In an interview with The Cipher Brief, Boston University Professor Kevin Gallagher sees Chinese and American interests in Latin America as complementary.
The Cipher Brief: Broadly speaking, how do you view China’s increased involvement in Latin America? Is it a good thing for Latin America? The U.S.?
Kevin Gallagher: China's increased economic involvement is very good for Latin America. China came to the rescue of the region after the global financial crisis dried up demand for Latin American products in the region's traditional export destinations in the United States and Europe. That new Chinese demand helped spark the largest run of economic growth in the region since the 1970s. This is also good for the United States, because a growing Latin America is a more stable one and one that demands more U.S. products. Challenges abound, of course.
TCB: What makes Chinese investment different from Western investment in the region? Has that investment affected certain parts of Latin America more than others?
KG: China's development banks provide more finance to Latin American governments than the World Bank and Inter-American Development Bank. Whereas those banks focus on institution building and social policy, China focuses on infrastructure and extractive industries—complementing rather than competing with the Western-backed banks.
TCB: What impact has Chinese influence had on U.S. businesses operating in the region? Have American companies seen any benefit?
KG: American companies are of great benefit to the region. Indeed, American companies tend to focus more on capital goods sectors that help the region go up the value chain and are more job intensive. Chinese firms focus largely on the natural resources sector.
TCB: What advice would you give American companies trying to compete with Chinese firms (including those with considerable state backing)?
KG: Lead by example. U.S. firms learned the hard way to build long-term relationships, and adhere to social and environmental norms. The Chinese are back at that early stage. The U.S. also has to reboot the Export-Import Bank, not eliminate it.
