According to the Ministry of Commerce spokesperson’s remark in January 2015, China has become a net capital exporter for the first time. Its total overseas direct investment exceeded foreign direct investment by the end of the year of 2014.It is an event worth of attention. Thirty-five years ago, China regained its membership in the World Bank and then received the first loan from it.Nowadays it has become a major FDI source for Africa, Asia and Latin America. In Asia, the loan from the China Development Bank and the Export-Import Bank of China has exceeded that from the World Bank and the Asian Development Bank. In Latin America, the loan from them has exceeded that from the World Bank and the Inter-American Development Bank.

　　Thanks to rapidly rising economic strength, China is expanding its influence worldwide in recent years, a driving force to cause structural changes in the global economic governance. It played an especially important role in establishing the BRICS Development Bank as well as the Asian Infrastructure Investment Bank. At the 2015 Boao Forum for Asia, Chinese President Xi Jinping proposed the “One Belt, One Road” initiative to extend economic and cultural ties with numerous Euro-Asian, Indian-ocean and South Pacific neighbors. All those actions indicate that China is seeking to assume greater international responsibilities and to play a leadership role in global economic affairs, which is recognized and supported by most of countries in the world.

　　As Joseph Nye argues, economic power inevitably produces soft power. A successful economy is an important source of attraction. With enormous economic strength, such an economy can reach a high living standard to woo people at home and abroad and demonstrate its tremendous institutional advantages. Based on cooperation-oriented diplomatic policies, it can help a state to entail great popularity among people and exert wide influences on world affairs.

　　As a result of rising economic strength, China is forging a close linkage with Latin America, either politically or culturally. According to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) 2013 data, an increase of China’s economy by one percentage would lead to an increase of the region’s economy by 0.5 percentages. Therefore, the LAC countries are seeking to boost partnership with China, expecting to fully benefit from its economic growth. As part of its preclaimed efforts to divert from the past growth mode, Chinese government and firms are inclined to explore market opportunities in the LAC region. Not just to promotebilateral trade, but a more ambitious investment and financial projection is mapped out in light of the recent overall China-LAC cooperation package, all aiming at reshaping the region’s competitiveness and the global value chain.

　　China and the Community of Latin American and Caribbean States (CELAC) member countries held a summit in Brasilia, Brazil in July 2014, declaring to found the China-CELAC Forum. Then the first ministerial meeting of the Forum, a distinguished gathering of developing countries, was convened in Beijing, China in January 2015, passing three documents: the Beijing Declaration, the Five-Year Cooperation Plan (2015-2019) and the Regulations on the China-CELAC Forum. According to those documents, the bilateral cooperation will cover political security, trade, investment, finance, infrastructure, energy, resources, industry, agriculture, science and people-to-people exchange. It is remarkable that the meeting has set road map for deepening the comprehensive cooperation between China and Latin America and the Caribbean.

　　Similar to the “One Belt, One Road” initiative, the comprehensive cooperation between China and Latin America and the Caribbean is a major framework for China to promote external cooperation. Both of them are seeking to overcome low effective demand and curb excess fluidity in the global market. Based on the principle of inclusive development, China calls for closer cooperation among developing countries as well as emerging markets, initiating several multi-lateral cooperation mechanisms to boost the South-South cooperation to fully exploit each other’s market demand, which is an important effort contributing to the recovery of global growth and the restructure of global chain of production as well as China’s economic transformation.

　　An international cooperation plan is a massive undertaking dependent on strenuous efforts and long-time work of all parties to finish it. At the first ministerial meeting of the China-CELAC Forum, President Xi Jinping pointed out that China and Latin American countries should firmly hold onto the main theme of common development and strive for early harvest as well as realization of the effect of “1 plus 1 becomes greater than 2”.

　　As a think tank specialized in Latin American and the Caribbean studies, the Institute of Latin American Studies (ILAS, CASS) meets the policy concerns of the Chinese government and places all its recent research and publication work centered around the mission of providing intellectual support for boosting the new-phase China_LAC bilateral partnership.

　　The theme analysis of the Annual Report on Latin America and the Caribbean (2014-2015) is the first product of the ILAS annual scheme on the China-Latin America comprehensive cooperation, focusing on the following three major issues.

　　First of all, motivated by policy consensus emerged from long-term partnership and domestic demand, China and the LAC countries are able to continuously enhance their relationship and eventually usher it into a new stage. China, the largest developing country in the world, and Latin American and the Caribbean countries, an important part of the developing world, are at a similar stage of development, facing the common task of implementing reforms and achieving development. They are complementary economically and willing to boost bilateral ties politically, giving an impetus to the relationship and enabling it to move upward. From 2001 to 2013, the trade volume between China and the region was up twenty-one times, which is a driving force to boost high level official exchanges and accelerate the cooperation in science, technology and education. Such facts suggest that time to develop a complex multi-lateral cooperation relationship between China and Latin American and the Caribbean is ripe. To achieve the goal, China is required to take measures to balance its trade with and investment in the region, to change the situation that its trade and investment are highly concentrated on a few LAC countries.In addition, China needs to emphasize economic ties and people to people exchanges with twelve regional countries that are yet to have diplomatic relations with China.

　　Second, China and LAC countries have forged a highly pragmatic and effective partnership based on mutual political trust, the economic cooperation aimed at win-win results, cultural and educational exchanges, continuous coordination on international issues, and promotion of bilateral and multilateral relations. There are five major principles guiding these relations, namelytreating each other as equals and respecting each other; upgrading bilateral economic cooperation to boost common development; encouraging public diplomacy to deepen mutual understanding; making concerted efforts in global governance to safeguard shared interest; and integrating bilateral and multilateral cooperation to foster an open and flexible mechanism for cooperation. According to the Five-Year Cooperation Plan (2015-2019), China and regional countries will use trade, investment and finance as engines to boost economic ties, focusing on the cooperation in energy and natural resources, agriculture, infrastructure, manufacturing, creative industries, and information technologies. China will establish cooperation funds and special or concessional loans as well as other financial leverage to support key cooperation projects.

