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Latin America and the Caribbean in 2008-2009: Social Cohesion & New Challenges of the Global Financial Crisis Facing the LAC Countries

Fecha:2009/03/02 Autor:Yue Yunxia

Under the theme of "social cohesion & new challenges of the global financial crisis", the CASS International Forum on Latin America and the Caribbean (LAC) in 2008-2009 was held in Beijing on March 2nd, 2009.  The forum is an annual event reviewing the situation in Latin America and the Caribbean co-organized by as the Chinese Academy of Social Sciences and the Organization for Economic Cooperation and Development (OECD). China National Petroleum Corporation (CNPC) also provided supports for making it happen. Around 150 participants came to the rally, from leading academic institutions, relevant government ministries and such home media as People’s Daily, Xinhua News Agency, CRI, CCTV etc.  Diplomatic envoys of LAC missions in Beijing also joined the audience.

I. Opening Remarks on Comprehensive Bilateral Relations in a New Era

Mr. Cheng Siwei (Vice-Chairman of the Standing Committee, the Ninth & Tenth National People’s Congress of China), Mr. Wang Weiguang (CASS Executive Vice-President), Mr. Chen Fengxiang (Vice Minister of the International Department of Central Committee of CPC), Mr. Yang Wanming (Director-General of the Department of Latin American and Caribbean Affairs, the Ministry of Foreign Affairs),  Ms. Thelma Jane Askey (OECD Deputy Secretary-General), and Mr. Zhang Xin (Director of the Bureau of Foreign Affairs at CNPC) attended and addressed the opening ceremony, which was co-moderated by  Mr. Yang Yang and (Director-General of CASS Bureau of International Cooperation) and Mr. ZhengBingwen (Director-General of ILAS).  Having reviewed the bilateral relations in 2008, they spoke highly of Sino-LAC cooperation in political, economic, diplomatic and social sectors. All shared the view that a new stage of comprehensive cooperation between China and the LAC partners had come. Repeatedly cited as a strong evidence, "China's Policy Paper on Latin America and the Caribbean”, issued on November 5, 2008, was highly appreciated by the speakers. For the first time in history, they argued, the Chinese government overtly stated its interest in forging a “comprehensive, wide-ranging and multi-level” cooperation with the LAC countries.  They further noted that shortly after this publication, President Hu Jintao addressed the Peruvian Congress on November 20, making a call “Together to Build a New Era of Comprehensive Cooperation Partnership between China and Latin America”. This address helped to streamline China's specific propositions on achieving new breakthroughs in the bilateral relations, respectively in the political, economic, globe-wise policy coordination,, and  people-to-people ties. Vice Minister Chen Fengxiang claimed that these initiatives not only reflected China’s interest in and commitment to enhancing the relations, but also clarified her objectives and principles to move them forward.  Mr. Wang Weiguang stressed that the policy paper and Hu’s speech set a new roadmap for the future partnership. With such a vision, he assured that both parties should be ever more confident in foreseeing their ties sustain in a healthy, stable and all-out way.

All speakers highlighted the high-level exchanges between China and the LAC countries in the past year.  In addition to President Hu Jintao’s tour, visits by Vice President Xi Jinping, Vice Premier Hui Liangyu and He Guoqiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee to the region were seen as sign of Chinese efforts to strengthen mutual trust and recognition. Meanwhile, leaders of Peru, Chile, Barbados, Mexico, Brazil, Venezuela and other LAC countries came to visit China.  DG Yang Wanming briefed the audience of what such two-way senior communications had worked out to deepen consensus and to expand cooperation between the two parties. Mr. Wang Weiguang hailed considerable progresses in the past year by marking them as key steps “conducive to developing a full-fledged Sino-LAC relationship”. In 2008, China and LAC countries sealed d a number of deals of substantial collaboration in the field of trade, finance, energy, agriculture, infrastructure construction, hightechnology and culture. Wang welcomed the China-LAC science and culture transactions, particularly represented by increasing exchanges of scholars, correspondents and students.  He also pointed to the Confucius Institutes as a good demonstration of the overlapping dynamics between the two peoples in knowing each other. Mr. Chen Fengxiang was inclined to cite high-rocket volume of trade and investment, the on-going/just-concluded or kicked-off FTA negotiations of China with Chile, Peru and Costa Rica, China’s full membership of IDB, and her growing contacts with the region’s multilateral establishments.

Mr. Zhang Xin, as a representative of Chinese firms that invested in Latin America, cast a optimistic light on the business ties with the LAC counterparts. His remarks recalled how China National Petroleum Corporation (CNPC) had managed to extend its foothold to Latin America since 1993. By the end of 2008, the CNPC had executed 9 projects on oil and gas exploration, development, refinery and sale in Venezuela, Ecuador, Peru and Costa Rica. Its crude oil productivity in South America exceeded 10 million tons beside its $10 million investment in resource-related cooperation.  According to Zhang, the CNPC had persistently sought over the past 15 years to win both good economic and social benefits in working with its hosts  in Latin America. Without its technology competitiveness, corporate responsibility performance, and sound public outreach in the host countries, the firm would not have the deeds and reputation as acknowledged by the local governments, communities and residents.

