Double Handshake

A free trade agreement between Peru and China, negotiated and announced last November during the APEC meeting in Lima, was officially signed today in Beijing. The agreement covers goods and services, as well as avenues for resolving trade disputes. China is Peru’s second-largest trading partner; in 2008, bilateral trade amounted to US$7.8 billion, up 41% from the previous year.

Chinese-manufactured goods are evident nearly everywhere here in Lima, from automobiles and appliances to clothing and kitchen utensils. Peruvian exports to China are by-and-large minerals like copper and iron ore. That fact hasn’t stopped Peru from dreams of diversifying. The FTA allows Peru to export US$805 million “non-traditional products” to China.

These products include frozen fish, pota, dried and frozen seaweed, cotton t-shirts, lumber, medicines, mangoes, mandarins, fresh bananas, sweet cookies, zinc alloys, beauty products and orthoboric acid, among other products.

It’s hard to look at that list and imagine anything other than minerals being the backbone of this trade relationship for a very, very long time.

I mentioned yesterday the fact that Chery’s plan to build a production plant in Brazil by 2012 would mean building ethanol-burning cars. I had quietly wondered whether or not Chery had the technology and experience to produce ethanol-burning or flex-fuel cars. According to the company’s chairman Yin Tongyao, the answer apparently is no:

Yin said that before the group started building the factory it needed to develop “flex-fuel” technology, “which is something we have not mastered yet.”

China’s own biofuel experience has been a mixed one. It will be interesting to see if that changes once Chery “masters” the process of turning sugar cane into biofuel using the world’s most advanced biofuel technologies.

Chinese car maker Chery Automobile announced it will invest up to US$700 million in a car production plant somewhere in Brazil. With a capacity of up to 150,000 vehicles per year, the plant will produce for both the Brazilian market and for export to other Latin American countries and the US. It is the company’s first production plant in Latin America, though it has an assembly facility in Uruguay.

The 150,000-unit/year plant represents one of the biggest investments yet by a Chinese car maker in Latin America. Chongqing Changan Automobile said in February that it will begin car production in Mexico next year, forming a joint venture with Autopark Mexico to build 50,000 vehicles per year. Meanwhile, China’s biggest privately held car company, Geely Holding is building a 300,000-unit/year facility in León, Mexico, to be in full swing by 2013.

Mexico has been the traditional destination of choice for Chinese automakers coming to the Americas both for its industrial infrastructure and proximity to the US market, itself the Promised Land for these automakers. The strategy is to skirt the heavy tariffs on exporting directly to the US by instead building the cars in Mexico and exporting north of the Rio Grande duty-free under NAFTA.

By contrast, Chery setting up a major facility in Brazil represents a major commitment to expanding its presence in that country and South America as a whole. Besides the plant’s physical distance from the US, Chery will likely be turning out ethanol-burning or fuel-flex cars to suit the local market, where nearly all cars use some amount of ethanol as a fuel source.

Keep your eyes peeled for QQs (pictured above) on the streets of Rio in the coming years.

Image: dancewithshadows.com

Two pieces of reading well worth your time this weekend:

In his post, The Death of the Asian Development Model, Michael Pettis lays out his argument for why China’s low-consumption-high-trade-surplus economic model will become unsustainable in the coming years (hint: it involves the US). Interestingly, Ariana Eunjung Cha of The Washington Post writes of how developing countries are increasingly looking to China as both a partner and model for their own ecoconomic growth. Does China’s growth model stand to change just has developing economies in Latin America and elsewhere are beginning to adopt the Beijing Consensus?

Earlier this week, the New York Times published an article about Chinese people with rare names and pressures in China forcing them to give them up. One interviewee, Ma Cheng, has a very common surname (马) but an uncommon given name, “Cheng,” obscure enough that my character input system doesn’t include it. In a sense, my problem writing Ma Cheng’s name in this blog post is the same one facing China’s Public Security Bureau.

According to the article, as of 2006, the bureau’s computer system recognizes about 32,000 of the roughly 55,000 Chinese characters out there. The newspaper then estimates that “at least some of the 60 million other Chinese with obscure names cannot get new (ID) cards.” So, the question: How do you keep track of these people (on ID cards, in police records) in a digital age?