　　It is especially notable that the comprehensive cooperation between China and LAC countries is actually a part of the historical process oriented towards rebalancing the global economy. The South-South cooperation is moving from the conventional path featured by the mix of trade and economic aid to an updated one based on market demand and covering a variety of sectors like trade, finance, industry and regional integration. China’s cooperation with the region is a swift reaction to the trend. China has shown a strong wish to develop a global partnership and construct a community of common destiny with developing countries. On the other hand, Latin American and the Caribbean countries are expecting to promote international status by establish the CELAC. The institutional cooperation between China and the CELAC is bound to raise the bilateral partnership to an unprecedented level.

　　Third, to promote the comprehensive cooperation with Latin America and the Caribbean, China needs to well design a development path to overcome challenges including highly sensitive geopolitics in the region, differentiated positions among the countries on handling relations with China, and the complex business environment as well as a group of regional countries without official relations with China. In the short and medium term, there are three focal points worth of attention to deepen the comprehensive cooperation. First, the China-CELAC Forum can serve as a platform to cement bilateral economic ties and greatly promote the role of investment. China may choose infrastructure as the breakthrough point to deepen cooperation. With the special loan for infrastructure building projects, it is able to help regional partners to construct or renovate railways, highways, harbors, airports and telecommunication facilities, enhancing mutual confidence on the partnership and facilitating cooperation projects in other fields. Second, China needs to widen the channel for public diplomacy and involve more educational institutes, think tanks, overseas Chinese organizations and local governments into the cooperation process, aimed at expanding people to people exchanges, deepening cultural understanding and increasing popular support for the bilateral relations. Third, China needs to better coordiante its diplomatic resources at the state, sub-regional and regional levels and reorganize them intoan integrated force to sustain its overall cooperation with the region.

　　To help Chinese readers understand the latest trend of development in Latin America and the Caribbean, and to provide some more subjective and referential materials, this book, which consists of special reports, situation reports and country reports, uses political, economic and social transformations as the analytical main line. It reviews political, economic and social situations and foreign relations in the region. It specifically looks at the new difficulties, tendencies and responses that are faced and dealt with by regional countries during the current economic downturn of the world economy.

　　The special report chooses Brazil as a case to analyze changes in the political environment, party building of the ruling party and the multiple challenges confronting the state governance transition process. It attempts to analyze the difficulty and uncertainty of the reforms in a brief yet systematic manner. The accelerated economic and political transformation is due to the development pressures from both home and abroad. On the other hand, the transformation faced by one country will also lead to new inter-disciplinary challenges. It has been a long-term difficulty for regional countries to get rid of the constraints of institutional inertia, and to move smoothly to a higher stage of development.

　　Latin America and the Caribbean have a long history of democracy. However, the development of democracy underwent a tortuous process. Democratic institutions and caudillos once coexisted. Democracy and authoritarianism ruled alternatively. In the late 1970’s, a new round of the democratization process started, which called for a systematic change from authoritarian to democratic transition. In the process of democratization and consolidation, democracies in the region became more mature, party politics were increasingly systematic, and the diversity was further developed. Nevertheless, the democratic consolidation in the region suffers huge obstacles. Democratic quality needs to be improved and the consolidation of democracy is still facing many difficulties.

　　With the development of political democratization and the accelerated economic and social transition, Latin America and the Caribbean are witnessing an increasing urbanization and the fast change of social structure featuring by the expansion of the middle class, which led to collapse of the traditional political pattern and people’s aspirations of developments and rights. Those changes do not only significantly impact the state development path, the governance pattern, government policies and social stability, but also caused new requirements to the ruling ability and political wisdom of the ruling party.In this sense, this special report is not able to give a certain conclusion about whether regional countries, setting Brazil as an example, could provide a clear and definite answer to the reform.

　　Relatedly, difficulties facing regional governments have increased greatly. Four situation reports attempt to provide a comprehensive analysis and outlook on the new trends in the areas of politics, economics and social affairs and external relations in the region.

　　Chapter “Political Situations” uses the major elections and ruling party changes in Latin America and the Caribbean as the main clue. This chapter suggests that the political situation in the region remained to be relatively stable and the change of governments and ruling party ran regularly. However, with the side effect of the global financial crisis and the regional economic downturn, the ruling environment in regional countries was expected to be more complicated. Central governments, in turn, faced more difficult scenarios, and their ruling pressures also increased. In many regional countries, ruling parties and opposition parties competed more severely. The influence of opposition parties rose, putting more constraints on ruling parties. Therefore, the ruling parties had to negotiate with the opposition when making some important decisions and drawing up policies and consider more about their requirements.

　　In the meantime, regional governments confront an increasing pressure for political reform. There are two sources of pressure for the reform: the exposed flaws under the system and the rapid change of social structure. In order to deal with the current difficulties, many countries proposed a series of new policies, which were used to improve the state and social governance and to resolve the social contradictions. These policies included the promotion of political and electoral reforms, the improvement of democratic system, and the counter actions to the social crisis.

　　With all the efforts, the state governance of regional countries will undergo a series of new challenges in the future, especially with the continuously simmering world financial crisis. Countries across the region are facing the task of maintaining political and social stability, reversing the downward trend of the economy, alleviating social contradictions and conflicts, and resolving social discontent promptly. Their performance not only shows governability, but also is related to the region’s development prospect and international influence. Therefore, more concerns should be paid on these matters.

