Specific Features of Chinese Economic Expansion in Central America and the Caribbean

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Government of the Russian Federation

National Research University Higher School of Economics

Faculty of World Economy and International Affairs Educational Programme

Socio-Economic and Political Development of Modern Asia

MASTER'S THESIS

Specific Features of Chinese Economic Expansion in Central America and the Caribbean

Student: Frolova Yana

Scientific Advisor:

Olga V. Volosyuk

Moscow, 2018

Сontents

Introduction

Chapter 1. China in Central America and the Caribbean: Reasons and Outcomes

1.1 Chinese Interests in Central America and the Caribbean

1.2 Diplomatic Struggle between People's Republic of China and Taiwan in the Central American and Caribbean Region

1.3 China as Possible Model of Development for Countries in Central America and the Caribbean

Chapter 2. Chinese Infrastructural projects in Central America and the Caribbean: Case Studies

2.1 Chinese Infrastructural Projects in Central America. The Case of Nicaraguan Canal

2.2 Chinese Infrastructural Projects in Jamaica. Highway 2000 and Goat Islands' Port

2.3 Chinese Hydroelectric Projects in Central America. The Case of Costa Rica and Honduras

Conclusion

Bibliography

Introduction

Historically, People's Republic of China did not include Central American and Caribbean countries in list of its interests. Small states with poor income remote from China could not pretend to become a target for Beijing. But situation changed when Beijing old competitor Taiwan got into the game and enticed most of the countries of this region into its allies' camp. At the very beginning Beijing did not react this much, it was more anxious about being the only representative of China in the UN Security Council and stayed focus on domestic affairs. Years past by and the PRC became richer and richer, more and more developed. Ambitions of the Chinese Communist party went far beyond the limits of Asia. The new era of China helping developing countries opened up.

In 1990s Latin America and Africa became new regions to attract Chinese attention. Slowly but persistently they got label “friend” from the PRC. After two decades of Chinese presence there nobody gets surprised about Chinese workers building roads, Chinese teachers giving lectures, Chinese doctors doing vaccination and Chinese managers offering bank and telecommunication services. But what stands behind it? Ambitions of the new world super power? Altruism and wish to help less developed nations? Or revenge Taiwan? The official message from government insists on altruism but it will be our task to find out whether it is true or not.

Chinese spreading their influence abroad is very popular topic for discussion. A lot of experts take Africa and Latin America as an object to study Chinese foreign policy. More than a half of works dedicated to the topic would discuss Brazil, Peru, Argentina, Venezuela, Kenya, Ethiopia, Zimbabwe etc. But almost all the works lack the interest in Central American and Caribbean countries. It is believed that if Beijing does not officially recognize presence of some of them, there is nothing to talk about. But this is a total misunderstanding. Actually this region is involved in full-scale diplomatic battle between Mainland China and its 23^rd province Taiwan. The core of the conflict lies in the idea that the one who would attract more supporters in the region wins. If it is the PRC, Taiwan will lose its last supporters and its chances to be independent will become weaker and weaker. If Taiwan wins, China will have to waste more and more time to swallow it up. Now certain parity was achieved: it is ten countries against ten. But according to recent tendencies this situation may soon change.

In June 2018 Panama has switched recognition in favor of Beijing which made the topic of Chinese presence in this particular region even more relevant. It proves that hidden war for allies takes place there and Beijing is not by chance strengthens its positions. Central American and Caribbean countries have a very good strategic location and thus it makes region worth fighting for. It the last hotspot of Taiwanese recognition and this automatically transforms it into the stumbling stone between the ROC and the PRC. Thus, recent Panama news and opportunity to predict tremendous possible changes in the global balance of power make topic relevant, important and worth to discuss. Academic novelty of the research could be explained by lack of specified studies dedicated to the topic.

The object of our research is relationships between the PRC and the following countries of Central America and Caribbean: Antigua and Barbuda, the Bahamas, Barbados, Belize, Costa Rica, Cuba, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama, Saint Lucia, Saint Kitts and Nevis, St. Vincent and the Grenadines, Trinidad and Tobago. We excluded from the object of our research countries which did not possess full independence and Mexico. In our view the last belongs to Latin American region as a whole but differs a lot from the neighboring states mainly by such factors as level of income, size of the territory, mineral and human resources.

While conducting the research we used mixed methodology. Mostly we implement content analyses, comparative analyses and case studies. We studied the content of articles and researches written in different languages dedicated to our problem and compare them in order to underline different attitudes towards the problem. In the second chapter of the paper, we took six different projects as case studies.

We conduct the present research within the framework of political realism theory taking into consideration that states are motivated by their own interests and their main aim is to ensure safety which is achieved by gaining power. During our research we would try to prove the following hypothesis: Chinese economic expansion in Central America and the Caribbean is an instrument of Taiwan suppression and self-fulfillment by means of which China wants to change the world balance of power.

In our research we discuss some other theories like theory of “periphery realism” written by Carlos Escude, Flying Geese Model and the theory of “soft power” by Joseph Nye. In the third paragraph of the first chapter we speculate on the topic whether it is possible to adopt some methods and technics proposed in these theories to the countries under discussion.