For the government, the simplest and most ham-fisted solution is to tell these people to get a new name:

Miss Ma said that while her given name was unusual, bank employees, passport control clerks and ticket agents had always managed to deal with it, usually by writing it by hand. But when she tried to renew her identity card last August, she said, Beijing public security officials turned her down flat.

“Your name is so troublesome and problematic,” she recalled an official telling her. “Just change it.”

You can almost see the NY Times reporters licking their chops.

Naturally, a name change is not an enticing prospect for Ma, who a) has obviously has grown attached to her name and b) would have to deal with the fact that “Ma Cheng” has appeared on everything from her birth certificate to her university diploma.

On the other hand, upgrading the government computer systems would cost millions, and even afterward, those with even more obscure names would still be left out, facing the same problem that Ma Cheng now does.

Quick linguistic aside: In English, you have a 26-letter alphabet, whose combination any data-entry software can handle. The US government, say, would have no logistical problem creating a drivers license for “John Doe” or “Fiaoeadvas Jaosvie.” But, with Chinese, you’re not dealing with an alphabet, but a database of characters. That database does not (and likely cannot) include all the possibilities.

A few thoughts about this dilemma:

First, if the government is willing to put up with the cost and trouble of upgrading a system (questionable), there must be an intelligent solution to this problem. You could devise a system focused on radicals – the smaller, fixed components that make up  characters – rather than the characters themselves. If there was a system in place that allowed you to manipulate and “design” new characters with radicals, that open up a number of new possibilities. For example, Ma’s given name, “cheng” is made up of three 马 condensed and placed in a row. If you took the left portion of a word like “zhou,” 骤, for instance, and repeated it two more times, you could write Ma’s name.

Given my interactions with Chinese PSB officers, though, I wouldn’t expect them to cheerfully take up the task. It would mean more work, more hassle. That’s not a good enough reason for people like Ma Cheng to lose her name, to me.

A second thought was: to be sure, documents like one’s ID card are a big deal; it defines “who you are” in an official sense. But in a practical, day-to-day sense, your ID-card name means almost nothing if you want it to. A Chinese friend of mine dislikes her middle name “gold,” which I didn’t realize she even had until looking at her ID card. I’ve never heard her introduce herself or seen any document of her’s in which it appears. Similiarly, almost everyone in China has a nickname or two, which they go by, even in relatively formal settings.

Any other solutions out there?

So, Venezuelan president Hugo Chavez surprised Barack Obama with a copy of Eduardo Galeano’s 1971 book Open Veins of Latin America at the presidents’ meeting in Port-of-Spain, Trinidad. The book is a left-wing polemic about the exploitation and suppression of Latin America by foreign powers over the last 500 years. The “gift” is part political stunt – the copy given to Obama is in a language he neither reads nor speaks – to make things a bit uncomfortable for the high-flying Obama and remind him of his country’s role in “Five Centuries of the Pillage of a Continent.”

The gift is good timing for me, though. I finished Open Veins a few weeks ago and was planning to post some thoughts on it anyhow. As I read the book, I didn’t often think of Obama and the US as much as I thought of China, which stands to be the next country to seriously impact Latin America with its hunger for natural resources. China may have played zero role in the last 500 years of pillage in Latin America, but it may well be the leader in the next 500.

Written in the early 70s, Open Veins is Galeano’s account of how the Spanish, then English and finally Americans arrived in Latin America, stole the regions’ resources, exported its wealth, and drove its people to poverty and backwardness through their greed. Since Columbus’s arrival, Latin America’s natural resources have been a continual curse, a major reason for its stunted growth.

Galaeno doesn’t much distinguish between the Spanish conquistadors who once outright stole and enslaved from 20th-century US companies in Latin America that exploited the land and exported profits back home under the guise of free trade. The pillage has taken new forms, to be sure, but the pillage is still going on.

The US comes out looking terrible in Open Veins – a paternalistic superpower openly exploiting Latin American countries and meddling in their political affairs. Corporations like US Steel and Standard Fruit Company “invested” millions in smelting plants and banana plantations, which polluted the earth, condemned locals to dangerous and low-wage jobs, and exported a lion’s share of profits north of the Rio Grande. Development banks like the IMF and IADB are mostly US pawns used to force Latin American countries to re-structure their economies for greater US manipulation. America’s only interest in a growing middle class in Latin America is that it provides a market for US exports.

