China’s Advance in Chile - Diálogo Américas

[ad_1]

Introduction

In October 2023, Chilean President Gabriel Boric traveled to the People’s Republic of China (PRC) to participate in a forum commemorating the 10th Anniversary of the Belt and Road Initiative, and for bilateral meetings with Xi Jinping and senior members of his government. President Boric was accompanied by a delegation of both government and business leaders, including the Chilean business promotion organization SOFOFA. In parallel with his visit, the PRC-based company Tsingshan, announced a planned new $233 million investment in Chile’s lithium sector, making batteries from materials obtained at concessionary prices from the SQM lithium operation in which China’s Tianqi has a stake. On the other hand, just before Boric’s visit, the Chinese pharmaceutical company Sinovac announced that for “strictly commercial reasons” it would not proceed with a planned $100 million investment in a vaccine distribution facility in Santiago and an associated research facility in Antofagasta.

In their bilateral meeting, one of eight conferred by the Chinese to visiting leaders at the summit, a senior Chilean knowledgeable of the matter noted that Xi gave particular attention to Boric, recognizing his “learning” orientation, and that, at the age of 37, Boric will likely be a player in Chilean politics for many years to come. In the political tradition of Chilean poet Pablo Neruda, Chilean painter and China enthusiast Jose Venturelli was part of the delegation, introducing a dimension of the encounter between Eastern and Western cultures into the executive-level discussions, as well as talking about business.

This work looks at the evolution of the Chile-PRC relationship, in the context of President Boric’s visit to the PRC.

The PRC-Chile political relationship

As noted by China-Chile scholar Pamela Arostica, Chile has led Latin America in advancing its relationship with China in numerous areas. It was the first country in South America to diplomatically recognize the PRC, with the socialist government of Salvador Allende establishing relations with the PRC in December 1970. The PRC pragmatically chose to continue relations with the military government of Agosto Pinochet, after the Chilean military deposed Allende in a coup in September 1973.

Chile was also the first country in the region to advocate PRC entry into the World Trade Organization (WTO), doing so in 1999. It was also the first to recognize the PRC as a “market economy” in 2004.

Reflecting the longstanding relationship between the two countries, Chile was recognized by the PRC as a “strategic partner” in 2012, then as a “comprehensive strategic partner” in 2016. With the relationship, the two governments established mechanisms for ongoing coordination on economic and other issues. In 2018, Chile joined China’s Belt and Road Initiative (BRI) one of the first countries in the region to do so. In 2019, Chile joined the PRC institution for financing BRI projects, the Asia Infrastructure Investment Bank (AIIB).

PRC-Chile trade

As with most countries in Latin America, Chile’s trade with the PRC has expanded exponentially since the PRC was admitted into the WTO. Chile’s imports from the PRC expanded from $1 billion in 2001 to $26.4 billion in 2022, while its exports to the PRC grew from $1 billion to $38.4 billion. As a product of its relatively low value added exports of copper to the PRC, Chile is one of the few countries in the region to have a net trade surplus with the country.

Driven in part by the hopes generated by the expanding economic relationship between the two countries, Chile was the first country in Latin America to sign a free trade agreement with the PRC. The agreement, signed in November 2005, was part of a series of agreements Chile negotiated during that period, principally with Asian nations, as it worked to strengthen its integration into the global economy. For the PRC, according to senior Chileans knowledgeable of the matter, the negotiation with Chile was seen as a learning opportunity for a multi-nation trans-Pacific agreement involving the United States and other major actors that China eventually hoped to pursue. Chile subsequently negotiated a supplemental agreement with the PRC for trade in services, signed in April 2008.

Copper and other mining sector goods currently accounts for over 84 percent of the value of Chile’s exports to the PRC. Nonetheless, Chile’s government and businesses have been successful in marketing Chilean wine, salmon, cherries, and table grapes to the PRC. Its trade promotion organization ProChile is considered the best such organization in the region for working with the PRC market, and has offices in Beijing, Shanghai, and Guangzhou.

