China going local in Latin America, harvesting data

China’s Latin America strategy is evolving. The Asian powerhouse still chiefly focuses on securing food and raw materials for its economy – but it is also developing markets at different levels of government for an increasingly wide range of high-value-added products.

Chinese companies are building links with both national and sub-national authorities in the region. 

Benefiting from subsidies from Beijing, Chinese firms are offering cut-price solutions chiefly in the technology and energy infrastructure spaces. These include citizen ID systems and facial recognition cameras.

Margaret Myers, director of the Asia & Latin America Program at US think tank the Inter-American Dialogue, spoke to BNamericas about this, and more.

BNamericas: What’s the general state of play regarding Chinese engagement in Latin America? What kind of sectors are the Chinese investing in, for example? 

Myers: I would say there’s both a degree of continuity and change in the relationship right now. On the one hand, we still see the vast majority of Chinese activity related to resource-seeking and market-seeking.

We see a lot of continued interest in the region’s raw materials but increasingly focused on raw materials that are not only related to Chinese food security … but also as inputs in Chinese technology.

Lithium has increasingly become an area of focus for a couple of Chinese companies in particular, with supply chain considerations in mind.

Then there is also market-seeking as I mentioned. This has been a feature of the relationship for more than two decades now, but increasingly we see Chinese companies seeking markets for much higher-value-added, high-tech goods and services and doing so in a very different way than they have in the past.

What we used to see were Chinese companies really being supported by large-scale loans given to governments across the region. That’s not really a feature of the relationship anymore. 

Instead, we see Chinese companies, which have now established significant presence across the region, engaging on their own terms through networks that they’ve established over the course of many years on the ground and increasingly doing so not just at the national level but also at the local, through networks of contacts.

A lot of dealmaking is happening through the companies, often with behind-the-scenes support from Chinese financial institutions but not through these sorts of commodity-backed loans or sovereign lending arrangements that were a major feature of the relationship in the past.

So, in a way, we see a lot of the same sort of activity – market-seeking and resource-seeking – but in different ways and for different types of things. 

The big areas where we see activity are indeed in tech, electricity transmission, and renewable energy and also in mining and still very much so in agriculture. 

BNamericas: Could you expand a little more on the focus of Chinese companies at the local level? 

Myers: Companies are engaging and there is a very wide range [of products and services]. It depends on the locality and what they have to offer. 

We see a lot of engagement at the local level among technology companies, Huawei being one of them, ZTE. Those are the big ones that are always mentioned, but there are many others, Dahua, for example, and these do a lot of surveillance technology; they have smart city and safe city applications which are city-level applications. It makes sense for them to engage both at the city level and national level to ensure that they are able to deliver these technologies and that all of the approvals are in place to do so.

BNamericas: Could you give us a few examples?

Myers: For example, in [Uruguayan] capital Montevideo there is a [surveillance camera] platform initiated in a series of parks to promote security. It’s pretty innocuous; it’s along the lines of what you would see plenty of Western companies also providing, but China frequently does this at a much lower price in part because a lot of these products are subsidized and the companies themselves are subsidized.

In other cases, there are vast systems aimed much more explicitly at social control. That’s the case with the [QR code-based ID card] Carnet de la Patria system that was implemented in Venezuela, which resembles in many ways what China has at home. It’s much more of an effort, through social monitoring, to use data to ensure a degree of social control.

There are others, more geared to emergency response, such as ECU 911 in Ecuador … it [also] has some surveillance monitoring capability associated with it.

The extent to which any of these are troubling largely depends on who is using them and what the inclinations of the government are. They can be used simply for crime prevention purposes and disaster response, or they can be used for population control and to limit the activities of dissidents. 

BNamericas: How else does China gain from deploying these solutions?

Myers: For China there is commercial rationale, certainly, but it’s more about data collection. Right now, for facial recognition technologies, for example, they have all of the data they would need on Chinese faces but they don’t have it for communities in Latin America. They see themselves as becoming dominant in AI in general by feeding their systems data from all over the world. 

The reason they deliver this at such low cost is that it need not be commercially viable because there is another rationale, and that is data collection.

BNamericas: Shifting back to the general outlook for Chinese involvement in Latin America over the next few years, what do you expect?

Myers: Most of us who track this closely agree that the relationship is not by any means in decline but, if you look at overall numbers, you see a sort of tapering.

We’ve seen steady growth in trade, which has underpinned the relationship throughout … it is still really quite fundamental.

Globally, FDI flows have slowed. In Latin America they haven’t really slowed but they’ve tapered. Finance has really dropped off the map, especially sovereign lending. It’s been in rapid decline for five years and we haven’t seen anything for a couple of years now.

When you look at that altogether, you see, in general, a sort of tapering of engagement. That said, as mentioned, we’re seeing a real focusing of efforts on some very specific strategic sectors and a much more localized approach which I think will result in a lot more dealmaking of a smaller scale, but, again, very targeted at achieving certain objectives concerning strategic sectors.

BNamericas: Finally, how has the administration of US President Joe Biden approached the region since taking office? Former president Donald Trump didn’t seem to make many friends. 

Myers: The Biden administration has sought to engage more extensively and more respectfully than the Trump administration.

I don’t envy the position the Biden administration is in, given the legacy that the Trump administration has left in Latin America. Even as the Biden administration looks to engage and make certain promises about reengagement and assistance and reigniting and reinforcing certain strategic partnerships, there is concern that, in the event that Trump reemerges in the next election, or if something else were to happen, all of this would be reversed all over again. 

I think the level of trust in the US is low. Not necessarily in the Biden administration but just in the longer-term US strategy, and so I think that’s a real challenge. 

The Biden administration has of course implemented [green development initiative] Build Back Better World and articulated its interest in engaging in particular with Colombia and Ecuador in an initial effort to get that initiative off the ground. 

The extent to which they are able to indeed extend considerable assistance to the region, whether through finance, cooperative arrangements, or more in the way of vaccines, and to do so effectively and efficiently, and in a reasonable timeframe, largely remains to be seen. Views of the US as a partner will be shaped by the extent to which the Biden administration can indeed deliver on these promises.