[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
CHINA'S ADVANCE IN LATIN AMERICA
AND THE CARIBBEAN
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON
THE WESTERN HEMISPHERE
AND THE
SUBCOMMITTEE ON ASIA AND THE PACIFIC
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 10, 2015
__________
Serial No. 114-95
__________
Printed for the use of the Committee on Foreign Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida BRAD SHERMAN, California
DANA ROHRABACHER, California GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio ALBIO SIRES, New Jersey
JOE WILSON, South Carolina GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas BRIAN HIGGINS, New York
MATT SALMON, Arizona KAREN BASS, California
DARRELL E. ISSA, California WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina ALAN GRAYSON, Florida
MO BROOKS, Alabama AMI BERA, California
PAUL COOK, California ALAN S. LOWENTHAL, California
RANDY K. WEBER SR., Texas GRACE MENG, New York
SCOTT PERRY, Pennsylvania LOIS FRANKEL, Florida
RON DeSANTIS, Florida TULSI GABBARD, Hawaii
MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas
TED S. YOHO, Florida ROBIN L. KELLY, Illinois
CURT CLAWSON, Florida BRENDAN F. BOYLE, Pennsylvania
SCOTT DesJARLAIS, Tennessee
REID J. RIBBLE, Wisconsin
DAVID A. TROTT, Michigan
LEE M. ZELDIN, New York
DANIEL DONOVAN, New York
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
Subcommittee on the Western Hemisphere
JEFF DUNCAN, South Carolina, Chairman
CHRISTOPHER H. SMITH, New Jersey ALBIO SIRES, New Jersey
ILEANA ROS-LEHTINEN, Florida JOAQUIN CASTRO, Texas
MICHAEL T. McCAUL, Texas ROBIN L. KELLY, Illinois
MATT SALMON, Arizona GREGORY W. MEEKS, New York
RON DeSANTIS, Florida ALAN GRAYSON, Florida
TED S. YOHO, Florida ALAN S. LOWENTHAL, California
DANIEL DONOVAN, New York
------
Subcommittee on Asia and the Pacific
MATT SALMON, Arizona Chairman
DANA ROHRABACHER, California BRAD SHERMAN, California
STEVE CHABOT, Ohio AMI BERA, California
TOM MARINO, Pennsylvania TULSI GABBARD, Hawaii
JEFF DUNCAN, South Carolina ALAN S. LOWENTHAL, California
MO BROOKS, Alabama GERALD E. CONNOLLY, Virginia
SCOTT PERRY, Pennsylvania GRACE MENG, New York
SCOTT DesJARLAIS, Tennessee
C O N T E N T S
----------
Page
WITNESSES
Evan Ellis, Ph.D., author, China on the Ground in Latin America.. 5
Enrique Dussel Peters, Ph.D., director, Center for Chinese-
Mexican Studies, School of Economics, National Autonomous
University of Mexico........................................... 31
Ms. Serena Joseph-Harris, chief executive officer, Sirius
International (Caribbean) Defense Contractors Ltd. (former High
Commissioner of the Republic of Trinidad and Tobago)........... 41
Ms. Margaret Myers, program director, China and Latin America,
Inter-American Dialogue........................................ 63
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Evan Ellis, Ph.D.: Prepared statement............................ 8
Enrique Dussel Peters, Ph.D.: Prepared statement................. 33
Ms. Serena Joseph-Harris: Prepared statement..................... 43
Ms. Margaret Myers: Prepared statement........................... 65
APPENDIX
Hearing notice................................................... 88
Hearing minutes.................................................. 89
The Honorable Christopher H. Smith, a Representative in Congress
from the State of New Jersey, and chairman, Subcommittee on
Africa, Global Health, Global Human Rights, and International
Organizations: Prepared statement.............................. 90
CHINA'S ADVANCE IN LATIN AMERICA AND THE CARIBBEAN
----------
THURSDAY, SEPTEMBER 10, 2015
House of Representatives,
Subcommittee on the Western Hemisphere and
Subcommittee on Asia and the Pacific,
Committee on Foreign Affairs,
Washington, DC.
The subcommittees met, pursuant to notice, at 2:22 p.m., in
room 2172, Rayburn House Office Building, Hon. Jeff Duncan
(chairman of the Subcommittee on the Western Hemisphere)
presiding.
Mr. Duncan. A quorum being present, the subcommittee will
come to order.
I would now like to recognize myself for an opening
statement.
And this is a joint subcommittee hearing between Asia-
Pacific and the Western Hemisphere Subcommittees, and so we
will allow opening statements from both chairmen as well as
ranking members.
In 1793, President George Washington warned a young America
that a reputation of weakness could lead us to a loss of
America's rank among nations and that if we desired a secure
peace it must be known that we are at all times ready for war.
Washington also believed a uniform and well-digested plan was
vital to meeting these objectives.
While the need for strategic planning to pursue a position
of strength and keep the peace finds relevance today, the
United States seems to have forgotten Washington's counsel.
Broken promises, faded red lines, budget constraints, a lack of
support for traditional allies, and an increasing reliance on
tactics rather than strategy have communicated U.S. weakness to
a watching world.
In 2013, Secretary John Kerry affirmed that the era of the
Monroe Doctrine is over, effectively putting other countries,
such as China, on notice that the United States would no longer
contend their actions in our neighborhood, the Western
Hemisphere.
In contrast to Roosevelt's policy of the Good Neighbor in
1933, the U.S. has drifted instead toward benign neglect toward
the very countries that have the greatest potential to impact
the daily lives of the American people--those in Latin America
and the Caribbean. China has taken notice, and China has
stepped up into this vacuum of leadership.
Today, China is weaving an intricate web of alliances in
the Western Hemisphere through a vast array of diplomatic,
economic, and military ties with multiple countries in the
region. Although the United States remains the largest trading
partner for Latin America--and I want to emphasize this--China
is now the region's second-largest trading partner and has
free-trade agreements with Chile, Peru, and Costa Rica.
This year, China hosted the first-ever China-CELAC summit
in Beijing for Latin American and Caribbean nations. This
organization expressly excludes both Canada and the United
States.
Since 2005, China has provided over $100 billion in credit
to the region. Last year, China announced it would give nearly
$35 billion in loans to the region in coming years. And, this
year, China promised its investment in the region would hit
$250 billion over the next 10 years.
These are not just empty assurances. According to the
Inter-American Dialogue, China has provided 16 loans valued at
over $56 billion to Venezuela, 10 loans valued at $22 billion
to Brazil, 10 loans valued at $19 billion to Argentina, and 12
loans valued at almost $11 billion to Ecuador.
In particular, Chinese banks have effectively provided a
lifeline to these governments, whose economic mismanagement and
corruption prevent them from accessing Western institutions. In
return, China receives oil, in the case of both Venezuela and
Ecuador. In addition, China has been buying up land and
companies in the region, investing heavily in infrastructure
and ports, as well as gobbling up a lot of rare earth minerals.
From 2008 to 2012, the 10 largest Chinese mergers and
acquisitions occurred in Brazil and Argentina, and other deals
have occurred in Ecuador, Venezuela, and Peru.
Of significant interest are two specific infrastructure
projects: First, a proposed Chinese-funded and Chinese-
controlled Nicaragua Canal, estimated to cost nearly $7
billion, which would rival the Panama Canal and provide greater
access for Chinese ships and potentially submarines to the
waters near U.S. shores. Second, a Chinese-funded Twin Ocean
railroad project connecting Peru and Brazil would also project
greater Chinese influence and presence in Latin America.
On a more troubling front, Brazil has provided the Chinese
with access to its satellite tracking facilities, which could
allow China to gain a more comprehensive picture of the flight
paths of U.S. satellites.
In addition, Chinese security ties to the region continue
to deepen, with the Chinese arms sales to Bolivia, Venezuela,
Ecuador, and Argentina. Reportedly, China has even expanded its
arms sales beyond traditional nation-states through providing
military-caliber weapons to non-state actors such as the FARC
terrorist organization in Colombia and drug trafficking
organizations in Mexico. This activity has only served to
increase the number of weapons in the hands of paramilitary
forces and transnational criminal networks.
It should be of grave concern to all Americans that the
Chinese maintain a military presence in Cuba, specifically
Lourdes, Bejucal, and Santiago de Cuba, all of which were
former Soviet-era monitoring facilities.
Clearly, China has big plans right here in our own
hemisphere. And what are we doing about it?
Traditional thinking about China's engagement in the
Western Hemisphere was that it was largely being done to
counter diplomatic efforts in Taiwan and the region or as a way
of paying for extractives or buying energy commodities to fuel
their ever-expanding economy.
Some have complained that China uses the region as a
dumping ground for goods, such as steel, textiles, footwear,
consumer electronics, and tires, and a visit to the
marketplaces of the Caribbean and South America would seem to
confirm some of those suspicions.
Chinese companies operating in the region often bring their
own workers, which they have no real effect on economic growth
or jobs in places where they operate, creating a source of
friction between China and the countries in the region.
So, in conclusion, the U.S. cannot continue to simply
ignore China's presence in this hemisphere. The U.S. must
engage more deeply in a sustained way with countries in the
Western Hemisphere. It should serve as a jarring wake-up call
that just a few days ago five Chinese Navy ships were spotted
off the coast of Alaska.