Chile’s success owes in part to the promotion of its “national brand” in the PRC. Chile has successfully marketed its grapes, cherries, and blueberries in China as “luxury goods,” associated with holiday festivities and gift-giving, permitting Chile to sell them at a premium, including their importation via costly means such as via aircraft and in refrigerated shipping containers. Chilean salmon was approved for sale to the Chinese market in October 2023, and Chileans are hoping for another export success in the PRC similar to that achieved by their fruits.

Mining

Mining has long been the core of Chinese economic engagement in Chile. Chile’s nationalized copper industry, run by the Chilean state company COLDELCO, has prevented significant investment by PRC-based companies in the sector, by contrast to substantial PRC mining investments in neighboring Peru.

In 2005, China Minmetals signed a $550 million advanced purchase agreement with COLDECO, funding the expansion of the industry in exchange for Chinese access to copper at an agreed-upon price. The agreement, designed to fund COLDELCO’s expansion of its mining capacity, prejudiced Chile when global copper prices subsequently rose, obligating CODELCO to sell much of its output to the PRC at below-market prices.

The PRC had also believed that as part of the agreement CODELCO would sell it an interest in the new Gaby copper mine. The Chilean government, which understood the sale of an interest in Gaby as a mere possibility, later decided not to sell it to the Chinese. According to senior Chileans with knowledge of the matter, this decision created bad feelings on China’s side that impacted PRC investment in the sector for years.

In recent years, lithium has become the new focus of Chinese mining investment. In 2018, the Chilean government approved a $4 billion deal in which the Chinese company Tianqi acquired a 24 percent interest in Sociedad Química de Minera (SQM), one of the two owners of major lithium concessions in the country, the other being the U.S.-owned company Albemarle. The declared interest by the Boric government to nationalize the lithium industry and establish a state-owned lithium company on the model of CODELCO, caused some consternation, but has not fully deterred Chinese investors.

As noted previously, the Chinese company Tsingshan committed to build a $233 facility in Chile for processing lithium into lithium iron phosphate for batteries, signing a commitment with the Chilean public lithium body CORFO to acquire lithium at concessionary rates from SQM, in which Chinese company Tianqi has a stake. The Chinese electric vehicle manufacturer BYD is also exploring establishing a lithium processing plant in Chile.

PRC activities in Chilean agriculture

Consistent with the establishment of business relationships for the sale of Chilean wine, fruit, and salmon in the PRC, PRC-based investors have established a modest presence as owners of Chilean farmland, orchards, and vineyards, and distributors of Chilean wine, as well as in the salmon industry.

In the salmon industry, in 2019, China’s Joyvio Foods acquired Australis seafoods for $900 million, giving it control over a Chilean salmon farms. There were subsequently multiple problems with the management of the company, and a dispute over how the representation of the company at the time of acquisition that led Joyvio to pursue legal action against the original sellers.

PRC activities in Chile’s construction sector

During the early years of China’s advance in the region, Chile’s competitive formal public procurement process, overseen by technically competent evaluation and oversight institutions, impeded China’s ability to win infrastructure work in the region through the “state-to-state” deals that PRC-based companies had used in the developing world.

In recent years, however, PRC-based companies have become more sophisticated in participating in Chile’s public procurement processes, including through the use of public-private partnership projects.

The first significant PRC effort to win a project in Chile’s construction sector was a bid by China Railway Group and China Road and Bridge to build a 2.6 kilometer-long suspension bridge connecting the island of Chiloe to the Chilean mainland. The PRC-based consortium withdrew, reportedly because they perceived they were not the favored vendor, and the project was subsequently awarded to the South Korean firm Hyundai.