　　Chapter “Economic Situations” starts from the fundamental economic situation in Latin America and the Caribbean and forecasts the economic growth trend. The main findings can be summarized as follow: Since 2014, due to the weak world economy and insufficient import demand from the main trade partners, the regional economic growth rate continued to decrease and the structural problems in the economic development became more obvious. More specifically, the whole region lacked driving force for economic growth and witnessed an imbalanced sub-regional economic growth. Main economies such as Brazil and Argentina reported a lower growth rate than their previous expectations. The weak economic performance led to lower employment rate and a higher inflation rate. However, the overall economic performance varied from one country to another.

　　To deal with the difficult economic situation, a series of policy instruments was implemented, such as the counter-cyclical fiscal policy to increase public spending, and the counter – cyclical monetary policy to simulate the aggregate demand and to control inflation. Some regional countries introduced the Marco Prudential policy, attempting to strengthen the domestic financial market supervision and to manage the international reserves and the international capital flow more efficiently. According to the forecasting results from the report, with slowing down of the decline of commodity prices, the region will see an improved trade conditions. However, there still exits the possibilities that one or more countries may report systematic financial crisis. The regional integration process is likely to be accelerated, intra – regional trade scale shows an increasing trend. The employment creativity is not likely to increase significantly, and the simultaneous downward trend between employment rate and labour force participation rate is not likely to change. The inflation rate of certain countries may continue to increase, the monetary policy may adjust, and the fiscal policy may concentrate more on the investment.

　　Social circumstances in Latin America and the Caribbean continue to keep ameliorating in the wake of political and economic transformation. Especially, during a new cycle of economic growth since 2003, regional countries carried out active policies and increased the public spending on poverty reduction, income distribution improvement, and employment promotion. These actions achieved significant results. Nevertheless, due to the fact that regional economic growth rate slowed down, the social development met with obstructions in recent years.Although slowed economy has a lagged effect on the society and people’s livelihood, the side effects are quite clear.

　　In Chapter “Social Situations”, it is believed that although the poverty rate of Latin America and the Caribbean kept stable in general, the population in extreme poverty grew, and the social expenditure increased slowly. While the distribution of income worsened and the risk of rising unemployment were still in existence, chronic ailments such as poor public safety and serious corruption didn’t get improved apparently. As the social structure changed, some communities constantly put forward new demands, which led to new social conflicts and contradictions in many countries. It has become more difficult to maintain social stability along with the more frequent protests. Furthermore, regional countries encountered more difficulties in carrying out social programs, and it gave rise to growing social vulnerability. Regional governments not only carry important responsibility, but also face new challenges to sustain falling poverty rates, improve social management, keep the steadiness of social public order, and retain the effects of social policies in these years.

　　With an increasing rate in political and social transformation and new changes in the trend of economic growth, Latin American and the Caribbean countries have made progress in safeguarding independence and autonomy of foreign policies. In Chapter “External Relations”, it is observed that because of the need to promote economic growth and domestic economic reforms, the foreign policies of regional countries were increasingly dominated by economic purposes of expanding overseas markets and attracting foreign investment. Meanwhile, the regional integration was in slow progress. Although regional countries attempted to build up regional unity, the competition between major powers and interest divisions between big and small countries led to a multipronged situation. It is becoming a trend that regional countries actively participate in global governance, promote its reform and play an important role in the international arena. However, regional countries did not yet reached consensus on many issues, and they failed to speak with one voice. While focusing on strengthening and deepening traditional relations with European and American countries, regional countries also took advantage of the opportunity to expand relations with emerging powers when other foreign powers were adjusting strategies and increasing investment in the region. By and large, the diversification of the foreign relations in the region is an inexorable trend.

　　There are 33 countries in Latin America and the Caribbean. The economic sizes, development levels, historical and cultural traditions and other aspects of the basic national conditions all vary from country to country. Some countries (such as Brazil) are facing great pressure of policy transformation, some countries (such as Mexico) need to deal with the intensifying security threats during the transformation period, some countries (such as Ecuador and Bolivia) have triggered a sizable social backlash in the process of the reform and some countries (such as Cuba) have to confront the new challenges brought by the change of the external environment. In the chapters of different countries in this book, we interpreted and analyzed all sorts of new problems and combined challenges in the course of reform and transformation of different countries in different special situation, and tried to reveal the generality of regional countries and explain their particularity.

　　The change of social structure of Brazil puts forward new requirements for social policy. During the rule of the Labor Party, the most profound change of the social structure was the rapidly emerging middle class, who now is the new demanding group for the public service products. At the same time, the majority of people are requiring more and better public services. These requirements have put great pressures on the existing social policies, which focus on poverty alleviation. Therefore, the ruling party needs to consolidate the strong and traditional support from the lower classes through the poverty alleviation policies, while also needs to gain new support from the middle class. This would lead to a significant increase of social policy costs. In the economic downturn, the degree of successfully balancing the interests of all classes will be vital for the ruling party.

　　Structural reforms in Mexico have made significant progress, with comprehensive promotion of revolution in energy, education, communication, taxation, finance and election. However, in the political and social transformation process, there continued to be the fragmentation trend of political parties while worsening public safety issues remained to be resolved. Three main political parties were immersed in various political scandals, which resulted to their dis-reputation. In this context, the leftist National Revolutionary Party rose rapidly and got a high support rate. The triple balance of three-party race may break in the mid-term elections in 2015.Fragmentation and multi-polarity will become new normal of Mexico’s politics. At the same time, the Mexican public safety issues are becoming more prominent. Sharp increase in violence since 2008 has incurred public discontent. The 2014 Iguana Event again caused common anxiety of public safety issues.

　　In Ecuador and Bolivia, the government-dominated transformation and reform have brought political stability, economic growth and remarkable improvement in social indicators. However, government policies have always confronted severe contention and even protest. Ecuador had witnessed intense debates and even massive anti-government protest against the social security reform, the Labour Law reform and the newly issued Water Resource Act, which manifested the extreme dissatisfaction from native Indian communities, trade unions and some other social classes. These protests could severely threaten the government’s ruling and administration. In Bolivia, the discontent with the government has resulted in serial strikes among sub-officers, miners and policemen. Frequent conflicts among mineral companies as well as those among companies and local residents have increased the risks of social unrest, and at the same time, challenged the governmental administration.