This hearing will be a comprehensive overview of China's
activities in the Western Hemisphere and consider how the U.S.
can better balance those actions with more effective engagement
in the region. So I look forward to hearing from today's expert
witnesses.
And, with that, I will turn to the ranking member, Mr.
Sires from New Jersey, for any opening statement he may have.
And then I will come to the gentleman from Arizona.
So, Mr. Sires, you are recognized.
Mr. Sires. Thank you, Mr. Chairman.
Good afternoon. Thank you to our witnesses for being here
today.
Today, we are examining China's continuing effort to assert
influence in Latin America and in the Caribbean.
Over the past decade, China's engagement with Latin America
has grown significantly, both economically and diplomatically.
Chinese leaders have made several trips throughout the region,
including Argentina, Brazil, Venezuela, Colombia, and Cuba.
Their engagement comes, by the way, with foreign direct
investment, loans, and increased economic ties. Specifically,
they have pledged $250 billion in investment in the region over
the next 10 years. China's interest in the region is a result
of their constant search for new markets to procure natural
resources such as various oils and minerals and agricultural
products to feed their domestic needs. Over the past 12 years,
trade between Latin America and China has grown from $17
billion to $262 billion. By many estimates, China is the third-
largest source of foreign direct investment in Latin America
and the Caribbean.
While this can mean greater investment for an emerging
Latin American economy and a boost in trade with the region,
there are also pitfalls. Chinese investments come with
baggage--with the baggage of dubious funding, environmental
disregard, and poor labor and health conditions for workers.
Proposed agreements like the $50 billion, 172-mile canal in
Nicaragua risk displacing indigenous communities, destroying
ecological preserves, and isn't guaranteed to be completed.
Mines and factories run by Chinese companies have reported
dangerous working conditions, where laborers are overworked,
mistreated, and constantly operating in unsafe environments.
For too many years, the United States has focused on other
parts of the world, which has led to neglect our own
neighborhood. While many have viewed China's increasing
engagement in the region as a positive contributor to the
region's economic growth, we must remain vigilant of what the
long-term consequences might be and reaffirm our own commitment
to the region. If China wants to continue to engage our
neighbors, we must insist that they comply with international
labor, health, and environmental standards.
I look forward to hearing from our panelists.
And thank you.
Mr. Duncan. Mr. Salmon, the former chairman of the Western
Hemisphere Subcommittee in the last Congress, now-chairman of
the Asia-Pacific Subcommittee, he is recognized for 5 minutes.
Mr. Salmon. I am a lot of former things, and I am not going
to admit to them all today.
But I would like to thank my good friend Chairman Duncan
for convening this joint hearing with me today on China's
presence and influence in Latin America and the Caribbean, what
I believe to be an understudied yet strategically important
trend. I am glad we have a distinguished panel here today to
help shed light on this very important issue. We are here today
to examine the extent of Chinese political, economic, and
military influence in the region, as well as how that may
affect U.S. strategic interests.
China's bilateral trade with this hemisphere grew from $15
billion in 2001 to $288.9 billion in 2013. These numbers are
staggering and indicative of China's dedication to bolstering
its presence in the region.
This January, China pledged to invest $250 billion in Latin
America over the next 10 years, serving China's strategic
interests of securing access to energy, agriculture, and
consumer markets and serving developing Latin American
countries' needs for infrastructure development and
technological innovation.
While China's presence in Latin America and the Caribbean
has been largely limited to trade and investment, there is a
movement toward greater military relationships. Nuclear
cooperation, shared space assets, and arms sales not only
provide China with economic and military leverage in the region
but also may expand China's ability to mitigate one of our
major advantages: Our relative geographic isolation.
China will continue to allege that it has no foreign bases,
meaning that their military posture is inherently defensive.
But China's non-explicitly military partnerships with countries
in strategic geographic locations like Brazil to share space
and satellite assets for Earth observation may raise some
eyebrows. ``No foreign bases'' does not mean ``no foreign
presence,'' and we should be wary of any potential military
implications of Chinese presence in our neighborhood.
In lending billions of dollars to service legitimate needs
in developing countries in the Western Hemisphere, China has
secured not only lucrative contracts but also diplomatic
support. In the 1970s and the 1980s, China made similar inroads
in economic assistance to Africa, propelled by the mutual
benefit of resources for China and development of African
nations. Today, Chinese infrastructure has expanded throughout
the continent, and its presence there dominates.
China's involvement in Africa has also marked many African
nations' turn-away from formally recognizing Taiwan. In the
Western Hemisphere, we currently have 12 states out of 22 total
that have formal diplomatic relations with Taiwan, including
Nicaragua, Paraguay, and Haiti. Consider China's political
benefits from stronger relations with Latin America and the
Caribbean countries and what that would mean for the
recognition of Taiwan. I am wary of whether China leverages its
economic and political sway to further isolate Taiwan.
China's growing economic, trade, military, and diplomatic
relationships with countries in Latin America and the Caribbean
certainly have implications for U.S. foreign engagement in the
region. We welcome China's presence in the region and hope that
they will yield mutual benefit for all countries involved.
However, we hope this does not come at the expense of the rule
of law and good governance and further entrenching inequality,
corruption, illicit commerce, and violence.
As the United States continues to look eastward toward
Asia, a vital part of our strategic economic future, we must
not forget the relationship with our closest neighbors. I look
forward to the hearing today about China's strategy within the
Western Hemisphere and how we can more effectively manage our
presence and our strategy and balance our relationship with our
neighbors in the region and China.
Thanks a lot, and I yield back my time.
Mr. Duncan. Thank you, Chairman Salmon, for your great
leadership and work on these issues in both hemispheres. And it
is so important to the American people, so I appreciate that.
Before I recognize you, the bio for each of the witnesses
was provided beforehand; I am not going to read that.
You have a lighting system in front of you. We are going to
try to maintain a 5-minute rule. If you will, when it gets to
yellow, just start trying to wrap up. When it gets to red, we
are going to allow a little leeway, but we are going to move
on.
So I will go ahead and recognize Dr. Ellis first for 5
minutes. And thank you for being here.
STATEMENT OF EVAN ELLIS, PH.D., AUTHOR, CHINA ON THE GROUND IN
LATIN AMERICA
Mr. Ellis. Thank you very much, Chairman Duncan, Chairman
Salmon, Ranking Member Sires, distinguished committee members.
Thank you very much for the opportunity to share my analysis
with you today. I will summarize my written remarks for the
committee.
Chinese engagement with Latin America, while producing some
benefits for some actors in the region, is generating negative
consequences, and not only for the region but also for the
strategic position of the United States. Moreover, these
consequences are evolving but not abating with China's current
economic deceleration.
PRC trade with the hemisphere today is 20 times greater
than it was in 2001, with China primarily purchasing low-value-
added commodities while selling higher-value-added manufactured
products and services. China has also loaned more than $119
billion to the region since 2005, with approximately three-
quarters going to Argentina and the regimes of ALBA.
The physical presence of Chinese companies in the region
has taken off in the last 5 years, particularly in mining and
petroleum, construction, manufacturing, telecommunications,
logistics, and banking. This presence has given China a greater
stake in the internal affairs of the countries in which they
operate.
With Taiwan, the PRC has generally honored its 2008
informal agreement not to woo countries, recognizing the others
to change their diplomatic position. Yet leaders of countries
recognizing Taiwan has regularly expressed interest in
establishing relations with the PRC. Thus, if current Taiwan-
ROC rapprochement breaks down, I believe that the PRC could
rapidly eliminate the remaining basis of ROC diplomatic
legitimacy in the hemisphere.
I see the near-term objectives of the PRC in the hemisphere
as principally economic, yet no less impactful for the U.S. and
the region. Primary products: Food stuffs, markets, and
technology.
China's President Xi has clearly engaged the hemisphere
more boldly than his predecessors, including important trips in
May 2013 and July 2014. The latter included the first China-
CELAC summit and, indeed, as Chairman Duncan pointed out, an
important Chinese choice to frame its multilateral engagement
with the hemisphere around an institution that excludes the
United States and Canada.
The current deceleration of the Chinese economy is likely
to decrease PRC commodity investments and the value of
commodity imports but will also likely expand Chinese efforts
to sell its goods and services to the region and to pursue more
loan-backed infrastructure projects, increasing tensions in an
already-troubled relationship.
I am concerned that the PRC engagement is indirectly
undermining democracy and good governance in the region, as
loans to populist regimes weaken the accountability of their
leaders to citizens and institutions and facilitate corruption.
In addition, PRC military activities in the Western
Hemisphere, as acknowledged, are significant and growing.
Chinese defense conglomerates, such as Norinco, are selling
increasingly capable military goods to an ever-broader array of
clients. In addition to the well-known sales to Venezuela,
Ecuador, and Bolivia, the Peruvian Army just last month
received 27 Chinese artillery vehicles, while Argentina plans
to purchase Chinese ocean patrol vessels and armored personnel
carriers, among other items.