In ware of the global financial crisis, all speakers underscored the importance of the China-LAC.  Ms. Askey and Mr. Yang Wanming respectively explained LAC and Chinese stance. Mr. Chen Fengxiang laid out rationales for upgrading the bilateral cooperation:firstly, both parties were confronting the similar challenges and tasks. At the moment, China and the LAC countries should make utmost efforts to stimulate economic growth and maintain social stability. So they share the same development goals; secondly, there were evident complementarities in the structures and scales of both economies. Hence each could play a contributive role in advancing the recovery of the other economy through intensive trade and investment arrangements; thirdly, the growing strategic consensus and common interest in improving global governing bodies were additional impetus that pushed both together for meeting the post-crisis systemic transformation and other challenges. In the same light, Mr. Wang Weiguang urged for a strategic approach between China and the LAC through intensive policy coordination and wisdom intercourse thereof. Mr. Cheng Siwei agreed that China and LAC should seize the opportunities existing with the crisis to innovate a new model of cooperation. He believed that China and LAC were promised to first get out of the crisis shadow and enter in a new growth cycle provided that both maintained their macro-finance capabilities and continued bilateral cooperation.

II. Foreign Envoys’ View of Moves in the LAC Countries and Relations with China

As scheduled, Costa Rican, Argentine and Brazilian ambassadors were invited to make keynote speeches in the first session to review the latest developments either in their countries or in the respective bilateral relationships with China.

Ambassador Antonio Burgues of Costa Rica recalled the economic, political and social evolutions in his home country since the second half of the 20th century. It was an extraordinary deed that the country denounced its defense force in 1948 and shifted her development priorities to education, environment protection and species diversification. On the diplomatic front, Costa Rica had persistently advocated such principles as “no use of force”, “permanent neutrality” and ”active involvement”, and for nation-building at home, it outweighed free trade, education and innovation as key pillars for economic growth.  Argentine ambassador Cesar Fernando Mayoral introduced the current social-economic situation in his country.    As he sorted out, the current world-wide recession caused the price decline of commodities and the surge of trade protectionism that had cast serious clouds over the Argentine economy.  Thanks to increased monetary independence, by disconnecting local financial system with the global one in recent years, the country happened to survive from a disastrous loss amid the 2008 financial crisis. Accordingly, Argentina would continue to elbow ways for meeting challenges ahead. At home, it had to accelerate development and solidarity as dual goals. On external matters, it sought to advance regional integrity not only as a long-term objective, but as a pragmatic ladder to help revive intraregional transactions. MERCOSOUR was something profound   and of particular implication for Argentina. When commenting the China-Argentina relations, he stressed that “Argentina thinks high of China, regarding it as a partner that helped to counterweight other great powers in Latin America and the world. But the utmost importance placed by Argentina on its relationship with China stemmed from the latter’s contributive role in promoting the export growth of the former.  Taking such incentives into account, he concluded that "the two parties are therefore bound to co-exist in harmonious environment and share a win-win outcome of their future ties that benefits the two peoples”.

Brazilian ambassador Clodoaldo Hugueney also joined the panel with his briefing on the post-crisis situation in Brazil, especially on the socio-economic policy responses made by the federal government. Despite the fact that the Brazilian economy in recent years remained stable with significantly improved macro-level indicators, he said,  the U.S. subprime crisis and the globe-wide recession afterwards had severely affected the Brazilian export and manufacture industry. To steer through the challenges and difficulties, policymakers resorted to massive monetary loosening to stimulate a investment and public expenses. Now such a series of rescuing policies were gaining returns as index of business operation, employment and home consumption showed recently. With regard to the China-Brazil relations, the ambassador voiced his optimism in an explicit way by highlighting the frequent visits of senior leaders between the two parties. He was also very satisfied with the growth pace of trade volume with a note of China’s upgrading to the seventh largest trade partner of Brazil.  He stressed that under the current circumstance, Brazil and China shared the same development  mandate to maintain economic growth, ensure income increase and social cohesion. There was no reason that both countries made fewer efforts to embrace each other to jointly combat with the crisis follow-ups and renovate the global economic and financial orders.

III. Panel on LAC Social Cohesion

There was pair of reports released at the forum in form of the OECD Latin American Outlook and the ILAS Special Annual Report on the LAC Social Cohesion.   Dr. Charles P. Oman (Head of Strategy, OECD Development Centre) and Dr. ZhengBingwen (Director-General of ILAS) provided their respective observations in this session.