　　The development of Cuba always draws the attention from the world, especially the recent change of its political and economic development. Politically, the 2013 Election confirmed the new leadership. In 2014, the succession structure became clearer. The Cuban government stressed that, on the premise of policy stability and continuity, the power would be passed to the younger generation through a gradual and orderly way. Economically, the “Update” mode has now become the overriding task of the nation. It is now the hope of stepping out the long-term economic difficulty and of adhering to and developing the Socialism. In social field, it is a urgent task for Cuban government to deal with the arising social polarization and social contradiction in the process of the “Update” mode. In the field of international relations, Cuba has begun to restore the full relations with the United State, with the emphasis that it will not turn Cuba’s political system to the Capitalism. In 2014, Cuba approved a new Foreign Investment Law. Policies such as tax alleviation and allowing foreign investment in non-state owned enterprise become the highlight. The new law is expected to further promote the process of economic transformation in Cuba.

　　Ⅰ　Main Report

　　1　China-LAC Overall Cooperation: Development Logic, Driving Force and Future Direction

　　【Zhou Zhiwei, Yue Yunxia】／001

　　Abstract: China and LAC States (Latin America and the Caribbean), on their way adjusting diplomatic strategies, have reached the consensus of strengthening the comprehensive, pragmatic cooperation. With their common interests and strategic needs increasing at the multilateral level, overall cooperation has become the new concern and focus in their policy to each other. The 1st Ministerial Meeting of the China-CELAC Forum marked the formal entry of bilateral overall cooperation into the phase of institutionalization and opened up a new era of friendly cooperation between the two sides. This paper analyzes the rationality and feasibility of the China-LAC overall cooperation. It argues that the new mechanism is an inevitable choice for both sides resulting from self-improvement consciousness, mutual dependence and promotion in the tide of global governance. The forming of the mechanism is a natural process with the evolution of bilateral relationship. It is externally promoted by the new trends of South-South Cooperation and cross-regional cooperation, and internally by the common needs of economic restructuring. According to the outcome documents which were passed in Chinese President Xi Jinping’s meeting with the LAC leaders and the 1st Ministerial Meeting of the China-CELAC Forum, this paper points out that the new mechanism aims to achieve Five-in-One comprehensive cooperation between the two sides. The five basic principles that should be followed are: first, to adhere to the principle of equality and mutual aid so as to strengthen mutual political trust; second, to adhere to the principle of mutual benefit and win-win to upgrade bilateral economic and trade cooperation; third, to strengthen mutual exchanges and learning to promote public diplomacy; fourth, to adhere to international cooperation in order to safeguard common interests; fifth, to adhere to overall cooperation and promote the China-LAC relations. The paper also focuses on the difficulties and obstacles facing the overall cooperation. It stresses that both sides should deal with the complex geopolitical situation in LAC, varied cooperative attitudes of LAC countries towards China, complex regional business environment, as well as subtle factors in making contact with the countries that do not have diplomatic relations with China. In conclusion, this paper believes that, in order to ensure the vitality and effectiveness of the overall cooperation mechanism, three paths should be realized in the short term: first, to build the economic and trade “engines” driving the China-LAC relations; second, to diversify channels of public diplomacy; third, to strengthen ties with regional, sub-regional organizations and specific countries, so as to effectively support the new mechanism.

　　Keywords: Overall Cooperation; China-CELAC Forum; Five-in-One; Challenges; Path

　　Ⅱ　Respective Reviews

　　2　Political Developments in the LAC Region: Governance Environment Increasingly

　　Complicated【Yuan Dongzhen】／035

　　Abstract: Since 2014,political stability has been maintained in the Latin American region generally, while changes in ruling parties and governments were carried out in an orderly fashion. As the negative consequences of the world economic crisis become more obvious in the LAC region, most governments have faced growing challenges, increasingly complex administrative environment and mounting pressure. To achieve effective governance, many governments have promoted political and electoral reforms actively, and put forward many reform proposals for state and social governance. It is possible that the governance environment could be worse in the near future, so the governments and ruling parties in the region have to address new challenges and difficulties.

　　Keywords: Latin America; Political Development; Governance Environment; Reform and Governance

　　3　Economic Developments in the LAC Region: Insufficient Demand, Weak Growth

　　【Chai Yu, Yang Qian】／051

　　Abstract: In 2014, because of poor economic performance, the growth rate of the Latin America and the Caribbean was only 1.1%, a record low in five years. Especially in South American countries such as Brazil and Argentina, economic performance was well below expectations. Due to the drop in commodity prices, cutting of consumption, and decline in domestic investment, the region was characterized by insufficient demand and sluggish growth economically. But for most countries, international reserve was relatively sufficient, the size of public debt was relatively reasonable, and the rate of inflation and unemployment did not increase obviously. In the region, therefore, macroeconomic situation remained stable. In 2015, it is expected that the economy of the Latin America and the Caribbean will remain weak in growth, but the growth rate is expected to increase slightly. In economic policy, Latin American and the Caribbean countries continued to implement relatively loose fiscal and monetary policy in a bid to solve the problem of insufficient effective demand, but the effects were limited. In the future, due to the limitation in public debt and the rate of inflation, the space of policy choice will be restricted. Stimulating investment will be the main policy goal in the short term, and the government will pay more attention to structural reform in the long run.