Chinese military personnel attend courses in Colombia's
Tolemaida military base and at Brazil's Jungle Warfare School
in Manaus. The PLA has progressed from participation in
multilateral forces, such as MINUSTAH in Haiti, to bilateral
engagements, including a November 2010 medical exercise with
Peru and the December 2011 deployment of its hospital ship,
Peace Ark, to the Caribbean. In October 2013, for the first
time, Chinese warships conducted combat exercises in the
region, including engagements with Chile, Argentina, and
Brazil.
My recommendations to the committee respectfully include:
Number one, working with our regional partners to strengthen
their government institutions for engaging with the PRC so that
all get a fair and constructive deal; two, ratifying an
effective transpacific partnership open to China in the future
is one step in constructing a multilateral rule-of-law-based
regime across the Pacific; three, facilitating ties between the
Western Hemisphere and Asian partners who share our values,
including Japan, South Korea, Australia, and India; four,
expanding theater security cooperation to bolster the U.S.
position as partner of choice in the region; five, prioritizing
a functional inter-American system in which the OAS and not
CELAC or UNASUR is the multilateral vehicle to engage China and
resolve regional security issues; six, articulating a clearer
vision of what the U.S. stands for in the hemisphere and why
the U.S. approach best advances broad-based development,
prosperity, and human dignity.
Respectfully, the U.S. cannot and should not block China-
Latin American engagement, but we must, I feel, work to ensure
that it is consistent with our own security, while advancing
the wellbeing of those with whom we share this hemisphere.
Thank you very much for your time.
[The prepared statement of Mr. Ellis follows:]
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----------
Mr. Duncan. Okay. Is it ``Dussel Peters'' or just
``Peters''?
Mr. Dussel Peters. ``Dussel Peters.''
Mr. Duncan. All right. Dr. Dussel Peters is recognized for
5 minutes.
STATEMENT OF ENRIQUE DUSSEL PETERS, PH.D., DIRECTOR, CENTER FOR
CHINESE-MEXICAN STUDIES, SCHOOL OF ECONOMICS, NATIONAL
AUTONOMOUS UNIVERSITY OF MEXICO
Mr. Dussel Peters. Okay. Thank you very much, Mr. Chairman
and members of the subcommittees.
I would like to share with you the work of the last 15
years we have been doing on the Mexico and Latin America-China
relationship. And I also invite you to participate next
Wednesday in a presentation of a report we will do with the
Atlantic Council exactly on this topic, no?
I would like to share with you three topics.
First, the first issue, the increasing relationship of
Latin America and China in all the topics that we have been
mentioning is no coincidence, which means China has been in the
last at least 10 years releasing a group of white papers
regarding this relationship. I would invite you to go through
the cooperation plan of CELAC and China, the first ministerial
meeting that was published in January 2015, which establishes
very clear goals regarding trade, investment, infrastructure
projects, and funding, respectively.
There is no single Latin American country that so far has
established a short-, medium-, and long-term strategy vis-a-vis
China. This results in a substantial disadvantage for Latin
America.
Second, as you mentioned, China has become the second-
largest trading partner of Latin America. Latin America has a
huge trade deficit, and particularly relevant is the difference
in the group of topics and of products that the region is
exporting to China. Less than 5 percent of Latin American
exports to China are of medium- and high-technological level.
There is a huge gap with what China is exporting to the region,
and this has also reflected and explains the region's
increasing disenchantment with its most dynamic partner.
Finally, the third topic I would like to share with you is
that, while it is well known that China has participated
importantly in the NAFTA region and displaced also Mexican
exports to the United States, probably the United States has
been the main loser in this new triangular relationship between
the United States, Latin America, and China.
In the paper I submitted to you, we calculate that 72
percent of the United States exports to Latin America are
threatened by Chinese exports. And probably much more important
is that, if we assume the share of the United States in Latin
American imports of 2001 when China became a member of the
World Trade Organization, if we assume the same share of Latin
American imports in 2014, the United States would have exported
to Latin America more than $145 billion additionally.
If we take this $145 billion in 2014, according to the
Department of Commerce, this $145 billion accounts for 840,000
jobs that the United States would have gained, maintaining the
same share in 2001. Again, this is a substantial and critical
topic not only for Latin America and for Mexico but for the
United States.
I finish with two recommendations.
First, I invite very much both subcommittees and the House
of Representatives, A, to support, fund, and create academic
and private institutions in the United States to promote
detailed understanding of a dialogue on the global reemergence
of China, especially in Latin America and the Caribbean, since
it also affects U.S. trade, production, and employment,
especially in manufacturing and particularly in the automobile
and auto parts sectors.
Secondly, I invite you to actively participate in and
support the important work that has been done in Latin America
and the Caribbean on the many issues related to this new
triangular relationship. Institutions such as CELAC, the
Economic Commission for Latin America and the Caribbean, and
the Inter-American Development Bank are some of the
institutions where you could participate.
Thank you very much for your time.
[The prepared statement of Mr. Dussel Peters follows:]
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----------
Mr. Duncan. Thank you very much for your testimony.
And the Chair will now recognize Ms. Joseph-Harris.
Thank you so much.
STATEMENT OF MS. SERENA JOSEPH-HARRIS, CHIEF EXECUTIVE OFFICER,
SIRIUS INTERNATIONAL (CARIBBEAN) DEFENSE CONTRACTORS LTD.
(FORMER HIGH COMMISSIONER OF THE REPUBLIC OF TRINIDAD AND
TOBAGO)
Ms. Joseph-Harris. Thank you very much. And a very good
evening to you, Chairman Duncan, Chairman Salmon, and Member
Sires.
My contribution comes at a very----
Mr. Duncan. Could you pull that microphone down just a
little bit? There you go.
Ms. Joseph-Harris. Is this better?
Mr. Duncan. There you go.
Ms. Joseph-Harris. Thank you very much.
My contribution comes at a very fortuitous time. It is the
culmination of a 4-year inquisition that has just concluded in
relation to the formidable strategic progress that China has
been making in both hemispheres, so that the statement on hand
will be confined to the following: I shall describe China's
engagement with the Caribbean, why Caribbean countries are
interested in Beijing, its objectives in the Caribbean and
success to date, a description of the economic relations, and
recommendations to the honorable Congress.
China is now the third-largest investor in the Caribbean,
with the United States and the European Union occupying the two
top spots. Its share of foreign investment regionally is an
estimated 9 percent with trade volume of U.S., which is $156
billion.
Given this fairly modest quantum, in order to make sense of
the region's magnetism to Beijing, we need to take stock of its
strategic and ideological significance, bearing in mind that
the Caribbean is part of the wider inter-American landscape,
the history and character of which is uniquely circumscribed by
legal and political instruments in principle and practice that
has helped to shape this environment.
The PRC is, in contrast, unconversant with these aphorisms.
If only for this reason, their engagements will have serious
repercussions, potentially so, that can very well challenge the
political culture and democratic traditions and values of our
hemisphere.
In order to understand Beijing's ambitions, we need to
keyhole its interests. And these are essentially as follows in
11 short points: Sourcing and consolidating cheap supplies of
food to sustain its burgeoning population.
Gaining comparative advantage along key trading routes. The
Caribbean, as already alluded, takes the form of the port
development projects, and it forms part of key chokepoints that
are vital to Western Hemisphere trade and defense concerns.
Gaining access to raw materials and vital resources in
anticipation of the looming problem of a worldwide resource
scarcity in fuels, metals, and minerals.
Infiltrating fuel markets through asset acquisition, as
demonstrated in parts of the mainland, like Colombia and
Venezuela.
Securing access to reserves of natural gas, which positions
Trinidad and Tobago an ideal strategic partner.
Accessing and utilizing large areas of fertile land in
promising locations, such as mainland Guyana, Suriname, and
Belize.
Diversifying and consolidating its commercial portfolio to
attain competitive advantage and market supremacy.
Introducing more enticing economic structures for countries
to adopt. And this avenue provides a counterweight to the
classical neoliberal model.
Gaining a foothold on the U.S. market indirectly through
frontline jurisdiction, such as Bahamas and Jamaica.
And opening employment opportunities abroad for its tens of
thousands of nationals that have been migrating to the urban
areas in China in search of jobs.
I shall now get into the main areas in which the Caribbean
has been more or less lured toward engaging with Beijing. These
are the constraints that governments in the Caribbean have been
constructed with, which causes them to look to Beijing and
partner with it: Inflexible fiscal policies; low gross domestic
product growth rates; high levels of violent crime and illicit
traffic; the inability of our governments to attract
development assistance; the increased liberalization of global
trade, which has diminished market access; the small size of
countries, which depletes from the full benefits of economies
of scale; and the failure of intraregional single market
arrangements; as well as the increasing costs of energy in the
face of fluctuating prices.
Chairman, what I would recommend is that the U.S. and the
Caribbean consolidate our deepening strategic relationships,
which began in 2010 under the Caribbean Basin Security
Initiative. This would essentially mean strengthening the
regional security architecture through continued engagement
with the United States, similar that has been done under the
CBSI initiative, through more deepened security arrangements
with our military, with our security and intelligence agencies,
as well as interoperability and asset-sharing.
