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Opinion: China may push Chile and Argentina closer together

By Dr. Antonio C. Hsiang*

RIO DE JANEIRO, BRAZIL – (Opinion) Upon the invitation of his Argentine counterpart, President Alberto Fernández, Gabriel Boric, the brand-new President of Chile, will pay his first official visit to Argentina on April 5.

It is a historic date for both nations since it commemorates the so-called “Abrazo de Maipú” (Maipú Embrace) of 1818 between José de San Martín, the Argentine leader of the resistance to Spain in southern South America, and Chilean General Bernardo O’Higgins, who later on became Chile’s first head of state (1817–23).

Despite these promising first steps taken together as independent countries, a review of recent history shows that Chile and Argentina have been reluctant partners for the most part (if not all) of both the 19th and the 20th centuries. In the 21st century, could China’s Belt and Road Initiative foster Chilean-Argentine cooperation?

FROM BEAGLE TO MALVINAS

In 1904, the Beagle conflict transformed into a border dispute between Chile and Argentina over the possession of Picton, Lennox, and Nueva islands and the scope of the maritime jurisdiction associated with those islands.

Seven decades later, it brought the two countries to the brink of war in 1978. The Beagle conflict was also seen as the main reason for Chile’s support to the United Kingdom during the Falklands War with Argentina in April 1982.

A UK-Chile Strategic cooperation agreement reflected Chile’s fear of being attacked by Argentina after the conflict.

It is too early to tell, but if China's BRI were to succeed in further attracting Chile and Argentina into China's sphere of influence and overcoming their historical reluctance into the willingness to cooperate with each other to meet the demands of the Chinese market better, it would certainly be a significant wake-up call for the United States.
It is too early to tell, but if China’s BRI were to succeed in further attracting Chile and Argentina into China’s sphere of influence and overcoming their historical reluctance into the willingness to cooperate with each other to meet the demands of the Chinese market better, it would certainly be a significant wake-up call for the United States. (Photo: internet reproduction)

In his book ‘The Official History of the Falklands War’, British historian Lawrence Freeman disclosed details of Chile’s assistance. More interestingly, British Prime Minister Tony Blair sent a copy of the chapter to Chilean President Ricardo Lagos, who shared it with his Argentine counterpart Nestor Kirchner, said Luis Maira, Chilean ambassador to Argentina from 2004 to 2008.

Also, former British prime minister Margaret Thatcher had even referred to Chilean-British assistance as she expressed support for Pinochet when he was in custody from 1998 to 2000 on a Spanish warrant on human rights charges.

DIVERGING ECONOMIC POLICY

Michael J. Boskin, Professor of Economics at Stanford University, used to compare the economic policies of Chile and Argentina and found they diverge in important ways.

For example, Chile’s Central Bank has kept inflation low. A bilateral free-trade agreement with the US has facilitated a surge in bilateral trade flows between Chile and the North American economic giant.

Chile has also participated actively in the negotiations for the Trans-Pacific Partnership (TPP) trade deal, the critical pillar of former President Obama’s economic policy to the Asia Pacific. By contrast, inflation in Argentina is both rampant and chronic, as the country engages in serial, self-inflicted economic upheaval.

The spread between the official exchange rate for the US dollar and the devalued Argentine peso and the black-market rate –the so-called “Dólar Blue”- occasionally doubles the official exchange rate, as was the case in January 2022.

CONVERGING TO CHINA’S BRI

There are three firsts in Chile’s economic relations with China. Chile was the first Latin American country to support China’s bid to join the WTO, the first to recognize the PRC as a market economy, and the first individual country in the world to sign an FTA with China in 2005.

More importantly, during his official visit to China on November 13-18, 2018, President Sebastián Piñera signed a cooperation agreement with his Chinese counterpart, with which Chile joined China’s Belt and Road Initiative (BRI).

There are more firsts in Argentina’s economic relations with the PRC. In 2009, during Cristina Fernandez de Kirchner’s presidency, Argentina became the first Latin American country to sign a swap with China.

The US$10 billion swaps were expected to provide an alternative currency to enable Argentina to avoid using dollars in trade exchanges with China (in practice, what happened was that the Argentine government would use the funds to strengthen its US dollars reserves). In 2019, China built its first overseas military-run space station in Argentina’s Patagonian region.

During his trip to China in February 2022, President Alberto Fernandez signed an agreement to join the Belt and Road Initiative (BRI). It was also announced the expansion of a currency swap with China by US$3 billion.

Argentina also became the first country in Latin America -and second in the world, after Pakistan- to have a nuclear energy plant equipped with a domestically-developed Chinese reactor, the Hualong One.

China would also finance most of the US$ 8 billion that the nuclear power plant, Atucha III, will require.

It is too early to tell, but if China’s BRI were to succeed in further attracting Chile and Argentina into China’s sphere of influence and overcoming their historical reluctance into the willingness to cooperate with each other to meet the demands of the Chinese market better, it would certainly be a significant wake-up call for the United States.

*Dr. Antonio C. Hsiang, an inviting professor at Chile’s ANEPE (La Academia Nacional de Estudios Políticos y Estratégicos) and a Board Member of Taiwan’s Society for Strategic Studies. He is co-editor of Taiwan’s Relations with Latin America: Strategic Rivalry between the US, Taiwan, and China in Latin America (2021).

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