　　Keywords: Economic Trend in Latin America and the Caribbean; Economic Growth; Economic Trend; Commodity Price; Structural Reform

　　4　Social Developments in the LAC Region: Towards Stability【Fang Lianquan】／065

　　Abstract: Since the financial crisis started in 2008, social situation in Latin America countries has been improved stably. However, in 2014 the sluggish economy had delayed the recovery of social development which was witnessed by several new trends: unemployment rate fell continuously, job growth remained anemic and labor participation rate was lowered; almost nothing new happened in poverty reduction, but the indigence population was growing; unequal distribution of income still loomed large as an obstacle; due to soaring fiscal deficits and presidential election in many countries, the growth of social public expenditure slowed slightly. In spite of sustainable economic development for many years, such social issues as crimes and corruption had heavily impacted the business environment and social stability in this area; also as the middle class became stronger, new social conflicts emerged in countries like Brazil and Chile. 2015 will be critically important for social development of Latin American countries. How to reduce poverty and improve social governance, thus promoting social progress, will be new challenges for Latin American countries.

　　Keywords: Latin America; Social Situation; Employment; Poverty; Public Security

　　5　International Relations of the LAC States: Diversification Irreversible【Sun Hongbo】／081

　　Abstract: Latin American countries have greatly enhanced their diplomatic independence and autonomy by implementing diversified diplomatic strategies with more emphasis on economic affairs. There is a complex diversity of integration in this region, but progress has been slow. Small Latin American countries and the Pope have played a positive role in mediating regional affairs. The focus of the US policy has been to promote the normalization of relations with Cuba, support the peace talk in Columbia and strengthen the relationship with the Pacific Alliance. Despite declining clout in the region, the European Union and some Western European powers try to keep their influence in Latin America through intervention and participation. The geo-economic diversification of this region has been particularly inclined to the Asia Pacific region, and China has become an important strategic cooperation partner. In multilateral areas, Latin American countries have played an increasingly important role in the reform of the UN Security Council, global development agenda, climate change and other issues of global governance, but it is difficult to coordinate the positions in the region.

　　Keywords: International Relations; Integration; China-CELAC Forum; Sovereign Debt; Global Governance

　　Ⅲ　Highlights

　　6　Brazilian Presidential Election 2014: New Political Ecology and Transformation of the Labour

　　Party【Zhou Zhiwei】／094

　　Abstract: In the intense 2014 Brazilian presidential election, Dilma Rousseff’s re-election ensured the Labour Party in power continuously, but also demonstrated the challenges that the Labour Party is facing in its party construction and its governance model of Brazil in recent years, such as the new, complicated pattern of political parties, new political ecology, and new social structure. There is an urgent need for the Labour Party’s Government to make a timely policy transformation. The Rousseff’s campaign reflected the idea “Seeking Changes during Continuing”, but judging from the current conditions, the space of policy change is limited, “Continuing” will remain the key to the Rousseff’s second mandate. In the next 4 years, Rousseff will face greater pressure on ensuring regime stability, recovering economic growth, social policies transformation, and regaining international influence, etc. Whether the Labour Party would reverse the current predicament or not depends largely on how it deals with the above challenges.

　　Keywords: Brazil; Presidential Election; Labour Party; Challenge; Change; Transformation

　　Ⅳ　Country/Sub-region Observation

　　7　Brazil【Zhang Yong】／110

　　Abstract: The 2014 presidential election in Brazil is the most competitive one since the re-democratization of Brazil. Economic stagnation and social protest had already brought barriers to Rousseff who sought a second four-year presidential term. The plane crash and exposure of corruption scandal of Petrobras had complicated the election process. Finally, with the firm support from the lower- and middle-class voters Rousseff narrowly won the 2014 election, but how to get out of the economic dilemma is the important challenge facing Rousseff and the reforms in fields such as politics, economic structure and anti-corruption have been difficult and long-term tasks. As regards foreign relations, Brazil continues to adhere to diversification strategy and strengthens economic ties with Asia-Pacific, especially with China besides consolidating relations with the EU and seeking a rapprochement with the US government, committed to building a more balanced and diversified world.

　　Keywords: Brazil; 2014 Election; Rousseff; Economic Stagflation; Structural Reform

　　8　Mexico【Chen Yuanting】／122

　　Abstract: The president Pe?a Nieto has made substantial progress in energy reform in 2014, but the Iguala case caused one of the biggest political crises. The party system is increasingly fragmented. Economic growth has been driven by exports. Many factors will influence economic performance: America’s recovery, falling oil prices, devaluation of the peso and low interest rates. The government has been blamed for bad job in public security and corruption, and failed to meet the millennium development goal. Mexico participates actively in global governance, and develops relations with countries of North America, Latin America and Asia Pacific, striving to establish the focus of foreign policy.

　　Keywords: Mexico; Energy Reform; Iguala Case; Public Security; Global Governance

　　9　Argentina【Lin Hua】／134

　　Abstract: In 2014, all of the Argentina’s political factions prepared for the presidential and parliamentary elections that will be held in 2015. The opposition parties tried to form coalitions to compete against the ruling Frenta para la Victoria. The economic situation deteriorated further, and coexisted with high inflation and severe devaluation. Promoting growth remained the core goal of its economic policy. Social stability continued to be affected by strikes, street protests and worsening urban security. The development of bilateral relations between China and Argentina was the most important result in Argentina’s foreign affairs in 2014.

　　Keywords: Argentina; Inflation; Devaluation; Venture Hedge Fund; China-Argentina Relationship

　　10　Cuba【Yang Jianmin】／145

　　Abstract: In 2014, Cuba’s political situation was stable. As Murillo was appointed as Minister of Economy again, the political successor structure became clear. The economic growth was slow, the updating of economic model continued, the number of individual workers continued to increase; and social situation was stable. In foreign affairs, the leaders of the US and Cuba announced the start of diplomatic relations normalization, which is a historic turning point after 53 years of broken diplomatic relations between the two countries. As Chinese President Xi Jinping visited Cuba, Russian President Putin also visited Cuba, Cuba’s negotiations with the EU went well, Cuba’s diplomacy has ushered in the spring.