As a result of constraints of time, I would invite you,
Chairman, and the rest of the listeners to refer to my most
recently published inquisition, which provides compelling
support in terms of statistical detail on those areas in which
Beijing has been making inroads into the hemisphere. The study
is called ``The Twilight of America's Omnipresence,'' and it
gives an in-depth analysis of the military inroads, economic
inroads, and political inroads being made by Beijing and makes
suggestions as to how the United States could strengthen and
build its relationship with the Caribbean in order to rebalance
itself within the hemisphere.
Thank you, Chairman, for your time.
[The prepared statement of Ms. Joseph-Harris follows:]
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Mr. Duncan. I want to thank you.
And now Ms. Myers is recognized for 5 minutes.
Thank you.
STATEMENT OF MS. MARGARET MYERS, PROGRAM DIRECTOR, CHINA AND
LATIN AMERICA, INTER-AMERICAN DIALOGUE
Ms. Myers. Thank you, and good afternoon. I would like to
thank the committee and subcommittee chairmen and ranking
members and other esteemed committee members for the
opportunity to be here today. I will be summarizing my written
testimony, which I have submitted for the record.
Let me begin by saying that this hearing, ``China's Advance
in Latin America and the Caribbean,'' is very appropriately
titled. As we have discussed, China's presence in Latin America
and other regions has grown at a remarkable rate in just over a
decade.
Latin American and Caribbean exports to China have
increased 23 percent per year, on average, since 2000, although
that has slowed rather considerably in recent years. We have
talked a lot about the $119 billion in finance that China has
given to Latin America since 2005, and most of that is going to
Venezuela, Ecuador, Argentina, and Brazil. There are numerous
investors now present in Latin America--small private ones,
large SOEs, banks, both commercial and policy banks, and also
China's sovereign wealth fund, although China's foreign direct
investment in the region is still fairly low.
China's growing presence, as we have mentioned, in Latin
America is also apparent in cultural, educational, military,
and political spheres, although over the past decade and a half
so much of overall engagement has supported the objectives of
China's so-called ``going out'' strategy. And these include
securing access to raw materials, establishing new markets for
Chinese exports, promoting Chinese brands--and there are many,
many Chinese brands in Latin America now--and
internationalizing Chinese firms.
And much of what we see China doing in the region today can
still be viewed as supporting these objectives. In this sense,
China's interest in the region has been rather static. But the
relationship has also evolved in some very important ways, and
I would like to use my remaining time to briefly highlight
three examples.
We have, first of all, seen some important changes in the
way in which Chinese firms are investing in the region.
Especially in the agriculture and energy sectors, there are
growing efforts to invest not only in crop cultivation and
mining and drilling, for example, but across entire supply
chains--in production, processing, logistics, and marketing--
this in order to better control supply and pricing and also to
compete with other multinationals and also U.S. firms.
Like in Asia, Latin America has also seen growing interest
from China in the development of cross-regional transportation
infrastructure, such as the proposed Brazil-Peru railway, but
there are many, many other examples. These projects are largely
intended to facilitate the transport of raw materials to port,
especially along the Pacific coast. Pacific maritime routes are
often favorable to those that go through the Gulf of Aden or
other areas--transport security, in other words.
Second, there is a perceived change or a growing focus on
the part of China in region-wide diplomatic initiatives in
Latin America and the Caribbean. And we have mentioned already
the China-CELAC forum, which was established in 2014 and which
excludes the U.S. and Canada. China has also recently announced
several new regional credit lines and investment funds. China's
central bank announced this month that it will establish a $10
billion fund for investment in Latin American manufacturing or
production capacity.
And, finally, we have seen some important changes in
Chinese firm operations. Recent case study analysis suggests
that Chinese companies have made real advances in community
relations and adherence to local, environmental, and labor
standards. But complaints about Chinese companies continue to
surface, and the environmental standards of China's top lenders
to Latin America are still weaker than those of other
international financial institutions. There are also
indications, troubling indications, that some Latin American
governments have intentionally weakened standards and
regulations in order to attract Chinese and other investment or
to facilitate cross-Pacific trade.
And China's ongoing financial support for certain
governments in the region, to include Maduro in Venezuela, is
thought to enable continued economic mismanagement and to
facilitate corruption and standards erosion.
So I would conclude simply by saying that China is and will
continue to be an important economic partner for many countries
in the region, even as economic growth slows on both sides of
the Pacific. Whether China-Latin America relations are, in
fact, a win-win and mutually beneficial, as China indicates, is
debatable. Chinese economic engagement has certainly
contributed to growth in some countries in the region, and
Chinese investment could be helpful for some Latin American
industries or sectors. But mutual benefit requires the regions'
governments to negotiate effectively and maintain necessary
environmental, labor, and other standards. And I think that the
U.S. has a real role in potentially facilitating these
developments.
Thank you very much.
[The prepared statement of Ms. Myers follows:]
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----------
Mr. Duncan. I want to thank all the witnesses for their
testimony. That was excellent and kind of a great segue into my
line of questioning.
I will now recognize myself for 5 minutes in the first
round.
So I spoke in my opening statement about John Kerry's
words, that the end of the Monroe Doctrine was upon us. And we
have kind of seen a U.S. disengagement in the region. It just
doesn't rest with this President; it actually transcends a
number of Presidents.
So do you believe--and I am asking all witnesses--do you
believe the lack of U.S. leadership and engagement in Latin
America and the Caribbean and Secretary Kerry's comment there,
the Monroe Doctrine is over, has impacted China's objectives
and actions in Latin America?
Dr. Ellis?
Mr. Ellis. It is a wonderful and very important question.
Mr. Duncan. Is your microphone on there?
Mr. Ellis. A wonderful and very important question, Mr.
Chairman.
I have the opportunity to interact regularly with
colleagues in China, and I remember at least three colleagues
shortly after Secretary Kerry's speech before the OAS actually
called me or emailed me saying, did he really mean it?
Clearly, China looks for signals, and I think that was an
important signal that, at the very least, China should not
decelerate its pursuit of economic and strategic objectives in
the region.
And, certainly, while our Department of State has done some
very credible and very good work and thinking on the topic,
clearly, with some of the difficulties with respect to U.S.
embassies and some of the lack of Presidential-level engagement
on this topic, respectfully, I think Latin America has clearly
perceived that lack. And, in that vacuum, I think, as well,
when one takes a look at the relative lack of definitions for
what the United States has to offer the region, that China's
seemingly value-neutral, you know, ``Take our money, we will
help you develop,'' fills that vacuum.
Mr. Duncan. Yeah.
Dr. Dussel Peters?
Mr. Dussel Peters. Yes. I would agree very strongly with
you that we perceive on the one hand this lack of a U.S.
commitment and interest in Latin America in general and
particularly regarding this new triangular relationship, no?
This is why I proposed at the end that the United States
should actively participate in these institutions that already
exist in Latin America, such as CELAC, among others, but that
the U.S. should also try to create new institutions and to
create new knowledge in academic, public, and private
institutions in the United States.
We have a lack of interest from the United States, a lack
of active participation, and, as I stated in the beginning, a
very clear long-term strategy from the perspective of the
Chinese public sector.
Mr. Duncan. Okay.
Ms. Joseph-Harris, I am going to ask the question to you
little bit differently. And let me first say that--a very
impressive resume, and I look forward to reading some of your
works.
So let me ask you the same question just kind of a
different way. Do you think if the U.S. was engaged more and
looking for trade opportunities and reaching out, spending more
time focused on this hemisphere and working with our neighbors
and friends here, do you think that would create less of an
opportunity for China?
Ms. Joseph-Harris. Thank you very much, Chairman.
Firstly, what escapes us sometimes is that the U.S. does,
in fact, have a fairly strong trade relationship with the
Caribbean and Latin America. That is a historic relationship.
However, the engagement appears to have weakened immediately
after the events of 9/11. There was a dropping of the ball, as
it were, as America, and rightly so, needed to redirect much of
its interest to the Middle East. And that is the period in
which China saw as a strategic opportunity. And there is where
many of the inroads have been made diplomatically,
economically, and culturally.
However, we have a very strong history of interoperability
between our respective militaries, you know, and that is
something that we should seize upon and consolidate. And one of
the things that I had said in my original text is that without
security and good governance there could be no chance of
economic sustainability.
So we need to revisit that strong history of
interoperability, continue to properly fortify the CBSI
initiatives, and then build from there in terms of exploring
areas that have been falling off in trade, like the CBSI, begin
to explore those areas and see how we could improve.
But I am pretty hopeful that it can be done. We have a
recent change in political administration in Guyana and
Trinidad and Tobago recently, and those very countries had been
instrumental in the early 2000s in bringing together a robust
security architecture.
So we continue to look to the United States and our
colleagues in the military and the security industries to
invigorate those types of relationships.
Thank you, Chairman.
Mr. Duncan. Thank you.
Ms. Myers, do you think the lack of U.S. engagement opens a
void? And do you think that China would not have this
opportunity if the U.S. was more engaged?
Ms. Myers. Absolutely. I believe the U.S. disengagement in
the region has provided considerable space for China and other
partners, economic partners, to engage quite a bit over the
past few years.
