Chapter 4: Costa Rica – People’s Republic of China Relations
4.3 Cooperation and Economic Relations between China and Latin America
國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
68 2010 was Taiwan’s rate (5%). GDP per capita (PPP) was US$12,500 (102nd), even higher than China. In 2011, the population below the poverty line was 24.8%, almost double the Chinese rate.
On the other hand, the HDI for 2012 was high: 0.773 (62nd) (CIA, 2012). These rates show that the country has relatively stable economy growth and the quality of life is high, however, it still remains to further distribute this welfare, reflected in the population poverty line rate.
4.3 Cooperation and Economic Relations between China and Latin America
As the Congressional Research Service argued in “China’s Foreign Policy and ‘Soft Power’
In South America, Asia, and Africa” (Appendix IV); the PRC’s main interest in Latin America seems to be for accessing resources China needs such as soybeans, iron, ores, oil, steel and copper, by enhancing investment and trade. It also seems China pursues the isolation Taiwan by persuading the 12 Latin American and Caribbean countries still sustaining official ties with Taiwan to shift to China. Furthermore, while many Latin American countries embrace the Chinese approach, some have seen the PRC as an economic menace since they believe both their local businesses and their exports to the U.S. market will be vanquished by Chinese competition.
Pursuant to Yopo, Mladen in his article about “América Latina en la Mira Estratégica de la República Popular China”, these relations date from the trade between China and Mexico in the XVI century, during the Spanish colonial times, and Macao and Brazil, under the Portuguese.
Later, in the middle of the XIX century, the rise of agricultural plantations and shortage of manpower led to the development of coolies traffic, or Chinese labourers who were hired under a forced contract, to Cuba, the Caribbean islands, Peru and Chile.
In the middle of the XX century, when Taiwan had diplomatic relations with the main Latin American countries, China deployed a strong diplomatic proactivity to establish friendly
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
69 ties, develop cultural and economic exchanges aiming to establish later diplomatic ties. On 28th September 1960, the PRC and Cuba set up official ties, thus becoming the first Caribbean country with official links with the PRC (Yopo, 2011).
In the 50’s, China actively promoted governmental and non-governmental exchanges (political, union and student leaders, etc). China sent to Latin America artistic groups, as well as union and trade delegations. She also started the business and economic unofficial and semi-official exchange, raising a total of US$ 30million (Yopo, 2011).
During the first half of the '60s, the Sino-Latin America bilateral trade grew from US$ 31 to 343 million but subsequently declined due to coups d’etat in the region, USSR-China conflict, Cultural Revolution, etc. It later retook the growth pace in the 70’s which was the period when economic agreements were signed, with over 10 countries and exchanges with over 50 trade delegations (Yopo, 2011).
In the 80’s and 90’s a readjustment in China's relationship with Latin America was implemented on the basis of the following areas: a) developing friendly and cooperative relations above the ideological differences; b) prioritize links with the larger countries of the region;
considered more developed at the expense of those more nationalistic, and c) support the economic and trade relations and the struggles for sovereignty as well (Yopo, 2011).
These policies had an impact in the increase of diplomatic relations, thus having, at the end of the 90’s, diplomatic relations with 19 countries in the region; increasing mutual visits and contacts with social and political organizations, while trade grew from US$ 1,363 million in 1980 to US$ 2,294 million in 1990 and US$ 8,278 million in 1999 (Yopo, 2011).
According to Mladen Yopo there are 3 fundaments why China’s presence is in Latin America; one is that the PRC aims to reduce Washington's influence globally, especially in Latin
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
70 America, through Sino-Latin America relationships. In Latin America, this desire is significantly remarkable in countries such as Cuba, Venezuela, and to a lesser extent in Bolivia, Brazil, Ecuador and Nicaragua. However, this situation does not take away the title of the U.S. as the main reference of Latin America and "restrictive" to the presence of China. Likewise, China also wants to receive Latin American support given the pressures received regarding the human rights or the conflict situation with Tibet. The null Latin American interpellation in these topics, can be a success of the Chinese diplomacy.
The second premise refers to the diversification of foreign relations in order to reduce dependencies, thus resulting in a smooth cooperation (South-South) to strengthen their positions individually or through global forums such as the G-20 and access to technology, raw materials, capitals and markets. The 3rd fundament is a progressive isolation of Taiwan through the recognition of One China by signing diplomatic relations (Yopo, 2011).
On the other hand, China considers continuing with the high level exchange with the national and sub-national legislative bodies, political parties, local governments, entrepreneurs and chambers of commerce creating and/or improving consultation mechanisms, strengthening the coordination and cooperation on international issues of mutual interest (Government of China, 2008). For instance, in the III China-Latin America Summit held in Colombia in November 2009, under the theme "Building confidence to overcome the crisis and boosting joint development of China and Latin America", more than 700 Chinese and Latin American entrepreneurs discussed how to deal with the financial crisis and the promotion of trade liberalization, and negotiated specific projects (Yopo, 2011).