　　Keywords: Cuba; Political Succession: Economic Model Updating; Cuba-US Relationship

　　11　Venezula【Wang Peng】／156

　　Abstract: While seeking to make an economic adjustment, the Maduro government failed to forge consensus on it within the ruling PSUV party. There were three major government reshuffles in 2014 as a result of ideological difference and factional fight. From February to June, Venezuela witnessed a nation-wide and extremely violent anti-government protest causing at least 43 people dead. Thanks to most regional countries’ support, the Maduro government managed to prevent the US from taking advantage of the event to isolate it in the region. A sharp decrease of export oil prices heavily impaired Venezuela’s economic performance and plunged the country into a recession. In spite of economic hardship, the Maduro government continued to follow an expansionary fiscal policy to sustain those social projects to consolidate popular support.

　　Keywords: Venezula; Inter-party Contradiction; Economic Adjustment; Falling Oil Price; Sanction

　　12　Chile【Lu Siheng】／164

　　Abstract: In 2014, Chile’s political scene was dominated by the return to power of a former president, M.Bachelet of the centre-left coalition. The new government is pursuing a series of redistributive policies focused on tax and education reform. Generally speaking, although Bachelet is facing the challenge of balancing pressure from the centre-right Alianza and the more Conservative elements within her coalition, results have been achieved in the implementation of reform plans. With regard to economy, there has been a sharp slowdown in growth as a result of a contraction in investment and slower private consumption growth. Therefore, a package of plans to spur economic growth has been vigorously promoted by the central government. In social terms, a series of explosions have drawn government attention to the public security sphere. The popularity of new media has advanced the development of social movements. The minimum wage has increased for three consecutive years. As to international relations, Bachelet attended APEC Economic Leaders’ Meeting in Beijing and paid a working visit to China. Chile strengthened relations with the US. The Pacific Alliance made a major step forward. The dispute between Chile and Bolivia remains unresolved, but the issue between Chile and Peru has been settled peacefully.

　　Keywords: Chile; Tax Reform; Education Reform; Public Security

　　13　Colombia【Qi Fengtian】／175

　　Abstract: Colombian President Santos defeated Democratic Center candidate Zuluaga and achieved a presidential re-election. Peace, justice and education become the central themes of the Santos government in its second term, and completing the peace negotiation with the anti-government guerrillas top its agenda. Due to continued expansion of domestic demand and investment, Colombia’s GDP growth would reach 4.8% in 2014. Because of uncertainty of international demand and declining export prices of oil and other export products, economic growth will slow in 2015. The internal security situation has deteriorated, unemployment rate continues to decline, and Santos is actively promoting national literacy programs to improve the level of education. The Santos government will continue to deepen economic integration with the Pacific Alliance countries, to address and resolve disputes in a gentle way with its neighbor countries. Sino-Colombian relations are facing new opportunities for development.

　　Keywords: Colombia; Presidential Election; Peace Negotiation; Pacific Alliance; Sino-Colombian Relations

　　14　Perú【Fan Lei】／186

　　Abstract: In 2014, Peru enjoyed stable political situation with successfully completed regional elections. The Partido Nacionalista Peruano fell in isolation with challenges caused by opposite political forces, internal conflict and low support rate. Economic growth remains weak in spite of several stimulus measures. The government continues emphasis on “social inclusion”, increases spending in social projects, but the public security faces new problems with unresolved preoccupations. Regional integration, bilateral or multilateral free trade agreements, as well as relationship with other Latin-American countries, are the key points of Peru’s international relations.

　　Keywords: Perú; Government; Political Isolation; Social Inclusion

　　15　Bolivia【Song Xia】／198

　　Abstract: Bolivian political situation was relatively stable in 2014. Bolivia’s President, Evo Morales of the leftist ruling Movimiento al Socialismo (MAS), won a landslide victory in the October 12th election and entered his third term in office. The MAS also received a two-third majority in both houses of Congress so that it needs to enact constitutional amendments and continue to control all of the country’s institutions. The opposition remained weak and performed poorly, although they formed some coalitions for the election. They were hampered by division and a lack of nationwide appeal. Morales continued to pursue a state-led development model to deepen the nationalization and industrialization reforms in 2014. The GDP growth was slowed down slightly in 2014, due mainly to a slowdown in the hydrocarbons industry. But it was still the third-highest rate in the region, only after Dominican Republic and Panama. Major economic indicators were improved, and the inflation rate was controlled to a good level. Morales continued to expand social welfare programs and raised the level of minimum wage and real wage in the public sector. There were still serious contradictions and tensions between Bolivia and the US, preventing the re-establishment of full diplomatic relations. Hostility between Bolivia and Chile persisted in 2014 still due mainly to Bolivia’s attempt to restore its access to the Pacific coast. There were some contradictions between Bolivia and Perú in the transatlantic railway line selection. The relationship with China was strengthened, underpinned by China’s increasing economic interest in Bolivia.

　　Keywords: Bolivia; Morales; Economic Growth; Industrialization; Digital Money

　　16　Ecuador【Fang Xufei】／206

　　Abstract: In 2014, the political situation remained stable in Ecuador. But the opposition forces were enhanced in municipal elections, which spurred the president, Rafael Correa, to intensify political control. Correa proposed to allow indefinite reelection of presidents, which led to strong response of the opposition forces. The whole year’s GDP growth rate dropped to 4% in 2014 due to a slowdown in economic activities. The stable economic situation and increasing social spending resulted in improvements of various social indicators, but many mass protests erupted due to the dissatisfaction with the government’ natural resource development and labor policies on some social sectors. China-Ecuador relations continued to deepen.