But I think this also has to do with what many Chinese
scholars are calling diplomatic transformation. And this is not
a well-defined concept, but I think the general idea is the
development of a diplomacy or a diplomatic presence that is
consistent now with China's global growing role and the ``one
road, one belt'' strategy, as described in this forum, as are
new initiatives over the past couple of years, like the China-
CELAC forum in Latin America.
So there is kind of an enhanced interest also in, basically
during the Xi Jinping administration, in promoting a new form
of diplomacy, more or less.
Mr. Duncan. All right.
My time is just about up. I just want to ask Dr. Dussel
Peters, what do you think about the railroad between Peru and
Brazil?
You know, China is investing this kind of money. You know,
with the lack of any sort of highways and other ways other than
the Amazon to move goods and services and people around, the
railroad could be a game changer.
What are your thoughts about that?
Mr. Dussel Peters. Look, I would say, in general, this
proposal and this project goes hand-in-hand with what China has
been proposing in the last 2 years under this heading, also, of
the ``New Silk Road,'' the ``one belt, one road'' strategy,
which means focusing development on infrastructure, no? So
there are a group of fundings. We have added up more than $150
billion U.S. dollars that China has been committing for
infrastructure projects, and this project could be one of
these.
By the way, you have to be careful also that not all the
partners of this project have been informed of the project, no?
Which means this project was launched in Brazil, and other
countries such as Peru were also informed by the news, no?
Usually you would think that you would work the other way
around, which means you would work 2 years and then you inform
about this publicly, no?
Mr. Duncan. Right.
Mr. Dussel Peters. It is not the only project that has been
launched this way. And there are a group of big projects all
over Latin America that can change the geo-strategy in this new
triangular relationship very profoundly, particularly the Canal
of Nicaragua that is very close to the United States.
Mr. Duncan. Thank you very much. My time is up.
We were there in November last year, Congressman Yoho,
Congressman Salmon, with Chairman Royce. And just knowing the
geography and watching that, it is fascinating to me that they
would do that. I look forward to talking more about that.
I recognize the ranking member for 5 minutes.
Mr. Sires. Thank you.
Thank you for your comments.
Getting back to these projects, you know, you read about
these projects--$100 billion, $50 billion. How realistic are
some of these projects? I mean, this canal, how realistic is
this, or is this just propaganda?
Ms. Myers, we will start with you. You are shaking your
head. You don't think it----
Ms. Myers. I have strong beliefs about the canal.
Well, since it was first discussed in 2013, there has been
really no progress, either in terms of construction or in terms
of finance, as far as we know. There is a considerable lack of
transparency surrounding this entire project, so it is
difficult to tell.
The general consensus is that, in order for this to
proceed, it needs to be funded by a government, and
specifically in this case China. But there is no clear evidence
at this point that China is backing this project in particular.
In fact, China has tried to distance itself from the Nicaragua
Canal, unlike all of these other major infrastructure projects
that it has proposed throughout the region. And these others
are big, too, and extremely expensive.
So I don't see much progress in the coming years. We have
seen the construction of an access road, a gravel road, some
lights. There are many, many promises of additional milestones,
but they tend to never come to pass.
Mr. Sires. Dr. Dussel Peters?
Mr. Dussel Peters. I agree that there has been little
progress in this project in the last months, but I would take
it very seriously, very seriously in terms that, A, it has not
been disregarded by the Chinese public sector; B, the public
sector and the central government in China have massive
resources for this kind of project, as in the case of Brazil,
as in other projects in Mexico and others, and I can imagine
that this might be a concrete bargaining coin for the future
for some kind of other negotiations, no?
Thank you.
Mr. Sires. Dr. Ellis?
Mr. Ellis. I think an important point which you raised by
this is the fact that perhaps 80 percent of all of the projects
that we commonly talk about do not ultimately happen, but those
20 percent and also the expectations raised by this are
reshaping the region.
I concur that the Nicaragua Canal project is probably about
6 months behind schedule and is probably on the point of
falling apart. We can mention other projects, from investment
in Pampa de Pongo, the mine in Peru, Rio Blanco, others, the
failed Dragon Mart project in Mexico, the Mexico City-Queretaro
railroad. The list goes on and on.
And the fact is that not only do the Chinese have
difficulty in engaging with the region, but, for that reason,
many of the projects fall apart. However, the fact is that the
projects that do go through--approximately $55 billion in
investment to Venezuela, about $12 billion to Ecuador--reshapes
and keeps alive those ALBA countries.
The net effect on trade relationships is we are moving
toward what experts call the reprimatization of the region,
which actually makes them much more vulnerable, the region much
more vulnerable, as we see declining commodity demand right
now.
We are seeing a shift in the institutional balance of the
region. When we say, well, what keeps UNASUR alive, what keeps
CELAC alive, and why are countries pulling away from the inter-
American system, the OAS, one has to look at the impulse, the
inspiration of being able to turn to Chinese markets even if
some of those key projects are indeed in doubt.
Mr. Sires. Thank you.
Ms. Joseph-Harris, I don't read about too many projects in
the Caribbean from the Chinese. What are they doing in the
Caribbean?
Ms. Joseph-Harris. Thank you so much, because I did have a
list of very, very specific projects in the region, and I am
glad I have the opportunity now to elaborate on it.
Just bear with me. Okay. Here we are.
In terms of the specific projects----
Mr. Sires. Still working on it.
Ms. Joseph-Harris. I think I have it here. Yeah.
In relation to Jamaica, the Bahamas, Trinidad and Tobago,
Grenada, and Barbados, I have made some very, very specific
pointers identifying where these projects were.
In the case of Trinidad and Tobago, the Chinese have built
a children's hospital. They have built a national arts
performing center.
In the case of Jamaica, they have made huge investments in
the sphere of what you will call ``investment critical
infrastructure hoteliering.''
In the area of the Bahamas, they have also gone into
critical infrastructure, port, and hoteliering.
In Grenada, they have invested considerably in what you
will call cultural centers and so.
In Guyana, they have also invested in the bauxite industry,
in terms of writing off at least nine major loans.
In Suriname, they have gone into mining.
And it is a long list. And what I am saying, essentially,
is that some of these countries, we have to look at the
strategic importance. Trinidad and Tobago is a provider of
natural gas to the United States. In the case of Guyana, you
have gold. In the case of Suriname, you also have gold. In
Jamaica, you have bauxite. And this is a materializing of the
Chinese quest to go after resources, raw materials, in
anticipation of the global looming shortage that is around the
bend.
In addition to which, there are ALBA members, members of
the Bolivarian Alliance that are also CARICOM, Caribbean
community members. And as China allies with many of these
countries, it may be very inadvertently empowering the
alliance, which is ideologically adverse to American and
Western-style neoliberalism and institutions.
So one has to look at the Chinese asymmetric approaches,
the way in which they model their diplomacy. They are trading
with members of the Caribbean community who are members of the
Bolivarian Alliance, empowering them, splitting allegiances,
and thereby tilting the balance in terms of the U.S. influence
within the region.
Another very interesting area is in what I would look at as
the currency wars, asymmetric types of warfare. You may or may
not be aware, Chairman, that recently, in July of this year, an
agreement was signed with the Bahamian Government and the
Chinese to go into arrangements with trading the renminbi. And
the possibilities are that other members of the Caribbean
community may be able to access trade through that form of
currency as distinct from trading with the U.S.
So one has to look at the matrix of indirect relations--
currency diplomacy, port diplomacy--and the very unique types
of modeling that the Chinese are using that are by no means
normal. And these are the areas in which the U.S. influence is
gradually being eroded.
Thank you, Chairman.
Mr. Sires. My time is up. Thank you very much.
Mr. Duncan. I thank the ranking member.
I will now turn to Chairman Salmon for 5 minutes.
Mr. Salmon. Thank you.
I would like to kind of follow along the same line of
questioning as the chairman, Chairman Duncan, started, with
U.S. involvement, U.S. presence in the region.
And I am going to turn to you, Dr. Ellis, first. I believe
that Chairman Duncan is frustrated--I know we have had
conversations--that, while the U.S. presence in the region
seems to be not as strong as it could be, where there has been
a vacuum--I think, Ms. Myers, you referenced that--and while
China's influence seems to be growing in the region, my
question is: If we could get a TPP agreement, would China's
influence in the region grow, would the United States'
influence in the region grow, or would it diminish on either
side?
Mr. Ellis. Thank you very much, Chairman Salmon. I think
you raise an excellent question. And I, indeed, in my own
writings, have been a strong advocate of a TPP, but certainly
an effective and well-negotiated final TPP.
What I see is for both our Asian partners and our Latin
American partners, the question is this emerging importance of
the trans-Pacific. What are the rules that governs economic
interactions? Will it be a Pacific in which the states which
are larger and better able to coordinate their government and
financial and commercial institutions can kick open the door,
bring away intellectual property, impose their labor laws and
workers on others? Or is it a rule-of-law Pacific environment
in which there is respect for labor laws, in which there is
respect for intellectual property, in which all states have the
opportunity to reap the fruit of their hard work and good
policies, whether Japan or China or otherwise?
I certainly am a strong advocate of a future TPP which
remains open to China but one in which we have a prosperous
Pacific, in which China and the other players play by the
rules. And I believe that that creates a bigger pie for all
parts of the Pacific community.
