Economic and political interaction between China and Latin America will be a defining force of this decade and, arguably, this century, a trend that was acknowledged in the closer co-operation announced at the recent China-CELAC Forum in Beijing.
At the meeting, which was attended by several Latin American leaders, Chinese President Xi Jinping pledged to pump US$250 billion worth of investment into the region over the next 10 years, and agreed to co-operate more closely on major areas including energy, trade and the economy.
Common ground between China and Latin America is imperative because the countries need to deliver innovative solutions on development for an expanding population that has higher expectations.
Whether they are in Tianjin or Lima, citizens increasingly share similar aspirations: to live in a city whose water or air quality will not kill them prematurely.
By getting urbanisation wrong in both Latin America and China, governments will experience increasingly angry outbursts from citizens if problems like pollution, traffic jams and water scarcity worsen.
But, if new and sustainable development emerges from this new avenue of cooperation, then the scale of the impact would be unprecedented and life-changing for hundreds of millions of citizens.
The narrative of closer ties is no doubt appealing to many. Yet the reality on the ground calls for prudence. The specific projects that the China-CELAC will foster could determine whether Chinese and Latin American citizens benefit from better development and higher standards of living. Or not.
Initial announcements at the forum weren’t immediately encouraging, and neglected some of the most urgent development issues in the region.
As the world’s second largest economy strives to overtake the US, China is resource-hungry. Already billions of dollars from China are pouring into Latin America in exchange for Venezuelan oil, Argentinean and Brazilian soybeans and Peruvian and Chilean copper. China has become the region’s second largest trading partner and the third largest source of investment.
But Latin America is not growing as fast as a few years ago, increasing the importance of pledges on foreign investment and aims to raise the volume of trade between the partnership to US$500 billion.
So this increasingly intense attention from China must be met with clarity of purpose.
Energy, transport and water
Three main areas, low carbon energy, sustainable transport and urban development, and water conservation, should be integrated explicitly.
Clean energy has a big potential across Latin America, the region is considered “one of the great frontiers for clean energy investment.” From 2006 to 2013, Latin America attracted a cumulative US$132 billion (US$93.4 billion of which went to build new projects).
China will account for almost 40% of the global expansion of renewable energy capacity deployment. Between 2003 and 2011 China’s renewable electricity generation increased almost 12%, while the global trend was just up 5%. The China-CELAC Forum needs to accelerate the pace of this energy transition – and not be a barrier. It would be a mistake to anchor this platform on polluting fossil fuels.
However, the China-CELAC energy and technology forums, announced by Ecuador’s leader Rafael Correa could deliver some announcements on low carbon energy in September.
China will add an estimated 350 million residents to its cities over the next 20 years. The Government already faces a public outcry because of air pollution, which is translating into environmental protests (They have grown an average of 29% every year and number rose by 120% from 2010 to 2011). Latin America also facing major challenges more of its populations move to cities. The Forum could provide a collaborative platform around long-term urban planning and low-carbon cities and clean transportation. Another question is whether China’s plans to develop rail networks, such as the intercontinental railway connecting Peru and Brazil will be part of the Forum. Co-opting it into the China-CELAC framework might make sense.
As China tries to solve its chronic water crises, and Latin America grapples with worsening water shortages, the China-CELAC Forum could insert conservation of this most essential of resources, and speed up solutions to a problem that will affect governments, people and businesses alike. It could also raise awareness of the links between water, food and energy.
Seizing the opportunity
Latin America is more democratic and urban than ever. This decade the region must build on hard-won gains– an expanded middle class, less extreme poverty and political stability – in order to deliver prosperity to a great majority of Latin Americans.
Today the region must make critical choices that tackle some fundamental problems. Take urbanisation. Latin America has the world’s highest percentage of people living in cities, 80%, and today our cities are unfit for purpose. Latin American countries need to reach new domestic consensus over private and public investments in infrastructure: What kinds of energy will power homes, buildings and factories? How should cities expand and existing urban areas revamped? How to use our natural resources over time?
Governments and the private sector (exporters, importers, tourism) must resist the “anything goes” logic that often comes when decisions only consider short-term outcomes. Each country must define internally the long-term strategies for energy, transport infrastructure, and cities best achieve domestic objectives. The point is this: China knows what it wants from Latin America – resources, influence, allies – but does the region know what it wants from China?