Double Handshake

Venezuela is in serious economic trouble. Production of oil – the backbone of the economy – dropped by 400,000 barrels/day last year due to reduced demand. “Indefinite” four-hour-per-week rolling blackouts have begun in big cities as hydroelectric dams have been hit hard by a drought. And then last week, Hugo Chávez announced last Friday he will devalue the country’s currency, the bolivar, for the first time since it was introduced in 2003.

The Venezuelan people are (rightly) afraid that even more serious inflation will set in. Many rushed out last week after the announcement to buy electronics and other durable goods that would hold their value. Merchants raise their prices as a result – the exact opposite effect a currency devaluation should have.

Chávez is not amused. “‘There is no reason for anybody to be raising prices,’ Chávez said Sunday on his national television show. He explained to listeners that the ‘bourgeois’ in Caracas society would plan price increases but that they would fail. ‘People, do not let them rob you,’ he said. ‘Denounce it,’” the Washington Post reported.

But if that approach doesn’t inspire a lot of confidence in the country’s stability, consider this idea:

A shipment of Chinese home appliances will be sold cheaply in Venezuelan government stores to stop speculation by retailers after the country’s currency was devalued last week, President Hugo Chavez said Wednesday.

“A boat is coming from China. It brings refrigerators, television sets and washing machines we’ll be selling at low prices, as we already do with food products in the Mercal chain,” Chavez said of the government-owned supermarkets opened in 2003.

A single appliance-laded boat from China? Well, that should do the trick for country of 28 million people.

I was reading about the weird and intriguing (and for purposes of this blog, not so relevant) theory of geological hot spots in Al Gore’s great climate change primer Our Choice, and it got me thinking. The (still unproven) idea is that areas of the earth’s surface that are unusually hot, such as Old Faithful at Yellowstone National Park in the US, can be explained by large asteroid strikes in the ocean at the corresponding place exactly on the opposite side of the world. This point, 180 degrees away, is called an antipode.

This made me remember growing up in the US and occasionally hearing grownups say “if you dig a hole straight through the earth to the other side, you’d be in China.” This, I can confirm with this nifty Antipode Map, is not the case. America’s whole collective anitpode is out in the south Indian Ocean (exception: Hawaii – you’re in Botswana!)

But it turns out that China and Latin America have some serious antipodean matching going on. John at the great Sinosplice blog apparently figured this out three years ago:

So you can see that China mostly just overlaps with Argentina, and most countries don’t overlap with any land at all. According to another website, China gets these exciting antipodes match-ups:

1. Beijing – Bahia Blanca, Argentina
2. Taipei – Asuncion, Paraguay
3. Shanghai – Buenos Aires, Argentina
4. Wuhan – Cordoba, Argentina
5. Xi’an – Santiago, Chile

Some of them are give-or-take a few hundred kilometers according to the map but still cool approximations to know.

Back in October, I posted a snippet of a Shanghai Daily article relating to Chile’s pavilion preparation for this year’s Shanghai Expo:

At the Shanghai event next year, Chile will attract visitors with three special wells. People will be able to look into the wells in the pavilion in Shanghai to see scenes and hear the sounds of some Chilean cities on the opposite side of the earth.

It still sounds hokey, but I guess now more credible than the “digging a hole to China” silliness I thought of when I first heard about it – even if those scenes and sounds are technically coming from Argentina.

Image: Sinosplice

Writing a blog about China and Latin America, some news stories seem just too good to be true. This is one of them: Real, live bullfighting may be coming to Beijing as early as next year. CAS International, a Dutch anti-bullfighting organization, reports:

According to pro-bullfighting websites, bullfighter Manolo Sánchez made a deal with the local government of the Huairou District in Beijing (Peking) to build a bullring and a bull breeding farm close to the Chinese Wall, as part of a Spanish amusement park (also with tapas bars and flamenco shows).

…

In January, they want to import 100 bulls and 100 cows from Spain and they also want to start building the bullring. The bullring will be finished in October 2010 and will be inaugurated with two bullfights. From 2011, they want to organize 16 bullfights a year, 4 in June, 4 in July, 4 in August and 4 in September.

Wow. Where to start on this one?

It’s worth remembering that China has toyed with this idea before. In 2004, Beijing almost allowed the city’s Wild Animal Park to hold a fight, but eventually scrapped the idea. City council members complained that bullfighting was cruel and had “the potential to tarnish Beijing’s and China’s image” ahead of the Olympics.