Mr. Salmon. Well, in some parts of the Western Hemisphere,
there still are some serious governance and rule-of-law
concerns, issues----
Mr. Ellis. Yes.
Mr. Salmon [continuing]. Some corruption issues, human
rights abuses, lack of environmental consciousness, and
organized violence in some parts of the Western Hemisphere.
So is that political and economic climate in the region, is
it going to hamper China's ability to be able to function
effectively or navigate in the region? Or are they pretty adept
at navigating with these types of relationships? Could they
serve as a model for greater government accountability and
respect for the rule of law for these countries, or does China
perpetuate these problems?
Mr. Ellis. An excellent question.
China is very careful not to impose its own concept of a
model but very happy to allow others to draw from China the
lessons that they will.
What concerns me is, in many ways, there is a new
ideological struggle that I see of the 21st century,
represented to some degree by the model of states such as the
ALBA states, a very statist concept of how you negotiate with
Asia, versus that which is represented by, for example, our
partners, the Trans-Pacific Partnership, but, as well, the
Alliance of the Pacific.
What concerns me in states like Nicaragua and Ecuador and
others, to a certain extent Bolivia, et cetera, is that the
opportunity to have Chinese money allows populist leaders to do
direct relationships, which gets them away from accountability
and oversight as previously imposed by institutions such as the
Inter-American Development Bank, et cetera.
And, in many ways, the reason why China has loaned so much
to Venezuela, over $55 billion, but has had very little success
in the projects that they have pursued very hard in countries
like Mexico and Colombia and elsewhere is that those countries
have established laws and institutions and strong bureaucracies
and are less willing to bend to the Chinese rules, whereas
countries such as Venezuela have been more willing to do state-
to-state deals.
And, at the end of the day, that disadvantages not only
Western businesses but, I believe, disadvantages the rule of
law in the region. It encourages corruption and bad governance.
And, really, it prejudices the people of the region and their
long-term democratic interests and development, I believe.
Mr. Salmon. I am going to paraphrase then. What I am
hearing you saying is that if the United States isn't deeply
engaged through activities like TPP, if we are not leaders in
the region, then there is a vacuum that is filled by others.
Is that something others on the panel would agree with?
That if we are not actively engaged in determining what the
rules of the road are for engagement in the Western Hemisphere,
if we are not the leader through things like TPP, then
countries like China have greater authority to dictate those
rules of the road? Is that--it looks like most of you agree
with that.
The other question I wanted to ask is, with some of the
economic woes that are happening in China domestically, is that
going to impact their ability to be able to interact in the
region, with the financial crisis that they have been going
through?
Do you think, Ms. Myers, that is going to impact their
ability to be able to complete the agenda?
Ms. Myers. Certainly, we have already seen a pretty
remarkable decrease in trade with Latin America, especially in
South America, commodities trade over the past year, in
particular, but also before that. Also, turbulence in Chinese
markets and the Shanghai Stock Exchange and then the recent
devaluation of the yuan has had effect on global markets,
obviously, and then so also has affected Latin America quite
considerably and, especially, again, commodities exporters--
Chile, Peru, and others.
And so, in the short term, yes, there is a considerable
effect on Latin America, and this is troubling to many.
In the medium to long term, I think--well, in the medium
term, at least, we will see considerably more demand still for
Chinese goods, for Chinese commodities--or, I am sorry, for
Latin American commodities, in particular, and for Chinese
goods in Latin America. These things aren't going to change
immediately. Growth has slowed in trade, but it is still
growing.
And China very much is looking not only to Latin America
but to other regions for raw materials, of course, but also to
help it facilitate its reform process. So many of these
investments promote, for example, economic upgrading, which is
a major element of reform, or the use of excess steel in China,
and that is a major problem in the domestic Chinese economy.
So we will see more, absolutely.
Mr. Duncan. Thank you, Chairman.
We will now go down to Mr. Rohrbacher from California.
Mr. Rohrabacher. Thank you very much.
When we are discussing China and its influences, this is
not just a situation where the United States wants to dominate
the world and we want to make sure that people are listening to
rock and roll instead of Chinese instruments playing their
style of music.
I just note that in China there has been no political
reform whatsoever. Although we had a promise that if we
increased our economic ties to China, increased our investment,
increased our involvement, that there would be a liberalization
of their system. And there is no opposition party, opposition
press. There are no people who are permitted to openly organize
and criticize the government.
China has also, at the same time that it has no political
reform, has become ever more aggressive in its many territorial
claims, territorial claims which we have ignored for a long
time, but now they seem to be reemerging. Plus, you have
military action taken by China over dubious claims in the South
China Sea.
So as we are discussing the issue of China's influence, it
is not just another country versus our country as our
influence. It is whether or not this totalitarian power will be
expanding its area of influence, but in some ways control.
And let me also note this. Years ago there was--I first
noted this when--and the Chinese targets and how they handle it
economically--when the Panama Canal, as it exists today, a
Chinese company was able to buy--Hutchison Whampoa was able to
buy terminals on both sides of the canal, thus putting the
Panama Canal in a position of being dominated by this Chinese-
owned company, and how that company received that contract
after the actual Panamanian Government had been notified, an
American company, that they had won the contract, and they were
there to accept the contract. In the middle of the
conversation, a phone call comes in. And I think it was the
Vice President had to leave the office. And when he came back,
he said: Oh, there was a mistake made. The contract went to
somebody else.
And the question, what I am leading into is, it was always
my belief that somebody had been paid off. In the United
States, we put our people in jail if they make bribes to
foreign leaders. Is there any such rule of thumb for the way
the Chinese companies deal with these Third World countries
that we are talking about and developing countries?
Mr. Ellis. Well, certainly China does have rules. However,
its understanding of how those rules restrain it and the degree
to which it enforces those rules, especially with respect to
companies overseas, is a gray area. Indeed, many fear that one
of the sources of a reduction in Chinese foreign overseas
investment may be that the crackdown on SOE heads in China
itself may make China's leaders reluctant to pursue deals which
would lead to their personal enrichment in places in Latin
America.
But certainly the deeper question that you raise is a very
important one, and that is that to the extent that you do not
have an analog of the Foreign Corrupt Practices Act, those type
of deals increase corruption in the region at two levels.
Mr. Rohrabacher. When you come from a society that doesn't
have a rule of law, doesn't have an independent judiciary,
doesn't have stated rights in terms of people's relationship
with legal procedures and who owns what property, et cetera,
you would expect that in that country there would be some major
problems in dealing with the citizens and companies from that
country.
Let me ask you this about those companies that are dealing
with these nations that we are talking about. Many of the
companies in China that are making profits, et cetera, are
actually companies that are owned by the People's Liberation
Army. Are any of the companies that you are talking about owned
by the People's Liberation Army?
Mr. Ellis. Probably one of the best examples that comes
up--and of course ownership is a difficult concept. We talked
about the Nicaragua Canal. And when we take a look at the
mysterious Mr. Wang Jing, although he is basically a defense
contractor in the Chinese parlance, the offices that he has in
the region and Hong Kong are filled with, you know, patriotic
paraphernalia, however, when one actually looks at his primary
company, a telecommunications company called Xinwei, which is
involved in building a system-of-systems type of infrastructure
for the PLA, the way that he got to be a very young 47-
something-year-old billionaire is because he made a leveraged
buyout to this company and then miraculously that company began
getting billions of dollars of contracts from the PLA.
And so certainly aside from Hutchison and your very good
point about Hutchison's relation--and Hutchison, of course, was
just recently bought by a mainland Chinese company--but I think
one of the things that worries me about Wang Jing is the fact
that those ties through Xinwei indicate that certainly there
are certainly interests. If there are commercial interests,
there are interests behind those interests. And I think, you
know, that that needs to be a concern as we look at the nature
of the relationship in the future.
Mr. Rohrabacher. Anybody on the People's Liberation Army?
Ms. Myers. I just wanted to add that Wang Jing's company,
Xinwei, just declared bankruptcy. So it kind of bodes poorly, I
think, for the canal operation as well, considering that he is
funding much of the first sort of elements of that.
Mr. Dussel Peters. In our experience, the public sector in
China is omnipresent in qualitative terms. It is not sufficient
to go very concretely regarding one public institution, but you
have the central government, you have cities, you have
municipalities, and the mixture of these governments, the
public sector.
To have an idea, more than 86 percent of Chinese FDI,
according to the work we have been doing from 2000 to 2013, has
been pursued 86 percent by the Chinese public sector. So there
is an omnipresent public sector participating in FDI.
And I would briefly relate to the question that was posed
regarding TPP by the chairman and Mr. Salmon. I think TPP is
not sufficient as a Latin American strategy. TPP is dividing
Latin America, a group of Latin American countries are not
geographically related to the Pacific. And I would highlight
how important it would be to modernize, to rediscuss, for
example, a topic such as NAFTA, which has been completely left
aside. I would very strongly propose to upgrade, to modernize--
--
Mr. Duncan. In the essence of time, I am going to need you
to wrap up. Try to respect the other members' time. I know Ms.
Joseph-Harris wants to respond.