Regarding the cultural aspect, both have reinforced exchanges and the Confucius Institute is spreading across Latin America. It is already in Mexico, Chile, Argentina, Brazil, Cuba and
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
71 Costa Rica, the only Central American country. In total there are 10 Confucius Institutes in the region (Yopo, 2011).
As the Chinese Government stated in its policy paper, in the economic field and South-South Cooperation, China seeks to deepen and balance the bilateral trade and optimize the commercial structure (including free trade agreements) for mutual benefit. It also highlights industrial, agricultural, energy, financial, tourism, customs, culture and sports, etc. cooperation and support to the investment of Chinese enterprises in the region in terms of manufacturing, agriculture, forestry, fishery, energy, exploitation of mineral resources, building infrastructure, services, etc., in contribution to the socio-economic development of China and the countries of the region.
In terms of the Sino-Latin American financial cooperation, in order to face the international financial crisis in 2009 both combined the surplus of China's foreign exchange reserves with the high demand of Latin America’s demand, finding new ways of financial cooperation, as currency exchange, loans for oil and project loans. For instance, in 2009, the People’s Bank of China and the Central Bank of Argentina signed an agreement of currency exchange of 70,000 million yuan, thus becoming the best financial business in the history of Sino-Latin American relations (Yopo, 2011).
Bilaterally, China have established strategic associations with Brazil, Venezuela, Mexico, Argentina, Chile and Peru, meanwhile strengthening trade, investment and cooperation relations (including donations) with the rest of the countries. Also, it is participating in sub-regional, regional and hemispheric organizations such as in the dialogue with the Rio Group in 1990, the IDB since 1991 and through this organization it has given soft loans to Bolivia, Guyana, Haiti, Honduras and Nicaragua; in 1994 it was the first Asian observer country of the Latin American
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
72 Integration Association (ALADI); in 1997 it was admitted into the Caribbean Development Bank;
in 2004 it became a permanent observer of the OAS; it has maintained a dialogue with the Andean Community of Nations (CAN) and with the Caribbean Community (CARICOM) and has police presence in Haiti (a country that recognizes Taiwan) as a part of a UN mission (Yopo, 2011).
Furthermore, as stated in the ECLAC37 report 2010 in terms of Sino-Latin American trade and investment relations in 10 years, the EU will be displaced by China. In 2009 the exports of the region to the U.S. and the EU reduced to 26% and 28% respectively. In 2010 the exports to the EU represented 14% and they may decrease to 12% in 2020, meanwhile the exports to China in 2009 represented 7% of the total and will grow to 19% or 20% in 2020. The imports have the same tendency. Moreover, Chinese investment in Latin America in the last years has increased 40%, surpassing US$ 200 billion (Yopo, 2011).
Another priority of the PRC is the region’s energy, thus the PRC is either concluding or exploring various energy investments in Colombia, Ecuador, Venezuela, Bolivia, Peru and Brazil.
Three main state-owned Sino energy firms investing in the region are the China National Offshore Oil Corporation (CNOOC), China Petroleum and Chemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC). Since 2006, Sinopec with Brazil’s Petrobras are constructing a natural gas pipeline connecting the northeast and southeast of Brazil. Petrobras and CNOOC are also apparently analyzing the viability of joining operations in exploration, refining, and pipeline building around the world. In Cuba, Sinopec has worked on onshore oil extraction. Likewise CNPC signed an agreement with Venezuela’s state-oil corporation, PdVSA (Petroleos de Venezuela, S.A.), to explore oil reserves. However, in spite of all these investments
37 Economic Commission for Latin America and the Caribbean.
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
73 China’s oil imports from Latin America only accounts for 3% of China’s oil imports (Congressional Research Service, 2008).
In terms of defense, according to Mladen Yopo, China has a military exchange with 20 countries of the region. For instance, in September 2010 the Minister of Defense and Chinese State Councilor, Liang Guanglie (梁光烈), visited Mexico, Colombia and Brazil. In these 3 countries China has developed strong commercial links which are broadening to the military field, particularly with Brazil and Colombia. Thus, China and Colombia signed a cooperation agreement for the acquisition of military equipment logistics, thanks to a Chinese donation of US$ 1 million. Additionally the 2 countries pledged to train troops under the direction of Chinese officials, focused on fighting transnational crimes such as drug trafficking, terrorism, weapon and people trafficking. Brazil agreed to hold military and aerial exercises together in China in 2011 and the two sides agreed to strengthen exchanges and cooperation in the areas of defense technology (Yopo, 2011).