By listing LAC’s social-economic indicators, Dr. Oman acknowledged that, despite an obvious improvement in growth quality and its status in the world, the region had serious social problems of disintegrity.  To look into the true causes, the OECD development centers’ LEO 2009 examined the fiscal policies of the LAC countries and appreciated their improvement in controlling fiscal deficit and volatility.  The report also sorted out pitfalls, such as higher ratios of non-tax revenue, indirect tax vis-a-vis a lower income tax, informal economy as well as irregular employment etc.,and attributed them to the unsatisfactory side of the LAC efforts to reduce inequality and poverty these years..  To solve these problems, the LAC countries should strengthen fiscal policies as an instrument to promote growth, reduce inequality and provide their citizens with opportunities of success.  On the prospect of the region to survive the on-going global crisis, Dr. Oman referred to three solutions for enhancing its counter-crisis capabilities: first, to adopt active fiscal policies to safeguard macroeconomic stability; then, to let  most central banks in the region undertake flexible monetary policies; to keep on fighting against non-performed assets and derivatives.  In ware of exacerbated export, remittances and equity situation in the aftermath of the world crisis, as Dr. Oman concluded, the LAC countries had to take all counter-cyclical fiscal measures at hand for approaching set goals of sustainable growth.

Dr. Zheng in his turn presented a sum-up of the ILAS serial analysis of the Latin American social cohesion. Report 1 made a general review of theories, origins and connotations of social cohesion. In Latin America, as the report asserted, social cohesion "is a distinctive political value” that preferred to the state’s fair role in public goods distribution. Only by doing so could  the premise solidarity and equality be fulfilled and could a social conciliation become true.  Report 2, " the LAC Fiscal Policy and Social Cohesion", argued for a steady budgetary increase on per capita social spending that aimed to make poverty rate and the Gini coefficient drop . However, fiscal policy in Latin America also faced challenges of procyclical, cyclical fluctuations of social spending, unsustainability of revenue growth and the upward pressure of food prices. Report 3, “Governance and Social Cohesion: the experience of the LAC countries”, pointed out that the two factors were significantly positive correlated.  The LAC countries’ governance was on the process of slow improving.  Its inherent flaws exacerbated social contradictions, harming the social cohesion.  The enhancement of social cohesion, in turn, largely depended on the better governance. Report 4, "Latin America: Political Development And Social Cohesion", contended that the social cohesion was not only the necessary precondition for the consolidation of democratic institutions in the LAC countries, but also the final destination of the democratic political development. The LAC countries’ current challenges in democratic institutions came from the missing social cohesion which blocked the healthy development of democratic politics. Report 5of “Employment Situation, Labor Market Policies and Social Cohesion - the Realities and Challenges of LAC Countries”,  Report 6 of "the Role of Education in LAC Social Inclusion” and and Report 7 of “Strengthening Social Cohesion: LAC Reforms and Improvement in Social Security System ", respectively analyzed the positive role of employment, education and social security on social cohesion.  They advocated that the LAC current policy must be improved in order to play against social exclusion. Report 8, "the LAC’s Growth Poverty, Social Security andd Poverty Alleviation”, figuring out the growth poverty phenomenon in the region, found the reason that the region’s lower contribution of growth on poverty reduction compared with Europe and the United States lied at the narrow social security coverage, which in turn led to an less effective poverty reduction.

IV. Panel on LAC’s Energy and Chinese Expedition in the West Hemisphere

On the forum, the ILAS launched its Annual Report on Latin America and the Caribbean (2008-2009).

Madame He Shuangrong of the ILAS represented the authors delivered a brief introduction of the Yellow Book’s theme. She claimed that Latin America was one of the earliest regions that host Chinese oil companies to “go out” for external supply.  Since the mid-1990s, China’s stakes in the West Hemisphere had grown rapidly. Meanwhile, some LAC countries adjusted their policies on energy industries. They were apt for greater state control over oil and gas resources, and by tightening their holdings, increasing taxation and imposing additional fees the host governments not just had more revenues to come, but also caused heavy grievance of shareholders from abroad. The Chinese enterprises were no exception. Dr. Yuan Dongzhen, Director of the Department of Political Science at ILAS, echoed her remarks with four commentaries: first, energy policy was part of the national economic policy; second, the LAC countries demonstrated a rule in their policy development process, swinging sporadically between open-up and state-control tendencies; third, despite slight distinctions in level and degree, the general trend of the LAC, counties were to better utilize their energy and natural resource advantages to gear economic growth and promote their  status in the international arena; last but not the least, a good political relationship was always the utmost important prerequisite for the home country to advance and protect its business in the host country.

Professor Su Zhenxing, who authored the Yellow Book’s cover report on the Sino-Latin American relations, offered an articulate assessment. He pointed out that the bilateral ties had entered into a new stage of "comprehensive cooperative partnership" that provided Chinese firms with new opportunities. In light of the investment incentives among the Chinese CEOs, he made specific recommendations as follow: firstly,  one should eye on the LAC markets for the long-term returns; secondly, it is time to consider shifting the export structure with the LAC partners by increasing high-tech products and reducing labor-intensive commodities; thirdly, bold t steps should be taken to accelerate China’s direct investment in the region; and finally, Chinese entrepreneurs should learn to  explore and initiate long-term opportunities after having settled down in the host countries.

“CASS International Forum on Latin America & the Caribbean" is an annual seminar on the purpose of promoting academic communication between Chinese scholars and their counterparts abroad.  Under the forum, LAC Workshop is an important annual academic meeting for Chinese circle of Latin American Studies.  The 2009 meeting had the OECD join as one of the organizers.  The new development would help the Chinese LAC study community to reach out and deepen the mutual trust and understanding between China and its LAC partners.

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