Improving infrastructure integration is one of the crucial preconditions for developing countries to join in the process of economic globalisation and make development gains. And, for that reason, it is one of five priorities for the Community of Latin American and Caribbean States (CELAC).
But like most developing economies, countries in Latin America and the Caribbean are challenged by their huge need for investment. While multilateral financial institutions have made substantial contributions, it is not enough to meet the demand.
As was affirmed by Santiago Levy Algazi, Vice President of the Inter-American Development Bank: “Whether it is integration into the global production chain, or realisation of inclusive growth and development in urban and rural integration, developing countries need a lot of investment in infrastructure.”
According to available information, infrastructure investment by sector in Latin America in 2012 was only 3.49 percent (as a percentage of GDP). To close the gap between supply and demand, the countries of the region should invest 6.2 percent of their annual GDP between 2012 and 2020 – some US$320 billion.
The UN’s Economic Commission for Latin America and the Caribbean has highlighted investment in transport, energy, telecommunications, water and sanitation works will contribute to increasing the coverage and quality of infrastructure services and increase the general welfare of the population.
According to the Development Bank Corporacion Andina de Fomento, logistics costs in Latin American and the Caribbean range from 18 percent to 35 percent of the final value of the products, compared to 8 percent in member countries of the organisation for economic cooperation and development. For small and medium-sized enterprises, this figure can exceed 40 percent. If the infrastructure in all countries in the region was the average level of middle-income countries, regional growth in Latin America would increase by an average of 2 percentage points a year.
The First Ministerial Meeting of the China-CELAC Forum, held in Beijing in January 2015, approved the China-Latin American and Caribbean Countries Cooperation Plan (2015-19). Its chapter on infrastructure and transportation made clear that China and Latin American countries will promote the development of infrastructure, such as transportation, ports, roads and warehouse facilities.
In March 2015, China published Vision and Actions on Jointly Building the Silk Road Economic Belt and 21st Century Maritime Silk Road. Although the document indicated that “the Belt and Road runs through the continents of Asia, Europe and Africa”, improving infrastructure integration worldwide has become its rationale.
And in May 2015, Premier Li Keqiang proposed the “3×3” model for capacity cooperation between China and Latin American countries during his visit to the continent. The first “3” is to jointly build logistics, electricity and information in Latin America, while the other “3” accounts for the means to achieve such goals, namely trade, investment and financial cooperation.
When Chinese President Xi Jinping began a state visit to Peru in November 2016 after the conclusion of the Asia-Pacific Economic Cooperation Economic Leaders’ Meeting in the Peruvian capital of Lima, he stressed that China is looking to extend the international trade and infrastructure initiative to Latin America and the Caribbean. He said China “welcomes all countries along the route in Asia, as well as our friends and partners around the world to take part in these endeavours”.
When President Xi ended his third visit to Latin America in November 2016, China issued a second Policy Paper on Latin America and the Caribbean. The document put forward 39 cooperative concepts in eight major areas: politics, trade, society, culture, international collaboration, peace, security, judiciary, overall cooperation and tripartite cooperation, many of which were new areas.
On May 14, 2017, at the Belt and Road Forum for International Cooperation, the then Chilean President Michelle Bachelet expressed her view on the complementarity of the Belt and Road Initiative with Latin American infrastructure projects. She said that: “We see the initiative as key in this process, as it promotes regional trade agreements and improves connectivity in Asian countries, Europe and Africa, but also in Latin America.
“Chile welcomes the great effort led by China to search for new mechanisms to bring us closer together, in connectivity, innovation and sustainable development. The breadth of the Belt and Road Initiative, the high level of participation and its strategic dimensions, highlight its capacity to become the biggest economic cooperation project in place today.”
Similarly, on May 15, 2017, Argentina’s President Mauricio Macri said that the possibility of South America converging with the Belt and Road Initiative “is an opportunity we do not want to miss”, as the integration of IIRSA (the Initiative for the Integration of Regional Infrastructure in South America) with the Belt and Road Initiative will promote connectivity, which is the key to development in the 21st century.
On Sept 17, 2017, Chinese Foreign Minister Wang Yi met the press in Panama City with Vice-President and Foreign Minister Isabel Saint Malo de Alvarado of Panama, and stated that Latin America and the Caribbean “is the natural extension of the 21st Century Maritime Silk Road, and the Belt and Road Initiative has become a new opportunity for current China-Latin America cooperation”.
After 40 years of successful opening-up and reform, China’s present phase of development shows the country has comparative advantages in conventional manufacturing and construction, and enjoys huge national savings and foreign exchange reserves.
The Belt and Road Initiative serves as an “integral part of China’s new strategy to further open up to the world on all fronts, prominently demonstrating a clear trend of more emphasis put on developing together with a multitude of developing countries”.
Accordingly, the Belt and Road Initiative is a paramount opportunity to enhance connectivity in Latin America and the Caribbean, and strengthen the foundations for the region’s development.