However, that same year in October, Shanghai successfully held two days of bullfights. Organizers imported bulls from Mexico, matadors from Spain, and converted a city stadium into a bullring, spending US$605,000. Bulls were taunted and stabbed with spears, but not killed.

Not all fell under the spell of “a bullfight with a truly Spanish flavor.” The editorial board of China Daily called the event a “mistake.”

While animal protection and anti-violence is becoming more fashionable in society, Shanghai’s “bravery” in staging this kind of bloodsport betrays itself as one of China’s most modern cities.

Rather than a milestone in its bid to become a much-coveted international metropolis status – indeed, the bullfighting episode is more like a slap in the face.

Will this time be any different?

Worldwide, times are tough for the industry. Spain’s northeastern Catalonia region recently banned the sport, and other regions may soon follow suit. In Latin America, bullfighting can be found in Mexico, Colombia, Ecuador, Peru and Venezuela and may survive there a bit longer. Still, anti-bullfighting sentiment is on the rise in Latin America too. Many people see exporting the sport to China and other foreign countries as a last-ditch strategy to save a dying industry. Pro-fighting optimists may believe China to be bullfighting’s last great hope.

But don’t count on it. Organizations like CAS International are already circulating petitions and mobilizing efforts to stop the sport from coming to China. On top of that, it will only take one top cadre deciding there is something decidedly “uncivilized” about the bloodsport before this plan gets scuttled like the last. Don’t get me wrong, I think most Chinese could stomach the blood to watch for the “mystery” and “passion,” as this account can attest.

My guess is this project becomes something much more benign and tourism-friendly – more “Spanish amusement park” and less bullfighting. Bloodless “bullfighting demonstrations,” perhaps. Tourists dressed up as matadors. Tours of the stables and photos with the bulls. Chinese copies of Death in the Afternoon, plastic banderillas, magnets and other tchotchkes – these all seem likely.

An authentic bullfight in Huairou? Not so much.

Image: China Daily

Peru’s defense minister Rafael Rey said his country is in talks with China to purchase “a fleet” of tanks made in China to replace its current 1970s Soviet-era line-up. The country is also planning buy Super Tucano planes from Brazil’s Embraer to fight drug trafficking in the Amazon.

Both Rey and Prime Minister Javier Velasquez were quick to dismiss any notion of a budding military arms race with arch-rival Chile. Times are sensitive given last month’s espionage controversy and 100-plus years of general bad blood stemming from a border dispute. However, the ministers did not mention what Peru’s leading newspaper La Republica reported recently: That in July, a Peruvian military delegation traveled to China to evaluate the MBT-2000 tank model. The result: The Peruvians were initially turned off by the MBT-2000 because they didn’t think it would be able to defeat the Chilean Leopard 24A.

Doesn’t exactly assuage fears.

Anyway, how do you go about closing an arms deal for a buyer on the fence, you may ask? From AP:

Rafael Rey told The Associated Press that the army is testing MBT-2000 tanks brought from China, but wants a better-equipped model of the tank. Peru showed the tanks in a parade on Tuesday.

Rey didn’t say how many tanks Peru would buy. The Lima newspaper La Republica reported that it plans to buy 80 to 120 tanks and has evaluated Chinese, German, Russian, Ukrainian and Polish models.

A parade! There’s a novel way to evaluate military hardware. Tank parades in Beijing during October’s National Day 60-year anniversary and now Chinese tank parades in “the US’s backyard”?

Cue US Congressional fear-mongering.

Hugo Chavez is a blogger’s world leader. From last month:

Venezuela’s efforts to combat severe drought conditions may include President Hugo Chavez going airborne with scientists as they try to generate rain from clouds.

Chavez has said a team of Cuban scientists are in Venezuela to fly aircraft with special equipment designed to influence weather patterns, specifically to bring on much-needed precipitation.

“I’m going in a plane; any cloud that crosses me, I’ll zap it so that it rains,” Chavez said late Saturday, according to Reuters.

Brings to mind China’s cloud tinkering during the Olympics and Beijing’s most recent set of snowfalls. Not that Hu Jintao will be manning the cockpit anytime soon.

