China in America's neighborhood

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Latin America has become nothing short of exuberant over China's growing economic and political role in the region. "China is the 'star' of the APEC summit in Chile" gushed a headline in EFE news agency late last year. "China seduces Latin America," read another. Shortly before Chinese President Hu Jintao's Latin American tour in November, the media in Argentina made breathless predictions about billions of dollars of Chinese investment in that country, which turned out to be fairly accurate. The Bush administration should be commended for viewing those developments with aplomb and refraining from launching a paranoid defense of its sphere of influence, a la Russian President Vladimir Putin. Still, the White House should not be indifferent to Beijing's expanding clout in the region.

Latin America has vital natural resources that Beijing is interested in. Market sophisticates tend to look only at global supply and demand when considering America's energy needs. In Latin America, though -- where most energy companies are owned by the state and business and diplomatic relationships are paramount and intertwined -- China's attempts to curry favor with governments and secure energy supplies could eventually undercut exports to America. China's outreach in Latin America could also have consequences for U.S.-ally Taiwan.

Clearly, Beijing is putting a premium on its Latin American relations. During Mr. Hu's visit, Chinese companies signed a letter of intent with Brazilian energy company Petrobras to finance up to $1.17 billion of a gas pipeline. Also, Argentina signed letters of intent to facilitate $20 billion in Chinese investment over a 10-year period, primarily in energy, and, interestingly enough, transportation infrastructure that allows for the movement of energy resources, such as railroad networks. That investment appears to come with some diplomatic strings attached. Both Mr. Hu and Argentine President Nestor Kirchner spoke of their reciprocal support of their countries' sovereignty and territorial integrity, with clear implications for Taiwan.

Trade between the region and China is booming, with China reporting that trade increased by 600 percent from 1993 to 2003 and doubled from 2000 to 2003. The region enjoyed a $3.3 billion trade surplus with China in 2003. Up until now, though, China has been unable to secure a free-trade agreement with the Mercosur customs union, which groups Argentina, Brazil, Uruguay and Paraguay. Paraguay does not recognize Chinese sovereignty and has had an historic alliance with Taiwan. Taiwan, in turn, gives Paraguay significant amounts of economic aid. Given Chinese spending in Latin America, though, some of Taiwan's alliances could be in jeopardy.

Latin America's trade and other ties with China are pragmatic. China is losing arable land as a result of its urbanization and needs Latin America's food and other exports. Latin American leaders are frustrated with U.S. and EU farm subsidies, and see the Chinese market as a more open alternative market. We should be ashamed of the fact that Communist China is seen to have a more open market than that of the United States.

Still, there is some apprehension in Latin America about ties with the burgeoning China, which competes globally with the region on trade. While China imports mostly raw materials from Latin America, China exports technological and other goods to the region.

The Bush administration understandably is focused on other urgent foreign issues, such as counterterror initiatives and nuclear proliferation. It should follow closely, though, China's involvement in our neighborhood and step up efforts to secure broader trade ties with the region.