Galeano is a great writer, which comes through even in translation. There are memorable anecdotes and powerful passages, but, on the whole, I found the book dogmatic and shrill as he forced his agenda into the pages. This is not objective journalism (nor does it claim to be), but rather a kind of blood-boiling invective that tears down straw-men counter-arguments. Still, there is plenty to get incensed about; it’s a moving book. I can see why Hugo Chavez likes it so much.

But I also think he gave Open Veins to the wrong president; the book should have been in his suitcase for his trip to Beijing earlier this month. There were no awkward book exchanges on Chavez’s trip to Beijing, of course, only zesty Xinhua headlines, multi-billion dollar oil investment deals and smiling photos.

For one thing, Open Veins would simply be a great read for any stalwart Communist cadre, at least in theory. There’s anti-imperialism rhetoric, scathing criticisms of the US’s political meddling, a dash of revolutionary fervor and pleas for better labor conditions. But more importantly, if any foreign country needs a cautionary tale about the fine line between “pillage” and “commodities investment” of Latin America in the 21st century, it is China. You never know how long your welcome will last.

Times are good now because China’s buying helps shore up the region’s battered economies, and its investments come without preconditions. China also provides another major trading alternative to doing business with the US. But, everything’s not perfect. Latin America’s trade deficit with China is growing, new free trade agreements have yet to reveal how much (or little) they will benefit Latin economies, and some Chinese mining companies are already getting bad reputations for their labor and environmental policies.

While none of this yet put the country in the same league with the villians in Open Veins, Spain, England and the US’s legacy in Latin America are clearly ones that China must keep in the back of its mind. If China turns out to be as greedy and exploitative as its foreign predecessors, you can be sure it will become the subject of a similarly themed book in the coming years.

Former Peruvian president Alberto Fujimori was handed a 25-year jail sentence yesterday for his role in a handful of killings and kidnappings that took place during his time in office. The ruling came down from a three-judge panel around 9:30am, the culmination of an epic 15-month trial. The 70-year-old Fujimori said he will appeal the decision.

Fujimori, who was president from 1990 to 2000, remains an polarizing figure in Peru. One poll released Monday found 64% of Peruvians believe he was guilty of human rights crimes, while 72% believe he is guilty of corruption. When most people describe Fujimori as “guilty” or “innocent,” however, it has less to do with the specific facts of the case and more to do with offering judgment on the Fujimori years as a whole. The real polarizing question is: Did Fujimori go too far or did Peru’s chaos justify his actions?

The answer from abroad is and has been clear. Fujimori began drawing the ire of human rights groups as early as 1991, during his heavy-handed campaign to wipe out the Shining Path. Terrorists and innocents were executed without trial. He dissolved congress and the judiciary in 1992 and re-wrote the constitution in 1993 to allow himself a second five-year term.

All of this did not help his popularity among democracy-loving nations. Within the country, there remains a big rural/urban divide with comes to the Fujimori issue – it depends on how the 1990s treated you. Nearly all the Limeans I’ve asked come down on him hard. “Asshole,” says the bus driver. “My brother was thrown in jail as a terrorist in 1983,” says the woman buying a newspaper. “He should die in jail,” says the restaurant owner. Fancy eateries in the city’s Miraflores district sell post cards with a cartoon Fujimori, in prison-stripes, getting kicked to the slammer.

In the countryside, the story is different. Here, where the Shining Path threat was much more palpable and economic stability is needed for outright survival, Fujimori remains popular. In countless villages, crumbling brick houses have “Fujimori Innocente” painted in red and white letters, usually alongside “Keiko” – the name of Fujimori’s 33-year-old daughter, who is a popular congresswoman. Keiko Fujimori has said she will pardon her father of all crimes if she is elected president when she runs in 2011.

The most remote place I’ve heard Fujimori’s name come up was on a trip to the floating islands on Lake Titicaca, where Peru borders Bolivia. About 250 people still live on the islands, which are handmade from floating totora reeds. Nearly everything on the islands – the houses, boats, kitchen, tools – are made from the reeds. In the 1990s,  Fujimori visited the islands twice, we were told. The president’s legacy here is not quashing terrorism or inviting foreign investment, but rather electricity. Fujimori and his people donated solar panels to the islands on their visit, which still stand today.

“Fujimori cares about us here. That is why we poor people support him,” our host Roberto said.