Image: Slate

Last month, a group of 15-20 gunman attacked a Chinese-owned copper project in northern Peru at dawn, killing three workers and torching 80% of the site. According to news reports filed in the following days, two other workers were still missing. The US$1.4 billion Rio Blanco copper project (bought by Fujian-based Zijin Mining Group in 2007) has been the site of violence and controversy before. In 2005, before Zijin took over, security guards killed one protester and allegedly tortured two dozen more. Those who oppose the mine argue it harms the environment and has a negative impact on local society.

Like the Bagua protests earlier this year, November’s Rio Blanco attack illustrates the major tensions between Lima’s economic and industrialization development plans for the country and some locals who fiercely resist it. Peru’s president Alan Garcia himself is a perfect example – he is lauded by international businesspeople for his open foreign investment policies and reviled at home, with an approval rating of 26%. Chinese companies, who are heavily invested in Peru’s mines, are caught in the crossfire.

Chinese mines in Peru have been targets of violence before, but I would argue the backlash against Chinese companies in Peru have little to do with them being Chinese. It is fast, polluting, large-scale development, and social and environmental upheaval that protesters are lashing out against. American and European energy and mining companies have been targeted as well.

Conflicts like the one in Rio Blanco are about development – about if and how it should happen, and who whose decision it should be.

In China, of course, fast, unconstrained, top-down development is near Gospel – The Gospel of Fazhan (or development). I’m using “fazhan” instead of “development” from here out because the word connotates so much more than new buildings and roads. You hear “fazhan” everywhere in China; it is a mantra, an obsession. Fazhan is progress, a thing to believe in. Fazhan levels are the way you compare countries. Fazhan is tied closely to national pride and unity. There are those who want fazhan and those who don’t know any better.

So note how state-owned newspaper China Daily handled the Rio Blanco attack:

Drug cartel behind Zijin Peru copper project attack

A weekend attack on a copper project in northern Peru that left three dead may have been the work of drug traffickers who want to keep the area undeveloped in order to protect their trade, the head of a business leaders group said on Tuesday

…

“There is no dispute or conflict with the community, so this makes you think that criminal interests are behind it, probably drug traffickers,” said Ricardo Briceno, head of Confiep, Peru’s largest business federation. Police said they were still collecting evidence from the attack.

Big mines tend to bring roads, police and development to areas where those involved in the drug trade want to keep a low-profile.

…

The company and people from the business community say townspeople now support the construction of the mine, though violence has broken out before at Rio Blanco.

The Peruvian government has also struggled at times to win the public debate over the benefits that big mines bring to isolated towns in the Andes.

The article is lifted from a Reuters report filed the previous day, which distanced itself a bit from the all-is-well comments from Briceno. Rio Blanco’s violent history disappears, as do mentions of environmental concerns. Indeed, with a few edits, the article becomes China Daily’s perfect affirmation of the Gospel of Fazhan – everyone welcomes fazhan with open arms except for the criminals.

It is much easier for China’s government to convince its own people that fazhan is a universal aspiration. Again, few of them need converting to the Gospel, and there’s no reason foreigners wouldn’t believe in the same thing. For every protest or attack against a Chinese mining interest abroad, China Daily and Xinhua will be there to dutifully explain that the cause was a few bad seeds at odds the vast majority of supporters.

But how does China sell the Gospel of Fazhan abroad to those who might resist it, to those who don’t share the same values? There is no doubt China will continue transform all of Latin America with its resource-buying and fazhan-leading. This reality is settled by governments, by trade agreements and investment policies.

But if China hopes to get along harmoniously with the Latin American people whose lives are being utterly transformed by all this fazhan, it may be useful to recognize and plan for the fact that not everyone is a believer.

A few noteworthy links from around the web (a few that I’ve had on my desk for some time now). With a little down time in the coming weeks, I’ll hopefully give a few of these stories their proper treatment. But, for now, the short list:

Bloomberg reports that newly christened 2016 Olympic city Rio de Janeiro is looking to China to help finance the its planned US$11 billion in Olympics-related infrastructure projects. (China knows a thing or two about the topic). State-owned China Development Bank loaned Brazilian state-owned oil giant Brasileiro SA US$10 billion earlier this year.

On the subject of oil, the Latin Business Chronicle republished an article from the Wharton Business School on China’s quest for oil in Latin America. Buried half-way down in the piece is a good breakdown of China’s proposed deal to buy Argentinean oil exploration and refining firm YPF for around US$17 billion – which would be the largest-ever overseas deal by a Chinese company.