Despite its initial setback, China Railway Construction Corporation (CRRC) went on to win multiple transportation infrastructure projects. In 2021, CRCC won a contract to improve a segment of Chile’s principal north-south road, Highway 5, from Talca to Chillán, and operate it as a toll road. In the same year, it won a contract to build Line 7 of the Santiago metro. In February 2023, CRCC won a follow-on contract to improve a second segment of highway 5, from Chillán to Collipulli.

Separately, China Road and Bridge Corporation (CRBC) won a $224 million project for the construction of three public hospitals in the Maule region.

PRC activities in Chile’s electricity sector

China’s most significant expansion of commercial presence in Chile has occurred in the country’s electricity sector. As in construction, PRC-based companies initially had multiple setbacks in electricity. China National Water Resources and Hydropower Corporation sought to build dams in the environmentally sensitive Patagonian region of Chile, while China State Grid would build the cables transmitting the power to Chilean population centers further to the north, in the Hydroayssen project. Environmental sensitivities, however, led to Hydroayssen’s cancellation in 2014.

Despite the setback, through acquisitions, PRC-based companies have gone on to acquire control over a substantial portion of the industry. Major deals include China Southern Power’s 2018 purchase of a 28 percent stake in Chile’s Transelec for $1.3 billion, and China Three Gorges’ 2019 acquisition of Atiaia Energy. In June 2020, China State Grid purchased Chilean power distribution company Chilquinta for $2 billion. In November 2020, it purchased Chilean electricity distributor CGE from Spain’s Naturgy for $3 billion. Together, the latter two deals alone give State Grid alone control over 54 percent of the country’s electricity customers.

Beyond electricity generation and transmission, in the public transit market, China’s BYD has sold 455 electric busses to Chile, including their use by the public transit authority of Santiago, RED. Santiago now has the largest Chinese electric bus fleet of any city outside the PRC.

PRC Activities in Chile’s Financial Sector

The PRC has a relatively strong financial infrastructure for doing business in Chile. Three major PRC-based banks have a presence in the country: China Construction Bank, which entered in 2016, Bank of China, which entered in 2016, and China EXIM Bank, authorized to operate in the country in 2021.

At the national level, in 2015, Chile signed an $8.1 billion currency swap agreement with the PRC, as the country sought to become a key clearinghouse for the PRC’s RNB-based transactions in the region.

PRC activities in Chile’s digital sector

As elsewhere in Latin America, PRC-based companies have come to dominate a significant portion of Chile’s telecommunications infrastructure and device market, as well as other digital sectors.

In the smartphone market, Huawei is the principal supplier to telephone operator WOM, and an important supplier to Movistar and Claro. China’s Xiaomi also has a sales network and an important presence in the country.

Beyond smartphones, Huawei is a major supplier of Chile’s telecommunications backbone, and currently the leading contender to build out its 5G network, after the Chilean government decided in 2021 not to exclude it. WOM’s win of a significant part of an important 5G spectrum auction in 2021 further positions Huawei to play a role in Chilean 5G as WOM’s principal supplier.

With respect to fiber optic connectivity, Huawei Marine has built an important fiber optic cable, the Austral, connecting the cities of southern Chile including Puerto Montt and Punto Arenas, and has attempted to sell the Chilean government construction of a transpacific cable connecting Chile to Asia through Hong Kong. In 2020, the government chose an alternative offer by the Japanese company NEC, to build a cable using different route through Australia. International funding for the cable never materialized, however, and the original Huawei proposal is reportedly again being discussed.

As in other countries in Latin America, Huawei operates multiple data centers in Chile, maintaining sensitive data and intellectual property of persons and businesses operating in the country in the Huawei cloud.

Beyond telecommunications, PRC-based sensor and security companies Hikvision and Dahua, play a major role in the Chilean market. In 2020, a public contract awarded to Hikvision for the installation of cameras in the greater Santiago area was cancelled after questions emerged regarding corruption in the award. The Chinese scanner company Nuctec is also present in Chile, including an office in Santiago.

