In the age of globalization, bilateral relations often involve multilateralism. The same is true for the strategic partnership between Europe and Latin America. That is to say, China can play a certain role in deepening the bilateral relations between Europe and Latin America.
Spain has already expressed its wish to help develop China’s relations with Latin America and so far the results are encouraging. On October 1, 2010, for instance, it was announced that Sinopec, one of China’s largest energy company, would invest US$7.1 billion into Repsol YPF Brasil, taking a 40% stake in the Brazilian business. If the triangulation of Spain, China and Latin America is feasible, why not expand it to include Europe, China and Latin America?
China’s interest in Latin America is mainly economic. As a result, the triangulation of Europe, China and Latin America should be built upon economic relations, and one of the great possibilities towards this end is to set up a joint fund to facilitate European and Chinese investment in Latin America. This kind of cooperation between Europe and China is possible for the following reasons:
- China needs to diversify the use of its enormous foreign exchange reserves. A joint fund with Europe might serve this purpose.
- The fund can help China implement the so-called “going global” strategy of encouraging outward Chinese investment in every corner of the globe.
- Affected by the on-going debt crisis, Europe is in need of capital to maintain its economic presence in Latin America.
- Both Europe and China have already established their separate economic ties with Latin America. Therefore, closer cooperation between Europe and China might further strengthen their relations with the region.
As a matter of fact, Latin America and China can also establish a similar joint fund so as to make more investments in Europe. The positive implication of this cooperation is evident. First, all the European countries in the debt crisis have decided to carry out large scale privatization programs. That offers many investment opportunities for both Latin America and China. Second, many Latin American countries are constrained by a lack of financial resources for outward investment, but China does not have this impediment. Third, because Latin America’s investment relations with Europe date back much earlier than those of China’s, collaboration between Latin America and China would be greatly helpful to China’s “going global” strategy.
More boldly speaking, Europe, China and Latin America might be able to create a trilateral investment fund to promote investment among the three continents. This fund can facilitate investment projects in any of the three parties.
Needless to say, for both Europe and Latin America, it is highly necessary to get rid of the mistaken mentality of “fear of China” or “China threat”. At the same time, Europe and Latin America should get over their suspicions about the nature of Chinese capital. Why care about the color of the cat if it catches a mouse?
Jiang Shixue is Professor at the Chinese Academy of Social Sciences and Vice President of the Chinese Association of Latin American Studies.
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December 21, 2011
Hans Reuther-Fix
One would agree, whether it is LAC and EU, or LAC, EU and China,that these sort of cooperations
are almost imperative to stabilize the world and start to eliminate the fear factor.
The fear factor is a well executed instrument in international politics to support a self serving purpose.
One must not forget that there is a continued appetite by many to get this feel safe idea, while
buying US treasury notes and others.
What one does not realize is the currency thread of the US$ throughout the world economy.
As the increasing US money stock keeps increasing the debt level in the US, the currency panic button gains more monmentum amd when triggered will marginalize all world economies, perhaps in anticipated proportions.
HRF