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Chinese Capital and Argentine Political Alternation: From Dependence to Autonomy?

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Abstract

The political analysis of Argentine–Chinese relations in investments and financial matters shows two faces of the China’s capital exports to Argentina. On the one hand, Argentina became the perfect example in the practice of China’s government’s desired aims stipulated in its first China’s Policy Paper on Latin America and the Caribbean. On the other hand, China increased its structural power, integrating Argentina into its trade and financial scheme, and the South American country became dependent on Chinese capital. However, the political alternation and the change of foreign policy in Argentina in December 2015 diluted the unilateral dependence on China and transitioned to a multilateral dependence on the global capital markets, although China continued to play an important role in Argentine trade and finance. For that reason, the paper asserts some ideas about the way in which Argentina’s integration into the China’s global strategy presented not only supports but also challenges to the Argentine democracy, while exploring the impact of the second “Policy Paper”.

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Source: INDEC, Prochile and Ministry of Industry, Foreign Trade and Services of Federative Republic of Brazil

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Notes

  1. The “going-out strategy” (走出去战略) is the name of the Chinese government's policy to stimulate and promote the investments of Chinese companies abroad initiated in 1999 to strengthening their competitive capabilities and mitigate the pressure that the huge amounts of foreign reserves exerts on the foreign exchange rate of the Renminbi.

  2. Dependency has been defined as an explanation of the economic development of a state in terms of the external influences (political, economic, and cultural) on national development policies (Sunkel 1969: 23) It is not a question of the two economies-central and peripheral ones-being separated, without a structural link that encompasses them. Quite the opposite. It is a relationship of interdependence-between two or more economies and between them and world trade, but in which the economies of the dominant countries can expand and be self-sufficient, while the economies of the dominated countries can only do the above as a reflection of such expansion, which can have a positive or negative effect on their immediate development (Dos Santos 1979: 216, cited by Bernal Meza 2016: 14).

  3. I would like to thank Chris Alden for this observation.

  4. President Mauricio Macri has not yet completed his first term, but from the point of view of Robert Keohane the relation has closed the process of political cooperation. This was started when appears discord generated by political alternation, followed by policy coordination between both presidents that led to a new phase of cooperation when President Macri visited China.

  5. This perspective is shared by several authors. During the Cold War, political realism divided the agenda of international affairs in high politic (strategic-military) and low politic (economic-cultural) issues. Nye (1990) divided the concept of power and coined the terms “hard power” and “soft power”. In a similar sense, Strange 2015) separated the power in the political economy in two kinds: structural power and relation power.

  6. The overseas Chinese, called huaqiao (华侨) in Chinese, are the Chinese citizens living outside Chinese territory; while huaren (华人) are citizens with non-Chinese nationality but of Chinese origin.

  7. According to the Ministry of Commerce of China (MOFCOM), the flow of Chinese tourists abroad from 10 million in 2000 passed to 57 million in 2010 and reached 127 million in 2015.

  8. According to the thesis of Lenin in Imperialism, the Highest Stage of Capitalism (1917), China’s capitalist development has already entered into the imperialist phase, where the exports of the capitals have more relevance than the exports of goods.

  9. Argentine-Chinese origin companies corresponds to private investments and private–public investments. The latter is defined as: "Announcements of private investments in the framework of an agreement with the public sector (public tenders, public sector credit lines). It does not include investments of 100% state-owned public companies” (Ministry of Finance 2016).

  10. The list of agreements signed during President Macri’s visit to China in May 2017 can be found on the following website: http://www.casarosada.gob.ar/informacion/eventos-destacados-presi/39571-estos-son-los-acuerdos-firmados-entre-la-argentina-y-china-durante-la-visita-del-presidente.

  11. Several factors produce different statistical data: (1) China only reports the first destination of FDI; (2) Chinese statistical data include Hong Kong and Macau among its destinations; (3) Several Chinese capital flows go to Argentina through “tax havens” (such as the Virgin Islands or Cayman Islands) and they must be considered China’s FDI in these financial destinations, but then these funds are re-directed towards other economies, without identifying the final destination.

  12. In 2016, according to the INDEC, the Argentine deficit was around US$ 6 billion, while for MOFCOM was US$ 3 billion. A report from the Chamber of Exporters of the Argentine Republic 2017: 11) asserts that in 2015, Argentina reported about US$ 540 million more in exports to China than China reported importing from Argentina. 70% of this difference corresponds to soybeans. In the same year, Argentina reported about US$ 2.8 billion more in imports from China than China reported exporting to Argentina. 50% of this difference corresponds to parts for telephones or mobile phones.