Military exchange has been benefited by the education as well. China trains Latin American officers in Military Academies or Civil Universities. The People's Liberation Army (PLA) have sent officials to receive courses in Argentina, Brazil, Cuba, Chile, Mexico and Venezuela, to a lesser extent to which the region sends to China. Venezuela and Cuba have the largest Chinese military presence, especially in Cuba where Asian militaries are deployed in some Cuban bases to collect intelligence about the U.S. (Yopo, 2011).
Furthermore, the PRC is one of the primary users of the Panama Canal - where 230 thousand Chinese vessels passed through during the first months of 2008 (Yopo, 2011) – to go to and leave from U.S. ports and other destinations, and is a main trading partner of Panama although this country has diplomatic ties with Taiwan.
‧
However, despite all of China’s achievements in approaching Latin America, Beijing’s soft power did not succeed in Haiti, which continues to recognize the ROC, in spite of PRC endeavors in 2005 to make cutting Haiti’s ties with Taiwan a requirement to China’s support to renew the U.N. peacekeeping mission there (Congressional Research Service, 2008).
Table 4.1: Latin America: China’s Rank as a Trading Partner for Selected Countries, 2000 and 2008 a/
Source: ECLAC (2010), “The People's Republic of China and Latin America and the Caribbean: towards a Strategic Relationship”.
a/ For Honduras and Nicaragua, data is for 2007.
In only 8 years (2000-2008), the PRC has become an important trading partner for most Latin American countries. This represents a structural change in the region’s foreign trade conditions and has occurred in a relatively short period. In terms of exports, China increased its ranking in all 17 selected countries and was one of the 3 main destinations in 6 countries:
‧
respectively in only 8 years.Regarding imports, China raised its share in all countries selected and became one of the top five sources for 15 of the 17 countries, except Honduras and Bolivia (ECLAC, 2010). In the cases of Nicaragua and Venezuela, China’s ranking moved from 18th position to 4th and 3rd
Funding Source Description Value in US$
Brazil Infrastructure/ Public Works Govt-Sponsored Investment
Power plant 850 million Brazil Natural Resources Concessional loan Oil exploration 10 billion Chile Infrastructure/ Public Costa Rica Infrastructure/ Public
Works; Natural Resources
Grant/ Donation Stadium/ oil refinery
130 million
Cuba Humanitarian Concessional loan Hurricane relief-
repair of hospitals
70 million Grenada Infrastructure/ Public Works Concessional loan Tourist marina 83 million Venezuela Infrastructure/Public
Source: Lum et al. (2009), “China’s Foreign Aid Activities in Africa, Latina America, and Southeast Asia”
Among the selected countries only Costa Rica received the funding as a donation, the rest as concessional loans38, and Brazil as government-sponsored investment. Furthermore, Cuba is the only one that received Humanitarian assistance for hurricane relief to repair hospitals.
38 According to the OECD’s Glossary of Statistical Terms, Concessional Loan is a loan “extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
76 4.4 Overview of Costa Rica-Taiwan relations until the shift of diplomatic relations
Before establishing diplomatic relations with the PRC, on June 1st 2007, Costa Rica had maintained official relations with the ROC since 1944. This relationship with Taiwan was characterized by a strong flow of cooperation. The Taiwanese funds helped across the country:
classrooms, bridges, wharfs, vehicles for the police, technical cooperation and training, were just some of the contributions funded by Taiwan for decades (El Mundo.es, 2007).
Between 2000 and 2005, Taiwan was the largest bilateral donor of grants to Costa Rica around US$ 59.5 million in grants and the second largest in reimbursable aid, around US$ 281.6 million. Among the most prominent projects were the Friendship Bridge (“Puente de la Amistad”
in Spanish) over the Tempisque River, the project “Puntarenas forever”, the enlargement of Moin port and the Road to San Carlos. With regard to technical cooperation, there were 9 Taiwanese technicians accredited in Costa Rica who were all specialists in agriculture and fishery since they collaborated in the development of production in the primary products sector (Rodriguez, 2013).
The most emblematic work of this broken relationship is the 1.6 km length – bridge: 'La Amistad', built during 2000-2003. This is one of the largest bridges in Costa Rica. It was baptized with this name as a reference to good relations between these two countries (El Mundo.es, 2007).
This bridge cost more than US$ 15 million, but Taiwan had already contributed a similar amount in 1998, when she donated a wharf. Costa Rica also received funds via the CABEI through which Taiwan usually channels its development aid for Central America (Olsen, 2009).
those available on the market or by grace periods, or a combination of these. Concessional loans typically have long grace periods”.
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
77 In terms of commerce, the figures in table 3.4 in chapter 3 shows that even though Costa Rica severed ties with Taiwan in 2007, the trade between them has remained relatively stable.
