COMMERCE | 4/28/2011 12:00:00 AM
Colombia’s new China story
After years of steady growth since the reestablishment of diplomatic relations in 1980, trade between Colombia and China has skyrocketed over the last half decade.
Nowhere is this more evident than in the flurry of recent business activity between Colombia and China. After years of steady growth since the reestablishment of diplomatic relations in 1980, trade between the two countries has skyrocketed over the last half decade. Last year China leapfrogged Venezuela to become Colombia’s second biggest trading partner, worth $5.8 billion.
The Chinese have also become key players in Colombian development and infrastructure projects, winning public contracts to build major highways and running Colombian airports, such as Medellin’s Rionegro.
All of this has led the Colombian government to talk up the future of Sino-Colombian relations.
Who’s the Daddy?
In his first state visit to China in 2005, former president Alvaro Uribe announced his desire “to put into practice cultural and commercial integration”, between the two countries. His aspirations seemed to be bearing fruit when earlier this year President Juan Manuel Santos announced a joint $7.6 billion project with the Chinese to build a railway connecting Colombia’s Atlantic and Pacific coasts. This would expedite the export of natural resources to the Asian country and could potentially become a rival to the Panama Canal. For Santos the rationale for the project was obvious: “Asia will be the future motor of the global economy”
The project’s scale and ambition, as well as a number of Santos policies which have strengthened diplomatic and economic ties, has led some analysts to question whether China could become a new pole of influence for Colombia, even replacing the county’s traditionally close relationship with the United States.
Such a reorientation is echoed in efforts by Colombia’s neighbours to develop Pacific links of their own. The Asia-Pacific Economic Cooperation (APEC) organisation styles itself as the body to achieve just that, by breaking down regulatory and tariff barriers between Asia, Australasia and the Americas. It counts Mexico, Chile and Peru amongst its members. Colombia intends to join.
More concrete results have been achieved through direct Chinese investment in capital intensive projects. One success story is the Mansarovar oil project in the Upper Magdalena. Mansarovar, a consortium made up of India’s ONGC Videsh and Chinese state oil firm Sinopec, rapidly expanded from its first wells and now controls 24% of Colombia’s oil market, which it exports to Asia.
The obvious advantage of Chinese investment for Colombia is the liquidity of Chinese state owned companies and banks, money that a shock-weary US private sector can no longer provide. Another is the willingness of the Chinese to build and maintain infrastructure vital to Colombian economic development, such as the mooted railway project, rather than simply buy unprocessed natural resources.
Lost in translation
But if this represents an enticing cocktail for the Santos government, Colombia still has some way to go in acquiring itself an alternative commercial partner to the United States.
According to Benjamin Creutzfeldt, senior lecturer in contemporary Chinese studies at Bogotá’s Universidad Externado, Colombian policy and business making is hampered by years of ambivalence and ignorance about Chinese affairs. “There is a big knowledge gap about China in Colombia”, says Creutzfeldt. “This is only just beginning to be addressed with the growth of Confucius Institutes and Mandarin lessons at universities, but up until now there has been no clear China strategy from the government or business groups”.
This explains, says Creutzfeldt, why many business deals in the private sector are still brokered by Europeans. “There remains a lack of trust on both the Chinese and Colombian sides”.
There is also doubt about Colombian motives. The announcement of the railway project, or ‘canal seco’, came as the US Congress was stalling over a US-Colombian free trade deal.
“The likelihood of the canal project happening is 30-40%”, says Professor Robert Ellis of the Centre for Hemispheric Defence Studies, a Latin America security expert. “There is no doubt that Santos was using the announcement as leverage for the Free Trade Agreement”.
According to Ellis, Colombian relations with China and the US are not a zero sum game. “The key goal of Santos’ foreign policy is to broaden the country’s options. Diversity in terms of economic relations is seen as desirable in itself. China fits the bill, but this doesn’t mean the US will be replaced any time soon. Colombia’s time sensitive exports need the geographical proximity of the US market”.
Partner or Peon?
Despite this, the Chinese need for Colombian natural resources and particularly coal, and the Colombian demand for cheap Chinese consumer goods and technology will continue to deepen commercial ties.
This raises questions both about Colombia’s institutional capacity to deal with China and the extent of the Asian country’s interest in Latin American affairs. The Chinese government is famously careful not to tie, at least in theory, economic relationships to political obligations. Yet relations have already moved outside the economic sphere, with low level military cooperation in the same mould as Uruguay and Peru, whose officers train at Shijhizhuang military academy, and Colombian requests for Chinese mediation in their dispute with Venezuela.
Perhaps more importantly Colombia will have to learn to deal with the might of Chinese business over the negotiating table. For Colombia building closer ties with China promises a more equitable economic partnership than it has enjoyed with its former patrons. Yet it will take a good deal more than a few Confucius institutes not to let this dream of discovery fade.