If you could do it briefly. This gentleman has somewhere
else to go and I want to try to get to him. So, Ms. Joseph-
Harris, if you will just respond briefly.
Ms. Joseph-Harris. Thank you. I will get to the crux of it.
What we are looking at, Chairman, is that we are in an
ideological war. The member is quite correct, it is
ideological. And I would even go so far as to say that the
whole idea, the whole notion of a China-U.S. dynamic is
ideologically based. And I would cite what I mean by it.
America's ideological apparatus, represented by its
globally dispersed network of central banks, international
monetary system, multilateral corporations, vis--vis a Chinese
facade, where you have no democracy, no rule of law, that
brings us in what you call a juxtaposition, it is an
ideological face-off.
This is what we are looking at, and that whatever we are
looking at ties back to ideas and ideology. And what makes the
Caribbean, in particular, vulnerable is the fact that we lack
that strong ideological base, save and except for the
institutional formidability of the OAS, which is the only
strong and true multilateral forum. And that is where we need
to look at the institution within the Americas as a
countervailing effect against China.
Thank you, Chairman.
Mr. Duncan. Great points.
Mr. Yoho.
Mr. Yoho. Mr. Chairman, I appreciate it.
I appreciate you all being here today.
And it is disheartening to see that we are losing our
influence with our closest allies, our closest countries, and
that China is kicking our rear end again.
And I wanted to ask you, before I ask any questions, Dr.
Dussel Peters, I am glad to hear you say that the TPP really
wouldn't help the area. It would be us negotiating a strong
trade agreement with all of Latin America. And you would agree
with that?
Mr. Dussel Peters. Yes, very strongly.
Mr. Yoho. Okay.
And then the other thing is what I see as a stale
relationship, it is like a relationship between people, the
United States and Latin America, it has become stale. We need
to revitalize that. And from what I have heard from you, it is
from a lack of engagement. And I know after 9/11 there was a
cause for that, but we need to move on. And we need to reinvest
in our closest allies before other people.
And I think we need to restate the Monroe Doctrine. I think
that is something that we need to stand for what the Western
Hemisphere stands for. Because what we have seen over the
course of the last 20 years is a slip or a slide into
socialism. They are lining up with Iran. They are lining up
with Russia and China. And we are losing that influence.
And what I wanted to ask you is, why is that, and what has
caused that? Is it because America, our country, meddles too
much in telling other countries how to live, the kind of rule
of law they should have, and our ideologies? And I know China
doesn't do that as much. They kind of just go with the flow and
invest in the infrastructures.
What are your thoughts on that, Dr. Ellis? Are we meddling
too much in telling people how to live?
Mr. Ellis. I think that to some degree the right kind of
meddling is useful. One of the dilemmas that China finds itself
in right now, for example, with the change in government in
Guyana, the new, very effective government of Dr. David
Granger, China suddenly finds that the dirty deals that it
makes with one government, when it is replaced by another
government, it now finds problems. It faces the same dilemma--
--
Mr. Yoho. I am glad they find that.
Mr. Ellis. But I think also, with all respect, one of the
things that I believe that we need more of--and it is ironic
because it is a point that is made I think very effectively in
the most recent defense and diplomacy review document that the
State Department has put out--is value-based leadership.
In my respective judgment, what we have done--what we have
not done sufficiently is explain why the U.S. concept of rule
of law and free markets in democracy will bring broad-based
development and why it is the best deal, why going with the
easy deal with the Chinese money does not bring sustainable
development, why going with particularistic negotiations
between a leader and a Chinese company is not the best way to
bring value added in the company involved. And I don't think
that we do that effectively enough in explaining our case to
the region.
Mr. Yoho. And I am glad you brought that up because what I
have seen in other countries, especially in Africa and some of
the other countries, China puts money into there, but then they
suck the resources off and they leave. You are not getting a
Chinese company. You are getting the Chinese government, their
military, their secret service, and all that in one. It is not
a Chinese company. I mean, it is a facade. We have seen that
over and over again and we know that for a fact.
But I have to give them credit. They are making headway.
They go in there and they get the trace minerals, the rare
earth minerals, and they are smart at doing that. And we need
to tighten up our strategy and our foreign policy.
Let me ask you, does the OAS, are they courting the
Chinese? Are they shunning us, Ms. Joseph-Harris?
Ms. Joseph-Harris. Member Yoho, I really, really welcome
this part of the discussion. I would like to tag onto what my
colleagues said.
Mr. Yoho. Yeah, sure. You have got a minute and 18 seconds.
Ms. Joseph-Harris. We do, in fact, have a very robust
inter-American institutional system under the OAS, and it is
very open, sort of poised, positioned to do exactly that, sell
the inter-American ideal to the community. And I think there is
where we probably dropped the ball and we need to focus there
on rebuilding that past. Thank you.
Mr. Yoho. Ms. Myers, do you have anything you want to add
into that? Did I catch you off guard?
Ms. Myers. Not on the OAS. But I would say that, I mean, at
the very least, there was a Pew study, a Pew Research study
that was done a couple of years ago on perceptions of China and
the U.S. In Latin America. And it was very clear that the
perceptions of the U.S. are still extremely strong. China is
rising in certain respects. But we have a very strong
relationship with Latin America and there is much to build on
in that respect.
But, yes, in terms of finance, no-conditions finance is
very appealing to many countries in the region. And for that
reason, not only in terms of investment, but also in finance,
there have been cases when Chinese companies and banks have won
out over American companies and banks, and that is problematic.
Mr. Yoho. I appreciate everybody's answers.
Mr. Chairman, thank you for the opportunity.
Mr. Duncan. I want to thank the gentleman for staying
around. I know you have got other places to be.
We will go to Mr. Smith from New Jersey.
Mr. Smith. Chairman Duncan, thank you very much for the
hearing, as well as for my good friend Matt Salmon, and, of
course, Albio Sires. This is a very important subject, and I
thank you for bringing some light and scrutiny to it.
A similar type of Chinese hegemony is actually occurring in
Africa as well. I chair the Africa Committee. And I am very
concerned, you know, sometimes, what is China's interest in
Latin America, we also have to ask what is Latin America's
interest in China? Increasingly for despotic regimes in places
like Sudan, it is Bashir who greatly cherishes his relationship
with Beijing. And, of course, Evo Morales and so many others,
the FMLN in El Salvador, increasingly.
My first trip to Latin America was three times during the
FMLN wars and saw upfront and close the terrible devastation.
But who was providing those funds? It was all coming from the
Soviet Union, usually by way of Cuba, and violence was being
used for political means.
Now China is stepping into that void with the demise of the
Soviet Union, and they are doing it all over the world. The bad
governance model, as you know, is being very aggressively
promoted.
I was in Bolivia twice in the last couple of years working
on behalf of an American who was being held captive in
Palmasola prison. Went to the prison. No charges were brought
against him. Eighteen months in that hellhole. And Evo Morales
and his government, and I while there became even more
sensitized to it, just loved Tehran and just loved China
because it is a source of legitimacy, for money, and trade.
So my concerns are, you know, we will have Xi Jinping
coming to the United States and visiting with President Obama
in just a few weeks, very, very shortly. I am doing a hearing
before he comes on China's race to the bottom with North Korea
on human rights abuses. They have gotten far worse. Name the
issue, trafficking, torture, the crackdown on religious belief.
And then you see that they are having additional and enhanced
influence in the Caribbean, as well as in the rest of Central
and South America. A very, very disturbing trend because
dictatorships, whether it be in Venezuela or elsewhere, thrive
on that kind of cooperation with a dictatorship like China.
So my first question or big question is, what is Latin
America's interest? Why are these, these guerilla movements now
turned, you know, whether it be FMLN or the FSLN in Nicaragua,
finding such a friend in Beijing? Twelve countries in Central
and South America and the Caribbean still support the Republic
of China on Taiwan. Is there pressure being put on them to
sever those ties or downgrade that recognition?
And, again, when it comes to providing arms, from AK-47s to
everything else, when it comes to using the Internet to surveil
dissidents and people who espouse real democracy, what is
China's influence there? Because they have literally written
the book on how to find good people, dissidents and others,
track them down, and throw them into prison.
Mr. Ellis. I think they are very good questions. China's
interest, in my judgment--I am sorry, Latin America's
interest--ranges from the legitimate and the commercial to the
less legitimate. I think it is reasonable for many Latin
American businessmen and leaders to see opportunities in
Chinese markets, to see opportunities in attracting Chinese
investment, to see new possibilities for funding sources.
Not all of those interests are illegitimate. However, it is
a spectrum. Because as we move into other types of things, the
opportunity of a Hugo Chavez and now Nicolas Maduro to be able
to escape good financial oversight and democratic institutions
and things like that because he can get the quick Chinese loan
or now the $10 billion in new Chinese loans in the runup to the
December 6 congressional elections in Venezuela.
And it goes into the personal as well. One takes a look at
one of the sons of Daniel Ortega, Laureno Ortega, who was
instrumental in putting together the Nicaragua Canal deal, as
well as the telecom financing deal in Nicaragua with Xinwei.