4.4.1 The Shift of Diplomatic Ties
According to La Nación, an important Costa Rican electronic newspaper, in the journalistic note (2012) “¿Por qué Arias cambió a Taiwán por China?” (in English: “¿Why Arias switched from Taiwan to China?”) the former President Oscar Arias, in a secret mission to Beijing with some of his cabinet, established official ties with the PRC on June 1st 2007. It was published until June 6th, and also the Ambassador of the ROC in the country was informed that all diplomatic staff of the embassy had to leave Costa Rica in exactly one month. This decision generated some support and criticism in the media. One of the most criticized aspects was the secret and non-transparent way everything was hatched.
In accordance with Oscar Arias - awarded the Nobel Peace Prize in 1987 for his intervention to reach the peace in Central America during his first rule period (1986-1990) - the shift was mainly due to market reasons, given that China has become in recent years the second largest trading partner of Costa Rica after the United States (Alvarez, 2012). Such arguments contradict Costa Rica’s foreign policy based on principles of democracy, human rights and peace as his 2006-2010 Government Programme promotes a foreign policy with the motto: "Costa Rica’s moral power in the world” (NLP39, 2005), which contrasts to what is observed in China, for instance, regarding to its innumerable political prisoners such as Liu Xiaobo (劉曉波) who was awarded the 2010 Nobel Peace Prize for "his long and non-violent struggle for fundamental human rights in China” (Arce, 2010) while he was in prison.
39 National Liberation Party
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
78 Also those arguments contravene Oscar Arias’ thought about China by the time of his first rule, as a threatening issue, a political-military power which had a very complicated relationship with the United States and did not cooperate with the peace process (Rodríguez, 2013).
Moreover, Oscar Arias argued that he based his decision on pragmatism and political realism to look to China for help developing his country (Olsen, 2009).
4.5 Cooperation and Economic Relations between China and Costa Rica
In the year Costa Rica and China established official ties, both signed 11 agreements on cooperation in investment, trade and culture. One of those was the donation from China of US$ 20 million in economic cooperation grants and 200 million yuan in technical and economic cooperation to be allocated to several projects (Government of Costa Rica & Government of China, 2007).
As stated on the official website of the Embassy of Costa Rica in the PRC, in the period 2000-2012, the trade between Costa Rica and China grew from US$ 91 million to nearly US$ 1.7 billion. According to the Foreign Trade Promoter in Costa Rica (PROCOMER), in 2006 exports increased from USD558.3 million to USD848.2 million in 2007. Regarding to imports, they increased from USD554 to USD763.2 million, in the same years respectively. By 2007 the trade balance was positive and the best one for the country, a total of USD85.1 million. However, since both countries signed an FTA, on April 8th 2010, the trade imbalance increased, and in 2010 it was US$ -701.0 million, in 2011 and 2012, USD -1.102 and USD-1.108 million respectively (Figure 4.1).
The Sino-Costa Rica FTA enabled immediate access to 99.6% of the Costa Rican exportations, which included products such as flowers, ornamental plants and orange juice, while
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
79 Costa Rica would have immediately access to 58% of Chinese products with no-tariff and the other 25% will be eliminated within 10 years (La Prensa Grafica, 2010).
Moreover, as stated in PROCOMER 2012, the top Costa Rican export sector to China is the technology industry, from which integrated circuits represent 78.1 % of Costa Rican sales.
Figure 4.1: Trade between Costa Rica and the PRC*, 2001-2012. USD Million
Source: Own elaboration based on PROCOMER data.
*Hong Kong is not included
4.5.1 Development Aid from the PRC to Costa Rica
In accordance with the Ministry of National Planning and Economical Politics (MIDEPLAN), in the period 2006-2008, Costa Rica received a total of US$ 456.9 million (including both non-reimbursable financial and technical cooperation and reimbursable financial cooperation), of which 69% was non-reimbursable technical and financial assistance and 31%
reimbursable financial aid, contrasting with the aid tendency Costa Rica had had since 1998.
This is due to China contributions.
-1,500.0 -1,000.0 -500.0 0.0 500.0 1,000.0 1,500.0 2,000.0
2001 2002 2003 20042005 2006 2007 2008 2009 2010 2011 2012
Trade Balance Import Export
‧ 國
立 政 治 大 學
‧
N a
tio na
l C h engchi U ni ve rs it y
80 Additionally, MIDEPLAN reported that the PRC provided 39.4% of the total resources received by Costa Rica which was about US$ 180 million, thus becoming the largest source of bilateral cooperation in the country in 2006-2008. The figures on tables 4.2 and 4.3 show how high the amount of aid provided by China was, compared with the rest of providers. It was
80 Additionally, MIDEPLAN reported that the PRC provided 39.4% of the total resources received by Costa Rica which was about US$ 180 million, thus becoming the largest source of bilateral cooperation in the country in 2006-2008. The figures on tables 4.2 and 4.3 show how high the amount of aid provided by China was, compared with the rest of providers. It was