Monday, November 17, 2008

Chinese President Visits Costa Rica, Cuba and Peru Hoping to Strengthen Economic Ties

China Seeks Boost to Cuba Ties, BBC News
China’s Growth Key for Latin America, BBC News
Hu Jintao to Visit Struggling Ally Cuba, Reuters
China’s Hu on Historic Visit to Costa Rica, Reuters

Chinese President Hu Jintao is traveling from Costa Rica to Cuba to Peru in hopes of strengthening economic ties with the three countries. China’s trade with Latin American countries has gone from $13 billion USD in 2000 to more than $100 billion USD in 2007. China buys massive amounts of Latin America's commodities to satisfy its booming economy. Yet there is room for growth. Even in 2007 only 7 percent of Latin American exports went to China. The concern is whether the high demand for commodities will continue in China given the global economic downturn.

Costa Rica began building ties with China last year, after it switched diplomatic ties from Taiwan after 60 years to China instead. China does not have diplomatic ties with nations that recognize Taiwan, because China considers Taiwan a breakaway province. The visit has been called “historic” as it is the highest-level visit by a Chinese official to Costa Rica. China and Costa Rica are expected to announce talks on a joint free trade accord between the two countries, which could be signed in 2010.

China is already Cuba’s second biggest trading partner after Venezuela. China and Cuba have strong ties due to their shared communist roots, but the two counties run their economies very differently. China has recently pursue market-based reforms, while Cuba’s economic model remains very government controlled. China has loaned large sums to Cuba in the past, and those loans are beginning to come due: just when Cuba has suffered $10 billion USD in damage from three recent storms, and the prices of nickel, Cuba’s main export, and oil, the main export of ally Venezuela, have plummeted. Restructuring those debts and possible future loans will be on President Hu's agenda, according to western diplomats.

China is also Peru’s second largest importer. Much of Peru’s recent high growth rates have been driven by investment in the mining sector, including from China. Peru is currently negotiating a joint free trade accord with China. President Hu Jintao will attend the APEC (Asia-Pacific Economic Co-operation) summit in Lima, which will be held on November 21 and 22.

1) President Raul Castro has already enacted some minor reforms in Cuba since taking over the presidency for his brother Fidel. How might this visit, as well as Cuba's overall ties with China, impact future reforms in Cuba? Might Cuba follow China's example and move from a state-lead economy to a more market-focused economy?

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