The Chinese crane supplier ZPMC is widely used in Chilean ports, including its main commercial container port San Antonio. The port and logistics firm APM, which operates in eight locations across Chile, has a strategic partnership with ZPMC for the purchase and co-development of equipment. The presence of ZPMC cranes is considered to pose a potential digital threat because the scanners included on the devices collect sensitive data about the contents of the containers passing through the ports where they operate.

In 2021, the major PRC-based technology company Aisino won a bid with Chile’s civil Registry to produce and manage identity cards and passports, but was disqualified late in the process.

PRC activities in Chile’s space sector

As with other countries in the region, the PRC has sought a presence in Chile’s space sector. The most significant PRC activity in the space sector in Chile is the Chinese Academy of Sciences South American Astronomy Center (CASSACA), on Calán hill in the greater Santiago area, in operation since 2013.

PRC personnel also are present at an observatory operated by the European Space Organization in Chile’s Paranal desert and previously sought permission to construct their own facility in the area but was denied permission to do so by the Chilean government.

In 2016, the PRC also explored an opportunity to replace Chile’s U.S.-built FASAT-C satellite system with China’s Beidou, but the initiative didn’t bear fruit.

Military and security engagement

PRC military and security engagement with Chile has been relatively limited.

By contrast to many other countries in the region, the Chilean Armed Forces have neither purchased, nor received gifts of major Chinese weapon systems. Nonetheless, Chinese defense contractors regularly participate in Chile’s signature military industry conferences, FIDAE and Exponaval.

Chile has received delegations from PRC Chinese military institutions and has sent limited numbers of persons to the PRC for training. In 2013, the Chinese destroyer Lanzhou, the missile frigate Liuzhou, and a fuel support ship visited Chile, conducted joint exercises with Chilean navy counterparts and subsequently transiting the Straits of Magellan. In November 2018, the Chinese hospital ship Peace Arc made a port call in Valparaiso. The Chinese and Chilean governments have also held discussions over PRC Navy access to Punta Arenas to support maintenance of Chinese facilities in Antarctica.

In law enforcement, in the context of the presence of Chinese organized crime groups operating in Chile, the Chilean Investigative Police are working with the PRC Confucius Institute at St. Thomas University for education on the Chinese language and other aspects of the country.

Intellectual infrastructure and networking

Despite its strong institutions and educational system, Chile’s academic and people-to-people ties with the PRC have been uneven. The country was relatively late to establish Confucius institutes in the country. It currently has only three: at the Catholic University, and St. Thomas Universities in Santiago, and at the University of the Frontier in Temuco, Araucanía. The latter is the newest, just inaugurated in December 2020. St. Thomas University is also host to CRICAL, the PRC headquarters organization for all Chinese Confucius Institutes in Latin America.

As with other countries in Latin America, the Confucius Institutes in Chile play an important role as a gateway for the Chinese government to make contact with Chilean students interested in studying the PRC and the Chinese language, linking them to scholarships for study in the PRC, funded by Chinese government organizations and major PRC-based companies such as Huawei.

Beyond language programs, such as those offered by the PRC government-affiliated Confucius Institutes, Chile still lacks a four-year China studies program in a major university.

In the business domain, the China-Chile Chamber of Commerce (CHICIT) is an important forum linking Chinese and Chilean businesses interested in opportunities in both countries.

The PRC also maintains a broad range of people-to-people networks within the country, generally tied to the United Front Work Department of the Chinese Communist Party. These include the China-Chile Friendship society, sponsorship of trips to the PRC for Chilean academics, journalists, and others.

PRC media activities in Chile

As with many other countries in the region, the PRC conducts an array of activities to support positive coverage and a positive image of the PRC within Chile. These include agreements with Chilean media outlets, in which PRC state media organizations provides images, video, and other content to them, including one such agreement between China Media Group and Chile’s La Tercera. Because no major Chilean media organization has an office in the PRC, providing of such materials allows the PRC to significantly control the narrative with respect to how its leaders, and events in China are perceived through the Chilean media.