　　Keywords: Ecuador; Municipal Elections; Social Protests

　　17　Uruguay【He Luyang】／213

　　Abstract: In the 2014 Uruguayan general election, ruling coalition candidate Tabaré Vázquez of the Broad Front was elected as president by a wide margin and the Broad Front won with a narrow majority in both chambers of congress. Despite the slowing trend, Uruguay’s economy still maintained a 3.5% growth. Public safety and education are still worrying, and the controversial cannabis legalization has entered into force. As the judicial sector’s demand for salary increase has been fermented, the government has to seek a compromise. Relations with Argentina remain tricky. On the issue of regional integration, Uruguay is seeking greater flexibility in Mercosur.

　　Keywords: Uruguay; General Election; Vázquez; Public Security; Cannabis Legalization; Mercosur

　　18　Paraguay【Li Hui】／220

　　Abstract: Since the new government of Cartes has been in power for more than one year, all kinds of political challenges have gradually appeared, such as the domestic strike and constant parades in 2014. Labor issues have caused the support of the new president to fall and internal inconsistencies made the Partido Colorado split for interests. Though the economy grew steadily, agriculture is still the main driving force. In diplomacy, Paraguay gave up striving for the qualification of being the rotating chairman of Mercosur; the Congress approved Venezuela to join in; Cartes attended the Mercosur summit for the first time.

　　Keywords: Paraguay; Partido Colorado; Cartes; Mercosur

　　19　Costa Rica【Zhang Yong】／228

　　Abstract: As the president candidate, Luis Guillermo Solís of the PAC won the 2014 election of Costa Rica from two rounds of voting and took office in May 2014. He advocated the re-establishment of domestic economy, reduction of fiscal deficit and alleviation of social injustice. Although a moderate economic growth of 3.6% was seen in 2014, the serious current account deficit and fiscal deficit have still loomed large. At the same time, the high poverty and rising unemployment rate have become serious social problems. It is urgent for the new government to solve them. Regarding international relations, the new government insists on a diversification strategy.

　　Keywords: Costa Rica; General Election; Solís; Dual Deficits; Challenge

　　20　Nicaragua【Li Han】／235

　　Abstract: The constitutional reforms proposed by Mr. Ortega were passed in 2014, which has resulted in increased concentration of power in the executive and weaken adherence to democratic governance. The government and HKND held the inauguration of canal construction which had been planned two years ago, only to meet with a mass protest. The ruling FSLN maintains dominance, and the opposition continues to be hindered by competing interests, and its divisions will weaken its influence to form a coalition of centre-right parties. Nicaragua was affected by natural disasters and experienced decelerated economic growth. The government has made significant progress in fighting against poverty and improving education. Nicaragua maintains a close relationship with Venezuela, and has developed economic cooperation with Mexico. Its relationship with Russia has been strengthened.

　　Keywords: Nicaragua; Ortega; FSLN; Trans-ocean Canal Project; Natural Disasters

　　21　Honduras【Yang Zhimi】／243

　　Abstract: President Hernández of the ruling National Party took office in January 2014 with a strong start, but his government still faces daunting challenges. The annual growth rate of GDP reached 3.0%, higher than that of 2013. Development will be hampered by high levels of crime and violence and poverty. Honduras will focus on strengthening economic and security ties with the US, as well as neighboring countries.

　　Keywords：Honduras; Presidential Inauguration; Poverty; Crime and Violence; the US

　　22　El Salvador【Tan Daoming】／251

　　Abstract: The presidential election of El Salvador was held successfully in 2014 with a peaceful and orderly change of government. In the year of 2014, the whole economy recovered slowly, for foreign trade shrunk and domestic supply dropped. Although a bold fiscal reform was adopted, inflation rose modestly, and employment increase fell observably. The achievements related to social policies were yielded remarkably, but the security situations in this small Central America country deteriorated dramatically. The new government in El Salvador would give priority to consolidating close relations with the US, and have broad cooperation with the neighbors in Central America. It would also seek balanced development with the rest of Latin American countries, and deepen relations with the EU and Asian countries. In one word, the new left government would extend various policies that the previous government had introduced.

　　Keywords: El Salvador; Presidential Election; Democratic Transition; Social Policy

　　23　Guatemala【Wei Ran】／259

　　Abstract: Otto Pérez Molina, Guatemala’s former army chief and president, during his third year in office, has put on a good performance, but meanwhile faced many challenges. In 2014, the economic growth rate reached 4%, as Guatemala rose in the ranking of Global Competitiveness Index and public security dramatically improved. However, the remarks of the opposition and relevant research also show that the situation is not impeccable. The problem of corruption, uphill struggle of new political alliance and uncompleted social pacts have posed direct challenges to the authority at its mid-term.

　　Keywords: Guatemala; Third-year Report of Government; Anti-corruption; Zero Hunger Program; Irregular Immigration

　　24　Panama【Wang Shuai】／267

　　Abstract: On May 4, 2014, the day of Panama’s general election, former Vice-President Mr.Varela of Partido Paname? ista won unexpectedly to be the new president. The new government faces challenges on political and economic fronts. Owing to the delayed Panama Canal expansion project and other factors, Panama’s economic growth has slowed, but it is still one of the fastest-growing countries in the region. Although the social situation remained stable in general, strikes for higher wages occurred from time to time in this electoral year. In the aspect of diplomatic relations, 2014 has been considered a complicated year. Thanks to the new government going to power, foreign relations between Panama and neighboring countries have been improved.

　　Keywords: Panama; General Election; Partido Paname?ista; Varela; Panama Canal; Diplomatic Affairs

　　25　Dominican Republic【Gao Qingbo】／275

　　Abstract: President Danilo Medina took office two years ago, enjoying great popularity among the people, while the PRD was still in chaos last year. Mr.Medina pursued an ambitious social agenda, such as security reform, policies on immigrants, education reform, alleviation of poverty, and job creation. In the economy aspect, GDP grew by 6.0%, and the financial deficit increased to 3.0% of GDP. On the social front, anti-crime was the most important problem, and the Dominican Republic was still in trouble with poverty and unemployment. At last, the most impressive diplomatic matter was the immigration law, which has caused endless issues.