R. Evan Ellis, whose book China in Latin America: The Whats and Wherefores has been reviewed nicely here, published another exhaustively cited bird’s eye view of what China’s presence in Latin America means for the US earlier this month for the Jamestown Foundation’s China Brief.

Two of his four main claims raised an eyebrow for me: “[China] is enabling the survival and spread of regimes oriented against the United States, Western-style democracy and economic models” and “[China] is undermining the United States as a source of political and economic influence in the region, as well as U.S. options for regional engagement.” Ellis takes pains to point out that China is, of course, not directly undermining democracy and US influence, but rather propping up the economies and the political lives of leaders like Hugo Chavez and Rafael Correa with its investment and trade dollars. Still, should we be alarmed or is Ellis being alarmist? Is the US’s capacity for “regional engagement” actually hindered by China’s presence or is the US simply in less of a position of power?

Chile is the only South American country to commit to its own pavilion at next year’s Shanghai Expo, spending US$6 million on construction rather than renting, according to Shanghai Daily. Fear not: Easter Island will be represented at the Chilean pavilion, as will this groan-inducing design idea:

At the Shanghai event next year, Chile will attract visitors with three special wells. People will be able to look into the wells in the pavilion in Shanghai to see scenes and hear the sounds of some Chilean cities on the opposite side of the earth.

Finally, here is a new trilingual corporate blog from the newly launched SinoLatin Capital, which specializes in China-Latin American investment deals. The blog got off to a roaring start in August, but posts have since grown a bit infrequent. I can relate. There’s more to be written about SinoLatin Capital, but for now, find some background on the company here.

So, now it’s official – Brazil will be the first-ever South American country to host the Olympic Games, in 2016. I can only imagine the parties going on now on the beaches of Copacabana…

Like last year’s Summer Games in Beijing, the 2016 Games in Rio de Janeiro promise to be “coming out party” for one of the world’s largest and most important developing countries. No offense to London, but 2016 stands to be a momentous occasion – beyond sporting competition – for not only a city and a country, but a continent as a whole. As an article in the NY Times earlier this week put it:

For Brazil, which has bid three times before — Rio twice and Brasília once — Friday’s vote comes after several years of economic growth and the nation’s emergence as the continent’s business and diplomatic leader. The Olympics, Mr. Osorio said, would have “a clear alignment with the country’s long-term strategy of presenting itself in the world.”

There will be much to say on the Rio-Beijing comparisons in the coming days, but for now: Enjoy the party!

Earlier this month, much was made of US president Barack Obama’s decision to impose a 35% tariff on tires imported from China. In retaliation, Beijing threatened to stop buying US-made chicken, causing the typical hyperbolic media to declare the start of a Sino-US “trade war.”

Of course, nothing of the sort has happened, and almost certainly won’t given the two countries’ mutual economic dependence. However, the unresolved question remains of how much (if any) countries should level the playing field when confronted with surging Chinese imports that undercut local producers. And it is not only a question the US must deal with. In countries like Brazil, Argentina and Mexico, low-cost Chinese imports across a range of goods remain a cause of trade tension.

At least one commentator, Latin Business Chronicle columnist Victor Mroczka, is calling for Latin American countries to consider following president Obama’s footsteps and impose their own “China safeguards,” when needed.

Mroczka, an international trade lawyer, argues that the imposition of what he calls “safeguard tariffs” against China are more effective in that they can be implemented much faster than WTO trade dispute rulings, which usually take years to be resolved (For the record, Latin American countries have initiated over 200 WTO investigations against China since 2001). By contrast, Obama’s tire tariff will take effect tomorrow, September 26, only five months after the initial petition was filed.

Second, he points out that as part of China’s 2001 WTO accession agreement, the country agreed to be subject to transitional, product-specific safeguard mechanisms, when facts warranted them, until 2013. When are these safeguards allowed to be imposed? “Where products of Chinese origin are being imported [into a WTO member country] in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers,” according to the WTO. In other words, imposing product-specific tariffs on China, until 2013, is perfectly legal within the terms of the country’s WTO accession agreement.