And the fact is that the Chinese deal, in part because of
the lack of oversight, provide both personal enrichment
opportunities, as well as opportunities for leaders who don't
want to have to adhere to the types of values that the United
States is promoting, democracy, labor rights, free markets,
transparency, to be able to get away from that.
But only get away from that for a time because ultimately
it leads to a greater collapse, because of the economic
contradictions, because of the poor governance. But when that
collapse comes, it prejudices us because it is we in this
hemisphere who are geographically, physically, economically,
and by ties of family related to the hemisphere, whereas the
consequences are much more indirect in terms of what happens
when those deals go bad for China.
Mr. Smith. I yield back my time.
Mr. Duncan. I thank the gentleman from New Jersey.
We will go to Mr. Chabot from Ohio.
Mr. Chabot. Thank you very much, Mr. Chairman.
I will ask probably just one question here unless I have a
follow-up. And I will address it to the whole panel to the
extent you would like to answer it.
My question is in regards to China's objectives with
respect to Taiwan and Tibet. In your opinion, is China
strengthening its diplomatic relations with countries in the
Western Hemisphere at least partly in an effort to isolate
Taiwan and to some degree Tibet or a free Tibet some day? If
yes, how successful have they been so far? And specifically
what are the benefits that China offers to Latin American
countries in exchange for their support in this effort to
isolate especially Taiwan, but also to some degree Tibet?
Whoever wants to take it first.
Ms. Joseph-Harris.
Ms. Joseph-Harris. Member Chabot, thank you very much. In
the case of the Caribbean, it has been a rather interesting
scenario. Within the CARICOM community, which is a 15-member
coalition, we have a situation where there is an absence of
what is called an Asian policy. And the Chinese have been very,
very successful in penetrating that absence of policy by
literally purchasing diplomatic relations in terms of inducing
countries to split their allegiance and remove their
relationship with Taiwan in favor of Beijing.
And the inducements have been large sums of money,
donations, and cash. Less than diplomatic, one would say, but
they have been extremely successful in it. So that, currently,
there are, I would say, there are still four countries out of
CARICOM left, and the Chinese are very aggressive in terms of
getting them to withdraw that allegiance with Taiwan. So I
would say that they have been very good at it thus far.
Mr. Chabot. Thank you very much.
Yes, Dr. Peters.
Mr. Dussel Peters. We have been working in the last years
on the Central American countries and their relationship with
China, and it has been very interesting how as a result of the
improvement in the relationship between Taiwan and China, China
has been extremely pragmatic regarding the issue of this
diplomatic relationship and recognition, which means that China
has been able to accept delegations from countries without a
diplomatic relationship. They have been doing turnkey
investments, trade, and a big group and an interesting
dialogue, political dialogue also.
And I would tell you finally that in the region China has
also increasingly stated that while it has offered a group of
projects to Costa Rica who broke these relationships in the
region, this will not happen again in the region. Also, again,
this pragmatism even in the diplomatic arena is very important.
Mr. Chabot. Thank you.
Dr. Ellis.
Mr. Ellis. Yes. As you know, in 2008, then newly elected
Taiwanese President Ma Ying-jeou formed an informal agreement
with then Chinese President Hu Jintao to basically suspend this
politics of the checkbook.
What has happened in general is that they have honored that
relationship. But I also look toward the importance of the
future. In other words, in that time since 2008, just about
every Central American and Caribbean president who has
recognized Taiwan has expressed an interest in changing. We saw
it with President Lugo, then president of Paraguay. We saw it
with President Funes in El Salvador. We saw it with President
Zelaya and later President Lobo in Honduras. We saw it with
President Martinelli in Panama, et cetera, et cetera.
The Chinese have said no. But the way I look at it is that
they have prioritized the resolution of their dispute between
brothers over any short-term gains that they could get from
Central America and the Caribbean. In that sense, I think it
has been a lesson for where their priorities actually lie.
But what concerns me about that is that if that truce ever
breaks down, it is very clear that China has been advancing its
commercial engagement offices of CPIET, et cetera, so that if
China decided to start accepting that interest in changing,
very, very rapidly Taiwan would find itself without diplomatic
recognition and in a grave situation diplomatically in the
region.
Ms. Chabot. Thank you, Doctor.
Ms. Myers, I have a little time left.
Ms. Myers. Sure, just very briefly. I mean, there is a
possibility that Tsai Ing-wen, the new candidate who is part of
the DPP party, could win the next election. And, of course, she
and her party are more supportive of Taiwanese independence
than the KMT.
If that were the case, then we could see a sort of
reemergence, there has been a diplomatic truce so far, but we
could see a lot more competition between China and Taiwan in
the region, especially in Central America and the Caribbean. I
am not sure how that would play out, but there is a good
possibility there.
And then just on the Dalai Lama, you see both sort of
direct opposition to Dalai Lama visits, for example, and
indirect. For example, you have a Confucius Institute in your
university and you are receiving a lot of funding from China
for that Confucius Institute, are you going to invite the Dalai
Lama even though you might want to? Maybe not, because it
certainly risks complete removal of all of that funding.
So you see certainly that sort of influence happening very,
very indirect, very sort of under the table. But it is
happening.
Mr. Chabot. Thank you very much.
Thank you, Mr. Chairman.
Mr. Duncan. I want to thank the gentleman from Ohio. Great
questions.
The Chair will now go to Mr. Sires from New Jersey for I
think the final round of questions here.
Mr. Sires. I have two observations. One of the observations
that I have is that one of the reasons that our two regions are
so tied together is the fact that this is a region where they
have had many revolutions and the only country that really has
opened their doors to all those people over the years has been
this country. So it has developed an umbilical cord type of
relationship that I think for China is going to be very
difficult to break. I don't know if you agree with that or not.
And the other observation that I have is the OAS, Ms.
Joseph-Harris, I disagree with you. I think it is completely
ineffective. I think it is an organization that doesn't speak
up enough on the abuses in this region. And if you are there to
represent these countries, you are just too influenced by some
of these countries not to speak up on the abuses that are going
on. I mean, I haven't seen the OAS talk about Venezuela and the
abuses of Venezuela at all. So when you tell me that you have
an institution that could be a vehicle, I am sorry, I really
don't see it as a vehicle. Not to mention the abuses in China,
but, you know.
Ms. Joseph-Harris. I agree with you on the ineffectiveness
of the OAS. I don't want to be misunderstood. But I am saying
that there is an institutional framework. It needs to be
empowered. It needs to be made effective. I am familiar with
the framework because years ago I have been part of experts
teams. But I am agreeing with you that a lot needs to be done
in order to empower the OAS so that it can be effective. Thank
you.
Mr. Dussel Peters. I believe that, in fact, CELAC has been
very successful in this dialogue with China. And I believe it
would be very relevant for the United States to participate in
CELAC. For whatever reason, OAS has not been active in this
area.
Mr. Ellis. Mr. Sires, I think you raise a very, very
important question. Thank you for the opportunity.
To me, I agree with you that the OAS has deep, deep
difficulties. When I look at this from a strategic perspective,
though, I ask myself, is it in the interest of the United
States to try to empower a debilitated institution or to let it
die or be ineffective.
And when I look at the alternatives, it worries me. For
example, China chose to engage with CELAC, which excludes the
United States. Other states in the region, one could say
Brazil, have interests in the empowerment of UNASUR to fight
the region's interests as opposed to the OAS.
But if the OAS remained ineffective, we, in my judgment, do
not have an effective vehicle. China was an observer member of
the OAS since 2004, but they chose to work through CELAC. Our
Colombian friends came asking for help from the OAS to resolve.
To me, if we allow the OAS to be ineffective, and that goes
down to leadership on our part, then we prejudice ourselves
respectively strategically in the hemisphere. That is my
respectful opinion.
Mr. Sires. Ms. Myers, what do you think?
Ms. Myers. We are hosting a meeting with the OAS today, and
they have done a fantastic job of helping us out.
But, no, I mean, I would actually agree with Enrique that
U.S. participation in some form in CELAC--I mean, it was the
brain child of Hugo Chavez and so it almost intentionally did
not include the U.S. and Canada. But I think at least in the
initial observer capacity, whereby, you know, facilitating in
some form some of the technical cooperation that has been
proposed could be a good thing.
The OAS, obviously there is much to do there to improve its
function. But I agree that it is also a useful organization to
the extent that it can be more effective in the region.
Mr. Sires. Mr. Chairman, thank you very much.
And thank you very much.
Mr. Duncan. I want to take this opportunity to thank the
witnesses. I thought this was an excellent discussion. I don't
know that we have solved any problems, but I don't know if that
was the goal. But I learned a lot. And I think this dialogue
about U.S. engagement and opportunities to allow others to get
a foothold in our hemisphere is so critical.
And so I want to thank you. And I look forward to
continuing this dialogue. I look forward to reading some of
your material as well.
So pursuant to Rule 7, the members of the subcommittee will
be permitted to submit written statements to be included in the
official hearing record.
Without objection, the hearing record will remain open for
5 business days to allow statements, questions, and extraneous
materials for the record, subject to the length limitation of
the rules.
There being no further business for the committee, we will
stand adjourned. Thanks so much.
[Whereupon, at 3:40 p.m., the subcommittees were
adjourned.]
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