　　Keywords: Dominican Republic;Anti-corruption; Economic Stability; Immigration Act

　　26　Haiti【Zhao Chongyang】／284

　　Abstract: In 2014, Haiti’s legislative and local elections continued to be postponed, leading to a political deadlock. Under the influence of political instability, Haiti’s economic growth in 2014 was lower than expected. The public discontent with the government and the possibility of popular unrest increased. Haiti’s relations with Republic of Dominica were improved.

　　Keywords: Haiti; Martelly Government; Political Deadlock; MINUSTAH

　　27　The Caribbean【He Xi】／291

　　Abstract: In 2014, the overall situation in Caribbean countries was stable, but spotted with regional disorders. A new prime minister was elected in Antigua and Barbuda; Dame Marguerite Pindling was appointed Governor-General of the Bahamas; political chaos overwhelmed Guyana and Guyana-Suriname border conflict continuously exacerbated; the regional integration process was further accelerated. The economic growth in Caribbean countries speeded up, but the problems of external debts and unemployment remained serious. The population growth in Caribbean countries slowed, yet the region was still bothered with drugs, poverty and crime. China attached more importance to overall cooperation with Caribbean countries and Sino-Caribbean relations have taken a new step. In addition, developed countries and international organizations have further enhanced their aids to Caribbean countries.

　　Keywords: Caribbean Area; Caribbean Community; Regional Integration; International Aid

　　Ⅴ　Regional Organizations

　　28　The Organization of American States【He Shuangrong, Sitegeqi】／305

　　Abstract: The Organization of American States (OAS) is the most important regional organization, founded and dominated by the US. As the most important multilateral policy tool of the US towards Latin America, the OAS’s roles and influences in the Western Hemisphere system are closely related to the US’s foreign strategies, its position of strength in international system and its dominant power in Latin America. Since its founding in 1948 to the 1960s, the US played an overwhelmingly dominant role in the organization. However, in the late 1960s, with the power of the US declined, its adjustment to foreign policies, and more independent foreign policies formed in Latin American countries, the OAS stepped into its low tide period since then. After the Cold War, pushed by globalization and adjustment of US foreign policy, the OAS was revitalized. But in the 21st century, the OAS again went downhill with the decline in the US’s power and rise of Latin American left wings. Due to more and more internal divergences and challenges from emerging sub-regional organizations, the OAS has a dim future, but it still plays irreplaceable roles in regional governance of low politics. Therefore, the US and Latin America countries will continue to keep it forward.

　　Keywords: OAS; the US; Multilateralism; Regional Organization; Inter-American Democratic Charter

　　29　The Inter-American Development Bank【Zhang Yinghua】／314

　　Abstract: The Inter-American Development Bank (IDB) has become a main financial resource to support social development of the Latin American and Caribbean region since its establishment in December 1959. The regional member countries as a whole subscribed more than 50% of the capital of the bank. In recent years, the IDB has guided many private enterprises to invest social development projects, and has transferred more support from consumer fields to product fields via increasing loans to infrastructure. As the newest member, China subscribed the smallest proportion of Ordinary Capital (OC), but has contributed much more to the Fund of Special Operation (FSO) which provides financing for most vulnerable member countries.

　　Keywords: IDB; Loan; Subscribed Capital Stock, the US

　　30　The Caribbean Community【Qi Chuanjun】／323

　　Abstract: The Caribbean Community (CARICOM) was established in August 1973, currently consisting of 15 members and 5 associate members. Its history can be traced back to the West Indies Federation in the 1950s. It should be said, as an important regional organization, the CARICOM played a positive rolein regional integration and maintenance of the interests of members. However, for a long time, due to the existence of ideological differences, institutional shortcomings and so on, it is difficult to implement the set objectives, so the CARICOM summit decided to start the reform process and launched the first five-year strategic plan in July 2014.

　　Keywords: CARICOM; Single Market; Strategic Planning

　　31　The Initiative for the Integration of the Regional Infrastructure of South America

　　【Xie Wenze】／332

　　Abstract: The Initiative for the Integration of the Regional Infrastructure of South America (IIRSA) was created in 2000 by 12 South American countries, whose main aim is to realize regional integration of transportation, energy and communication. Up to 2014, the IIRSA has defined 10 hubs of integration and development with 579 integration priority projects. The estimated total investment would be about 163.3 billion USD. The IIRSA has 4 striking features: the sector of transportation is the key field; most of the projects are the member’s national projects; public investment is the main financing source; 4 bi-oceanic corridors and 3 economic belts are the main components of programming and planning. The absence of funding and the difficulty in unified institutional arrangements among the members are the most stubborn challenges for the IIRSA. However, the IIRSA can be one of the important platforms for China-Latin America cooperation in the area of infrastructure.

　　Keywords: South America; Infrastructure; Integration

　　Ⅵ　Appendix: Economic Statistics

　　32　Table 1　Average Annual Growth Rates of GDP and GDP per Capita (2005-2014)／341

　　33　Table 2　Regional GDP and GDP per Capita of LAC(2011-2013)／343

　　34　Table 3　Balance of Payment(2012-2014)／345

　　35　Table 4　Net FDI(2005-2014)／350

　　36　Table 5　Total Foreign Debt(2005-2014)／352

　　37　Table 6　Annual Variations of CPI(2005-2014)／354

　　38　Table 7　Open Unemployment Rate(average annual rate) (2005-2014)／356

　　39　Table 8　Sino-Latin American Trade Statistics(2010-2014)／358

　　40　Table 9　Non-Financial FDI Statistics on China and LAC(2009-2013)／363