Finally, Mroczka argues that if one Latin American country imposes a safeguard tariff against China, it may have a knock-on effect for other Latin economies. As an example, he supposes Brazil impose a safeguard tariff against Chinese refrigerator imports:

If China’s low-price exports to Brazil increased 20 percent from 2006 to 2008 and the Brazilian refrigerator industry was losing market share and sales to China, and as a result began to reduce its workforce, the evidence would be pretty strong to initiate a safeguard action.

…

After the imposition of the safeguard tariff by Brazil, let’s assume that Mexico saw an increase of refrigerator imports from China (even a small increase) and feared that large volumes of refrigerators that were originally destined for Brazil would now be coming to Mexico and threatening its refrigerator industry as well. Reacting to this threat, Mexico could bypass the safeguard investigation process and request immediate consultations with China. If, after 60 days, the consultations fail to obtain assurances from China that an increase in refrigerator imports is not coming, Mexico could then impose tariffs or a quota. The same process could be followed by Chile, Peru, Panama, whoever.

To me, the legality of all this seems convincing enough. My question is not “Is this this something Latin American economies can do?” but rather, “Is this something Latin American countries really want to do?” To wit, the answer largely depends on where you come down on free trade and your stake in the countries involved. One man’s “safeguard” is another man’s “protectionism.”

But in the case of Latin America, it’s important to bear in mind that the region has far less leverage when “poking the dragon” as does the US. The region is dependent on China as one of its largest buyers of natural resources, its economies essentially propped up by China through the global crisis. For, say, Brazil to slap a tariff on Chinese-made refrigerators, it must make sure it doesn’t have serious repercussions for the backbone of its trade relationship with China: soy beans and oil. Ditto, Peru and Chile with copper.

Similarly, even though China “invests” in the US in its holding of US$ trillions in T-bonds, I’d argue that Latin American economies are far more palpably influenced by China’s foreign investment decisions than the US. China Development Bank – a government-owned entity – is responsible for US$ billions in loans to Latin American projects this year. In the global downturn, you can’t get that kind of financing anywhere else.

Moreover, as Latin American companies are still struggling to get their footing in the Chinese market, a retaliatory tariff against them is the last thing they need. China’s love of American chicken feet may save the US in their trade bout, but no one in China will likely notice if bottles of Chilean Malbec disappear from the shelves of Beijing because a 40% tariff makes them prohibitively expensive to import.

Well, since DH cannot be anymore “harmonized” in China than it already is, I thought I’d offer a quick update on the “Amazon’s Tiananmen,” a label that’s been used to describe the violent clashes between indigenous Indians and Peruvian police in June over land use in Peru’s Amazon jungle. The tensions bubbled over three months ago, as Peru’s government continued opening up more areas of the country for oil and mineral exploration without consulting the local inhabitants. All in all, around thirty police officers and protesters were killed and more than 200 were injured.

When I first wrote about the clashes in the days that followed, I questioned the “Tiananmen” comparison. Aside from the timing (happening in early June, around the time of the 20-year anniversary of the China protests) and easily simplified narrative (oppressive government cracking down on its own people), I didn’t find a lot of similarity between the two protests.

One thing that I did get wrong in that earlier post, however, was the amount of media coverage Peru’s protesters got. I had rashly predicted that the incident would not capture international attention like China’s protesters got twenty years previously. Yet, in the weeks that followed Peru’s clashes, the incident made front-page headlines worldwide. Some of these news sources jumped on the “Amazon’s Tiananmen” label, while most did not.

Regardless, mounting international pressure and Lima’s backtracking culminated in the apology and resignation of the country’s prime minister Yedude Simon and congress’s repealing some of the laws granting wanton commercial development in tribal areas. This is not to say that all foreign development has stopped in the area, but I submit that the protests did have a major impact in Lima, something I would not have predicted had you asked me in June.

So, what then of the “Tiananmen” label? Survivor International, a British NGO, whose director Stephen Corry coined the term as far as I can tell, is still using it. Last week, Survivor published another indictment of Peru’s government in the 100 days that followed the “Amazon’s Tiananmen” and called for an independent investigation of what happened really happened in June.

But while China’s Tiananmen legacy inside the country is hushed at best and forgotten at worst, it seems to me that the Peru’s “Tiananmen” stands to be held up by indiginous groups as a major (if bloodied) victory, given Lima’s repentance over the incident. Would anyone in participating in the 1989 demonstrations claim the same?