Dear Editor,
The October 30th release of the Guyana-China July 27th Memorandum of Understanding has placed our bilateral relations with China in the spotlight once again. Given the disparities between Guyana and China in economic power, international influence, and military capability, examining the latter’s intentions are legitimate and necessary. I have previously written of the responsibility that we bear in having an attitude towards China that is representative of our interests, rooted in fact, and formulated by discourse within civil society. We must therefore attempt to contextualize Guyana within China’s economic foreign policy objectives in a broader Latin America and Caribbean (LAC) discourse.
China’s economic assistance as a strategic tool in the developing world is discussed as a recent phenomenon. To be sure, this has been the case across the region for fifty years and closer relations with China have served to challenge the status quo of economic dominance in the Western hemisphere long enjoyed by the traditional metropolitan powers. Between 1990-2005, Latin American and Caribbean imports from and exports to China increased by seven-fold and three-fold respectively. China’s presence in the region is tied to growing demand for mineral and agricultural commodities required for its export-oriented manufacturing and own domestic consumption trends. Chinese automobile companies in Brazil for example have established production centres across the region to reduce costs and acquire new markets. This has served to compensate for slumping demand and higher labour/input costs in China. These operations produce cheaper machinery & equipment that assists in telecommunications and infrastructural projects locally, while mitigating trade conflicts (Brazil requires that certain goods be produced fully or in part domestically). Even in the face of correlations between the rise of China and the decline of certain LAC industries (Mexico’s textile sector is one example), the region continues to look to China as an alternative to traditional avenues of investment.
Producers of commodity mineral and agricultural resources have thrived in contemporary China – LAC relations. Chile is a noteworthy example of a commodity producing beneficiary in the region where export prices for copper have boomed and the economy has been complementary to the rise of China. Of the LAC region’s 35% export performance for which China accounts, 70% is comprised of primary commodities. These sectors stand to improve the Terms of Trade within the Sino-Latin American and Caribbean context, while being economically beneficial for the region given the net decline of commodity prices internationally. It is within these conditions that the governments of LAC states have attributed significant poverty reduction and economic growth to China’s investments in the region. There is much scholarship now which cautions that the rise of China and its exports serve to shrink, outcompete or alter existing regional economic patterns regardless of their efficiency, market orientation or sophistication. Indeed, this has oft been the refrain within our Guyanese context, albeit colloquially. Admittedly, domestic markets in the LAC region have failed to diversify, and dependence on Chinese consumption to fuel demand is not a comprehensive development model for our states. All the while, we must be ever vigilant of historic precedents across the region, which predate China’s involvement, of export-oriented industries only benefiting small segments of the population.
Bilateral assistance and borrowing from China over the five decades of its regional presence, have nearly always featured delayed starts and longer timeframes for repayment, as well as lower interest rates. We must note that across the LAC region, China’s enhanced profile continues to be welcomed by governments as an alternative source of development that is less constrained by loan conditionality (requirements placed on borrowing nations by developed states and international financial institutions) or interference in domestic affairs. China’s investment of capital in the Latin America and Caribbean region has taken shape via green field operations (using investment to build an enterprise from the ground up in a foreign country), mergers & acquisitions of local companies and development assistance in the form of lending from the China Development Bank and Export Import Bank. China’s lending patterns have placed less stock on traditional conditionalities such as the World Bank Rule of Law Index, Equator Principles of Lending, or measures attached to governance set by the world’s leading International Financial Institutions that qualify developing states for loan programmes. For better or worse, this has endeared the developing world’s governments to Chinese state-owned lenders who now surpass the Inter-American Development Bank and World Bank in total programme assistance.
The effects of the China-LAC relationship have differed by state and sector. The region shares an overarching objective in its need to diversify both its products and markets economically. As uncertainty deriving from the protectionist tone of the Trump administration grows, there exists an opportunity for Sino-Latin American relations to augment in ways that will be beneficial to all parties, what is referred to by China and beneficiaries of its economic agenda as win-win development. China is an emerged great power on the world stage. It is therefore not within Guyana’s interests to ignore or pull away at a time when the rest of the LAC region is strengthening and accelerating their relationship with China. The undertaking of policy reviews and setting definitive objectives is required by small states like Guyana in order to maximize our own benefit from these relations. Efforts on both sides to deepen ties have placed insufficient attention to the building of institutional capacity. This will hinder an effective examination of the benefits and shortcomings the continued intensification of economic relations may have on all parties. Across the LAC, lack of attention by states individually or collectively to develop an agenda of reciprocal engagement towards China will be a poor representation of our interests in an international arena of increasing bilateralism and multipolarity.
Yours faithfully,
Brandon Cheong