“El Chino”

Though his parents were Japanese immigrants to Peru, Fujimori’s nickname is “el Chino” or “the Chinaman.” “Chino” can be used either affectionately or derrogatively, serving as a catch-all for “East Asian.” Fujimori himself is said to have liked the moniker, though as a dark horse presidential candidate in 1989, he likely didn’t have much electoral room to dislike it too much. It certainly is catchier than a nickname like “la segunda generación japonés.”

More importantly, “chino” is a term loaded with associations for most Peruvians, many of them positive. “Chinos” are spendthrift shop owners, hard-working restaurant chefs. They have also been in Peru for 150 years. “Chinos” are just as legitimate to run for office as anyone else. Take the image of the “chinito de la esquina” (the little Chinese man on the corner) for instance. Here’s one recollection of growing up with the “Chinaman on the corner” from a Peruvian now in Australia. Translated (roughly):

Almost every neighborhood (in Lima) had its “Chinese Corner,” each with a picturesque character. The characteristics and habits of all of them were almost similar. The Chinaman at the corner could be identified by having a cigar in his mouth, a pencil in his ear, the cats, his credit book, scooping rice and sugar with khaki paper without spilling even one grain.

In reality, Fujimori was no shop owner nor chifa chef, but cultivating the “chino” image was especially useful given the time he arrived on the national scene in the late 1980s, Peru’s economy was in shambles with an annual inflation rate of more than 10,000% in 1990. Trust the Chinaman, he’s got his credit book.

Fujimori has been depicted many other ways as well. I’ve seen him as Christ, Satan, Blind Justice, a jail bird and a samurai, among other things.

Barrios Altos, then and now

Barrios Altos is a poor and run-down district of Lima, east of the city’s center. On the night of November 3, 1991, members of the Grupo Colina – members of the Peruvian Armed Forces – killed fifteen people at a chicken barbecue suspected of being Shining Path rebels. The Colina were dressed completely in black and sprayed the neighborhood gathering for about two minutes. This incident, and Fujimori’s role it, was at the heart of the 15-month trial.

Yesterday afternoon, five hours after the sentencing, I found myself walking in Barrios Altos, a poor and run-down district of Lima, east of the city’s center. Narrow, treeless streets baking in the sun, graffiti, peeling paint and piles of trash in the street. I walked past Jirón Huanta, the site of the massacre (which I didn’t realize at the time).

Two blocks east of the site, at Plaza Buenos Aires, I examining a historic plaque when I was surrounded by six guys in their twenties. I knew immediately what was going to happen, and it only took twenty seconds. The group bolted down the residential alley. Relieved of money, camera, phone, voice recorder and backpack, I walked back where I came from to find the police. Regardless of who I talked to in the police station over the next few hours, the first response was always the same: “Well what were you doing there in the first place? Alone? Don’t you know it’s dangerous?”

Yes, then and now.

Images: JournalPeru, DustEyes blog

If he’s working, you can’t miss seeing Francisco Choy on the main street of Lima’s Chinatown. If you don’t see his red booth with “Horoscopo Chino” painted in black letters, you’ll at least have to skirt around the dozen or so people crowding around it, straining to hear his words. Francisco has been telling fortunes, advising on spiritual matters and selling Chinese spiritual goods in Lima for the last thirteen years.

Born in Peru of a father from Guangdong and a second-generation Chinese-Peruvian mother, Francisco himself is likely in his forties, with long shoulder-length hair and balding on top. When I saw him last week, he was wearing a white button-down tucked into jeans and a pair of magnetic bracelets – like the ones he sells for ten and fifteen soles a piece – on both wrists.

There were other Chinese spiritual goods and knickknacks on sale: gold Buddha sculptures, felt posters with calligraphy, ginger in plastic bags, fake jade, dolphin wind chimes made out of blue glass. Incense smoke blew across the fifteen people crowding around the booth, making this section of Calle Capon smell like the inside of a Chinese temple.

Francisco would press his thumb into the customer’s palm and immediately began speaking – “There is a big financial opportunity coming for you,” or “Be on the lookout for love.” He’d speak for a minute or two, quickly. He had a silver engraved bowl that he would strike with a stick when the reading was finished, making circles around the readee’s face with it. Then, he’d ring a bell, holding his palm out in front of him, eyes shut. Both he and the customer would open their eyes and he’d dispense change for the transaction. Three soles (US$1) for your future told.

