China's growing interest in Latin America.

Summary

Over the past year, increasing attention has focused on China's growing interest in Latin America. Most analysts appear to agree that China's primary interest in the region is to gain greater access to needed resources--such as oil, copper, and iron--through increased trade and investment. Some also believe Beijing's additional goal is to isolate Taiwan by luring the 12 Latin American and Caribbean nations still maintaining diplomatic relations with Taiwan to shift their diplomatic recognition to China. Some analysts maintain that China's involvement in the region could pose a future threat to U.S. influence. Others assert that China's inroads in Latin America are marginal and likely to remain overwhelmed by the economic and geographic advantage of the U.S. market. Although many Latin American countries welcome the new Chinese investment, some view China as an economic threat, and are concerned that both their domestic industries and their U.S. export markets will be overwhelmed by cheap Chinese imports. This report will not be updated. For further information, see CRS Report RL32804, China-U.S. Relations: Current Issues and Implications for U.S. Policy.

Introduction

China's interest in Latin America is a fairly new phenomenon that has developed over the past four years. Beginning in April 2001 with President Jiang Zemin's 13-day tour of Latin America and followed most recently with high-profile visits by President Hu Jintao (November 2004) and Vice-President Zeng Qinghong (March 2005), Chinese officials have continued to court regional governments. While Beijing's interests in the region appear largely economic, they also have a political and diplomatic dimension and may have longer-term implications for U.S. interests.

Economic Linkages

Much of China's interest in Latin America--especially in South America--is economically motivated, with Beijing eager for access to such commodities as iron and other ores, soybeans and soybean oil, copper, iron and steel, integrated circuits and other electrical machinery, and oil in order to meet the demands of China's booming economy. China's imports from Latin America grew from almost $3 billion in 1999 to $21.7 billion in 2004, a more than 600% increase in five years. (1) Because of this growth in imports, China has run a trade deficit with the region for the past two years. While imports from Latin America are just a small percentage of China's overall imports, they grew from 1.81% of total Chinese imports in 1999 to 3.88% in 2004. China's top five import markets in Latin America in 2004 were Brazil ($8.7 billion), Chile ($3.7 billion),

Argentina ($3.3 billion), Mexico ($2.1 billion), and Peru ($1.5 billion).

China's exports to Latin America have also grown considerably in the last five years, from $5.3 billion in 1999 to $18.3 billion in 2004, with major exports including electrical appliances; woven and knit apparel; computers, office machinery, and other machinery; and mineral fuels and …