China’s increasing presence in Latin America has been subject of much discussion in Latin American academia and popular media. The growing role of China in the region raises many questions. Is China an alternative, anti-imperialist partner (McKay et al., 2016)? Are we witnessing the emergence of a ‘Beijing consensus’ that may replace the ‘Washington consensus’ (Slipak, 2014)? Is China simply producing new relations of dependency? This paper intends to explore these questions by examining the political economy of China-South America relations, specifically through a focus on the production and trade of soybean. This crop is, on the one hand, the fastest expanding economic activity in some of the largest countries in South America, such as Argentina and Brazil, and on the other hand, it is the main component of agricultural exports to China. The relevance of soybean for the Chinese economy is connected to this country’s needs to satisfy a growing population whose food preferences are improving. According to Zha and Zhang (2013), food security is a top priority for the government, as the risk of social turmoil linked to food availability is taken extremely seriously Beijing (Freeman, Hoslag and Weil, 2008). This paper hence explores the ways in which China-South America relations are strongly marked by the former’s strategies to expand its governance of the soybean commodity chain.
This paper is organised as follows: the first section will explore the relationship between China and South America and its connection to the soy boom; the following section explores the trade implications of this connection in more detail, focusing on the role of soybean in these exchange relations. The third and fourth sections analyse Chinese strategies for extending its control of the soybean commodity chain, by first exploring how acquisitions of land, takeover of South American agricultural companies and Chinese government investments in South American infrastructure give China a continuous supply of soybean at competitive prices, and secondly by looking at the Chinese government’s capacity to authorise (or not) new biotechnological innovations as a form of leverage in the international trade of grains. Overall, this paper will argue that China-South America relations are strongly marked by China’s multiscalar strategies for increasing its influence over the governance of the soybean commodity chain.
China and the South American Soy Boom
The commodity boom long cycle that began in the year 2000 was largely the result of the rising demand for energy and food staples by the emerging economies. Amongst these, China was usually signalled as the main driver behind this upward trend in the international market (Baffes and Haniotis, 2010). While, this constituted a challenge for net importing countries, particularly with regards to agricultural commodities and hence affecting issues of food security; for those net-exporting countries who were capable of adjusting to the new level of demand, the boom became an opportunity to expand their performance in international trade. For Latin America, this represented a radical improvement in its terms of trade, and the region became an important supplier of natural resources and agricultural commodities to the international market.
In the 1980s, China began a policy of opening up its economy and reaching out to other areas of the world. Almost simultaneously, from the 1990s on, China’s outward strategy began to include increasing its diplomatic and economic ties – mainly through trade – with Latin America. As Wise and Quiliconi note, this increasing contact and the 2001 entry of China into the World Trade Organisation has resulted in two outcomes regarding China-Latin American relations. Firstly, a specific pattern of trade relations have emerged, as Latin America becomes a supplier of raw materials and agricultural exports to China, while China has increasingly exported manufactured products to Latin America (2007). It is this pattern, reminiscent of the subject of dependency theory’s analysis, that has led many authors to talk about a North-South dynamic emerging, rather than a scheme of South-South cooperation (Sevares, 2007; Slipak, 2014). Secondly, there has been an increase in competition experienced by countries in the north of Latin America, chiefly Mexico and certain Central American countries, from Chinese imports such as textiles and electronics (Wise and Quiliconi, 2007: 411). There is a geographical division between South and Central and North America underpinned by the different economic dynamics that emerge from China’s increasing presence in the region and in the global economy.
The commodity boom has also transformed the global food system in terms of which products are produced and traded. In particular, there has been an increasing relevance of so-called ‘flex crops’, meaning crops and commodities that can have multiple uses thus so are flexibly interchangeable (Borras et al., 2015). The existence of these crops also depends on other flex commodities being able to fill in possible usage shortages as a result of these changes. The expansion of these crops is furthermore linked to the demand for animal proteins in developing countries whose populations’ dietary demands have been changing towards greater consumption of meat.
Among the rise of these flex-crops, soybean has risen to become one of the most important agricultural commodities today, fuelled by its ‘fundamentally flexible’ quality (Oliveria and Schneider, 2014: 2). Originally an Asian crop, soybean was introduced to the United States and other American countries at the beginning of the 20th century, but it was in the 1990s when it started to gain prominence as an export commodity (USDA ERS; Dros, 2014: 9). World production of soybean in 1994 was around 136 million tonnes with a harvested area of over 62 million hectares. Twenty years later, production has increased by over 150% and the harvest area has grown by almost 90%, covering, as of 2014, over 1 million square kilometres (FAOSTAT). Moreover, soybeans lead global commodity trade in terms of value, exchanging over 90 thousand tonnes worth over US$51 billion in 2011 (FAOSTAT).
The production and trade of soybean has a very particular and clear geographical dynamic: while China and East Asia in general are the main areas of consumption, production is split between China and the Americas. As China’s production is consumed domestically, exports mainly originate from the American continent, and are chiefly destined for China in the form of grains. Myers and Jie suggest that the Chinese government’s prioritisation of the domestic production of rice, wheat and corn, fundamental for the country’s grain sufficiency, over soybean, has fuelled the global boom for this commodity (2015: 7). In fact, the rise of soy as a flex-crop and as a valuable agricultural commodity is inextricably linked to China’s demand and the changes in Chinese structure of consumption. As one analysis estimates, the grains:meat-fish:vegetables-fruit ratio went from 8:1:1 in 1980 to 4:3:3 in 2005 (Myers and Jie, 2015: 5). As evidence of the inextricable link between soy’s rise and Chinese demand, WWF reported that the China’s consumption of soy increased from 26 to over 55 million tonnes between 2000 and 2009, and Chinese imports are expected to have increased by almost 60% by 2022 (WWF, 2014). China imported 69 million tons of grain and 1.4 million tons in soybean oil in the last year, while the European Union received over 12 million tons of soybean and 19 million tons of soybean meal in the same period (Foreign Agricultural Service/USDA 2014). According to the OECD-FAO Agricultural Outlook 2013-2022 (2013), production of oilseeds in general is expected to increase by 26% over the next decade, through a combination of re-distribution of land use in favour of oilseeds and increased yield. Increasing demand for soy, both for consumption in China (and other developing countries such as India) and as biofuel, reinforces a tendency for oilseed prices to increase in the medium term, consolidating the profitability of the crop (OECD/FAO 2013:141).
While demand for soybean is geographically concentrated in East Asia and particularly China; supply is also spatially focused. Most soybean production for export is found on the American continent. Global supply of the oilseed is dominated by the United States, Brazil and Argentina, who together cover 75% of the world’s production (FAOSTAT). More specifically, the Southern Cone in South America has a prominent role as a pole for soybean provision, and Brazil, Argentina and Paraguay follow closely the United States in volumes of production and export.
China’s economic expansion and increasing demand for primary commodities has enabled, along with other structural conditions, the rapid growth of agricultural production, and particularly that of soybean, in South America. This, in turn, has been a fundamental piece in the region’s overall growth in the last decade. The following section explores in more detail the trade relationship that soybean has facilitated among the Asian country and the Southern Cone of the Americas.