The PRC also regularly purchases informational supplements in major Chilean newspapers such as El Mercurio and La Tercera. Such material supports PRC messaging objectives on two levels. On one hand, because it has the appearance of other informational content of the paper, many may read it without recognizing it as propaganda produced by the Communist Chinese government. At the same time, because such supplements are an important source of income to often struggling media outlets, some may self-sensor their content in other areas to avoid offending their PRC clients.

Conclusion

Chile’s relatively strong institutions and good governance increase the probability of economic benefits through engaging with the PRC. Nonetheless, Chile’s expanding dependence on the relationship in sectors from copper and lithium mining to electricity and digital sectors, as noted in this work, is concerning.

As with other countries in the region, slower PRC economic growth in the coming years may depress global copper prices, highlighting the vulnerability to Chile of a largely extractivist relationship with China, selling it minerals while purchasing a broad array of higher value added Chinese goods and services.

While Chile’s democracy and institutions are examples for the region, the expanding web of Chilean businesspersons and others with economic interests in the PRC market and partnerships with Chinese firms, the interest of Chilean media in Chinese sponsors and content providers, and the hundreds of Chilean journalists, academics, think tank professionals, and others who travel regularly to the PRC courtesy of “special relationships” with Chinese think tanks, will increasingly put the objectivity and functionality of those institutions in dealing with the PRC to the test.

As a Pacific rim nation, it would be illogical for Chile not to engage with the PRC, but its ability to get the “best deal” for the Chilean people, while protecting the cherished values of democracy and individual rights, gives fundamental importance to Chile’s continued use of transparency, objectivity, and institutional competency in dealing with the PRC, while also maintaining Chile’s many other “options” with democratic friends across the Pacific such as Japan, Korea, India, Australia, and Taiwan, as well as its democratic friends in Europe, and its neighbors to the north.

Evan Ellis is Latin America Research Professor with the U.S. Army War College Strategic Studies Institute. The views expressed herein are his own.

Disclaimer: The views and opinions expressed in this article are those of the author. They do not necessarily reflect the official policy or position of any agency of the U.S. government, Diálogo magazine, or its members.

[ad_1]

Source link : https://dialogo-americas.com/articles/chinas-advance-in-chile/ Author : Publish date : 2023-12-13 03:00:00 Copyright for syndicated content belongs to the linked Source .

December 2025
M	T	W	T	F	S	S
1	2	3	4	5	6	7
8	9	10	11	12	13	14
15	16	17	18	19	20	21
22	23	24	25	26	27	28
29	30	31

China’s Advance in Chile – Diálogo Américas

Moderate mag. 4.6 earthquake – 31 km northeast of San Jose, San Jose, Costa Rica, on Saturday, Apr 6, 2024, at 11:25 … – VolcanoDiscovery

Abnormally Dry Canada Taps U.S. Energy, Reversing Usual Flow – The New York Times

Abnormally Dry Canada Taps U.S. Energy, Reversing Usual Flow - The New York Times

Heartbreaking Tragedy Exposes Critical Failures in America’s Pedestrian Safety

Uncover the Caribbean’s Best-Kept Secret: The Island Everyone is Talking About for Its Safety!

Antigua and Barbuda Poised to Shine as the Caribbean’s Second Fastest Growing Economy!

Exciting News: Aruba Reopens Its Borders to Latin America on December 1!

Urgent Warning: US Tariffs Could Jeopardize Bahamas’ Trade and Tourism!

Barbados Welcomes a Tourism Boom as the US Overtakes the UK in Visitor Numbers for 2025!

Peak Re Launches Thrilling New Venture in North America!

Bolivia’s Political Landscape Transforms: Centrist Candidate Surges as Voters Turn Away from Socialism

Bolsonaro’s Conviction: What It Means for U.S.-Brazil Relations

Turks & Caicos Islands Triumph Over British Virgin Islands in Epic Rugby Clash!

Categories

Archives