will be a challenge, but also an opportunity. In the next couple of years, with a favorable international environment, ChinaLAC cooperation is expected to enter the fast track.

The author is deputy director with the Institute of Latin American Studies at the China Institutes of Contemporary International Relations. bizopinion@

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