When I checked back with the booth three hours later, the group had swollen to thirty. Business was good.

The video above, care of the Lima newspaper El Comercio, is a little more than a year old. In it, Francisco introduces himself and talks about the then-upcoming Chinese New Year (Year of the Rat). It is now, of course, a “niu year,” but Francisco and his business haven’t  changed too much in the meantime. Enjoy!

Ecuador’s Economy Minister Diego Borja announced yesterday that China will lend his country US$1 billion this year to help finance a hydroelectric plant near Quitos. Construction on the project, to be Ecuador’s biggest hydroelectric plant, will begin late this year or early next and last five years.

The checks will start coming from the China Development Bank in two months’ time. You may recall that the CDB – the government’s financing arm for national, and increasingly international, building projects – agreed to lend Brazilian oil giant Petrobras US$10 billion in February. Venezuela got its US$8 billion Chinese investment into a joint-development fund the same week. And then, days ago, the head of China’s central bank announced a US$10 billion currency-swap with Argentina, whose government bonds may be worth next-to-nothing by 2010.

The IMF now has US$1 trillion in its coffers for crisis-stricken countries in need of a loan, but, at this pace, Latin America may do just fine without much of it.

Conventional wisdom has it that, in the eyes of China, Latin America and Africa are largely interchangeable: vast tracks of land full of precious commodities. It’s simple, really: China invests billions building mines, derricks, roads and schools abroad in exchange for a steady supply of oil, iron ore, copper and bauxite to feed the factories back in Zhejiang. And so, if it’s truly all about the commodities, then when demand plunges, as it has in the last nine months, China should start getting cold feet about, well, being in places like these.

Indeed, the New York Times recently ran a piece on China’s retreat from Africa. Here’s the gist:

But so far Guinea has not gotten what it really wants from the world’s fastest growing economy: a multibillion-dollar deal to build desperately needed infrastructure in exchange for access to the impoverished nation’s vast reserves of bauxite and iron ore.

As global commodity prices have plummeted and several of China’s African partners have stumbled deeper into chaos, China has backed away from some of its riskiest and most aggressive plans, looking for the same guarantees that Western companies have long sought for their investments: economic and political stability.

The article goes on to suggest that China’s misgivings in Guinea extend to the rest of the continent. Whereas China would once invest in places forsaken by the West, the country is now reining in expansion plans (at best) and pulling out (at worst). Should we believe the hype? Aleksandra Gadzala, at her excellent blog China in Africa, offers a counter argument:

Indeed, while some Chinese companies might be fleeing, the general trend is seemingly one of firm restructuring. China is continuing to invest in natural resource sectors across the continent, with projects picking up now that the weather is improving. Small-scale entrepreneurs are likewise continuing to pursue independent ventures in states across the region, peddling cheap goods in African markets. Though we may be witnessing a slowdown in such trends, it is hardly the end of ‘China in Africa,’ as such.

Two points that Aleksandra mentions here can, I think, be said for Latin America as well. In fairness, I haven’t come across any reports arguing for a similar “end of China in Latin America”, so I don’t want overdo it here, but I thought I’d try to pre-empt any hungry journalists on “the Crisis beat” nevertheless.

First, the crisis may be forcing some Chinese companies here to adjust their operations, but projections for Chinese investment are rosy. This largely due to the fact that China knows that this crisis is short-term and its resource needs are long-term. Of course, it helps your companies’ long-term vision when you’re flush with cash and backed by massive amounts of foreign reserves if needed. In Peru, while some American mining interests are begging for an 11th-hour bailout from Alan Garcia to survive, China’s mining interests are begging the government for a bigger port to handle the surge of future exports in the coming years.

Second: Though commodities trade gets most of the ink, China has a definite interest in both Africa and Latin America as markets for its manufactured goods. Chinese textiles, shoes, heavy machinery, appliances and consumer electronics are everywhere in Latin America. Meanwhile, China’s big automakers Geely, Chery and Zhongxing are cutting their teeth in Latin America as they try to internationalize their brands. Finally, the small-scale entrepreneurs that Aleksandra mentions are also a major component of China’s presence in Latin America as well. These sellers will stay on even after the last ounce of copper is extracted from the Andes.

Image: Columbia.edu