  13. Strange (2015) describes four interacting structures: control over security, production, credit, and control over knowledge, beliefs and ideas. In more specific term than Strange’s structures, Keohane considers that “Hegemonic powers must have control over raw materials, control over sources of capital, control over markets, and competitive advantages in the production of highly valued goods” (Keohane 1984: 63).

  14. According to this author, harmony “refers to a situation in which actors’ policies (pursued in their own self-interest without regard for others) automatically facilitate attainment of the other's goals” (Keohane 1984: 51).

  15. Keohane defines international cooperation “…as a process through which policies actually followed by governments come to be regarded by their partners as facilitating realization of their own goals, as the result of policy coordination” (Keohane 1984: 63).

  16. According to the World Bank data, in 1991 the Argentine GDP (in current US$) represented 50% of the Chinese GDP. In 2000 that percentage dropped to 20.3 and in 2011 to 6.1%. In 2015, the Argentine GDP represented 5.5% of the Chinese GDP.

  17. It is necessary to clear out the difference between the North–South relations and the centre-periphery scheme. While the first indicates the positions of states in the international system in terms of power (China in the North; Argentina in the South), the second refers to trade exchange between different economic structures. As central country, China exports manufactures to Argentina. As peripheral country, Argentina exports primary products to China.

  18. According to the Central Bank of Argentina, international reserves decrease from their peak of US$ 50,517 million on March 27, 2008 to US$ 31,443 million on December 30, 2014.

  19. Article 5: Infrastructure cooperation: “The Parties shall establish a five-year integrated plan. This plan shall be detailed in a Complementary Agreement for Infrastructure Cooperation to be concluded within the framework of this agreement. The Argentine Government, pursuant to the provisions of such Complementary Agreement for Infrastructure Cooperation, shall apply the most advantageous award process used in similar cooperation programmes with third country in connection with the public-sector projects provided for in the Integrated Plan. The procurement of Argentina´s public sector projects, the execution of which falls under the scope of the Integral Plan, may be made through direct award provided they are subjected to concessional financing from the Chinese side and the award is made under advantageous quality and price conditions” (Framework Agreement for…., 2014).

  20. Macri said that such agreements compromise Argentine state for the next decades and require broad consensus, as well as profuse information on the commitments established in them and a clear basis of their convenience and scope. Unfortunately, this has not happened (Curia 2015).

  21. This concept is only used in the democratic system and it is different to political succession, used in both democratic and authoritarian regimes.

  22. The additional Protocol establishes that the Station “will be implemented exclusively with a view to nonmilitary use in the field of science and technology, and the information resulting from its research may under no circumstances be used for military purposes.” (In Additional Protocol to the “Cooperation Agreement between…”, 2014).

  23. Decree 338 defines "concessional financing" as financing that meets the following conditions: (a) a grace period equal to at least the contemplated period of total or partial execution of the project, in the event that it is anticipated stages for the project execution; (b) an interest rate with a discount of at least 25% with respect to the interest rate of public securities issued by the Argentina subject to the law and jurisdiction of the state of New York, with a similar duration, considered at the time of the signing of concessional financing loan contracts; and (c) a repayment term of at least 10 years counted from the expiration of the grace period (Argentine Republic Republic et al. 2017).

  24. According to INDEC, in 2016 China is Argentina’s second largest trading partner, after Brazil and before US. Exports to China accounted for 7.7% and imports 18.8%. In financial matters, Chinese FDI is not important, but as above-mentioned, the US$ 10.375 million swap agreement has been used and there are loans granted for various infrastructure projects.

  25. It be recalled that up to 2015 China’s FDI stock in Argentina was US$ 1948 million, similar to the stock of the Pacific Alliance. Up to same year, Chile had 204 million and Mexico 524 million.

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  1. National University of Rosario (UNR), Riobamba 250, Rosario, Argentina

    Eduardo Daniel Oviedo

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  1. Eduardo Daniel Oviedo
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Correspondence to Eduardo Daniel Oviedo.

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This paper was written thanks to the support of the fellowship granted by the Global South Unit of the London School of Economic and Political Science.

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Oviedo, E.D. Chinese Capital and Argentine Political Alternation: From Dependence to Autonomy?. Chin. Polit. Sci. Rev. 3, 270–296 (2018). https://doi.org/10.1007/s41111-018-0092-4

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