Taking Central America and Caribbean as separate region from Latin America we would try to analyze tendencies and motives of Chinese presence there. The main aim of this work is to prove that Chinese altruism is based on a wish to revenge Taiwan and to argue that Chinese companies tackle infrastructural projects in order to make countries of the region obliged. We would discuss several case studies of Chinese projects in the region namely Nicaragua Canal, Highway 2000 and Goat Islands Port in Jamaica, Patuca III and Aqua Zarca project in Honduras.

In order to achieve the main aim of the work and prove the hypothesis we propose the following objectives:

1. What possible interests the PRC may have in the region?

2. What motives lie behind Chinese growing interest in the region?

3. What are specific features of Chinese economic expansion in Central America and the Caribbean?

4. How does diplomatic struggle between the PRC and the ROC influence the region and who is likely to be a winner?

5. What are the main aspects of Chinese and Taiwanese check-book diplomacy?

6. How countries of the region and the PRC would benefit from Chinese infrastructural projects there?

7. Do the projects suppose win-win formula?

8. Can infrastructural projects help countries of this region to become more developed?

9. Can China or other Asian nations become a developmental model for the region to follow?

Central America and the Caribbean are a new place for China. If one would ask an ordinary Chinese citizen why your country participates in so many projects in Central America and the Caribbean, he or she probably would not understand what you are talking about because the topic of Chinese participation in the life of this region is not widely covered in Chinese media. Chinese citizens have clear directives from the authorities about who is good and who is bad, who is a friend and who is an enemy. And if Latin America already fits this framework with the title of friend, Central America and Caribbean don't have a clear status yet. Historically it was the sphere of Taiwanese interests and China silently ignored this region as it never existed and Cuba was the only reliable friend there. But times changed a lot since then and now Chinese presence in the region is an interesting and relevant topic to discuss.

The PRC growing influence in the region is widely discussed in Western and Latin American press. Most independent authors tend to criticize Chinese side for persistence and intrusiveness. However, state press of Chinese allies does it best in praising and expressing their gratitude to “big Chinese brother”. In order to avoid one-sided opinion and to look to the problem from different points of view we have used sources in English, Spanish, Chinese and Russian.

The majority of works on the topic is written in English which is understandable because the problem is rather popular in the western school of thought. Some of them tend to exaggerate problems but most of them are trying to be objective. We used some articles in Spanish written in Latin America but unfortunately most of them are not easy to access through the internet. There are a lot of sources in Spanish written in form of news articles but they are not of great interest towards our research. On the contrary, news reports written in Chinese might be interesting for us but mostly they represent official point of view of the Chinese government and contain less or even zero personal opinion.

Articles in Russian did not stand out much from other publishers. They are more optimistic and contain much descriptive information than analytic one. While reading, it becomes clear that for Russian authors internal problems of the country are more important than international. Mostly, they tend to discuss Central American and Caribbean region in terms of their relationship with Russia but pay little attention to their relations with China which once again proves the necessity of doing the research on this topic.

Authors who analyze issues connected with Central America prefer to use more general approach instead of examining the countries one by one which sometimes may create certain misunderstandings. Despite the fact that countries of the region sharing the same level of development, their income and living condition are pretty the same, each of them occupies different place in the geopolitical map of this region. In our research we tried to analyze countries separately and emphasize the fact that each of them occupies different niches in Chinese strategical game in the region.

The group of primary sources which we have used could be divided in several groups: statistics, official government agreements and expert opinions. Among statistical sources special attention was paid to Patuca 3 Project Feasibility studies Feasibility Studies Patuca III Project // Inter-American Development Bank, 2017, Doing business statistic by World Bank Doing Business 2017: Economy Profile Nicaragua // The World Bank Group.-Washington.-2017 and information provided by the internet portals Central America Data Central America Statistics//Central America Data, 2017 and Focus Economics Economic Snapshot for Central America//Focus Economics, 2017.Here one should mention that information provided by Latin American agencies were mostly out-of-date. Webpages even of some respectful and well-known news agencies have not been updated for a long time. Chinese statistical information could not be called reliable too due to some specific conditions like censorship and policy of the party. It was used in the work just for sake of understanding and comparison. The biggest part of all statistics was derived from famous global web portals because the topic presupposes suggestions to be proved by figures and thus requires only reliable sources.

Another type of primary sources used in the research is official documentation. The special part here belongs to the text of Legislation Law No.840 Legislation Law No.840 // Nicaraguan National Assembly, 2012 approved by Nicaraguan National Assembly in 2012 both in Spanish and English. The text of the law helps to analyze the situation in the country which took place while it was submitted. The accuracy of those who draw up it leaves much to be desired. It left the feeling of incompleteness and negligence.

Expert opinions had a great influence on the work. The primary sources of this type could be divided in terms of authors' attitude to the problem. One group of authors sticks to positive attitude to the problem, another insists on negative point of view. Among the first group we can mention Jeff Dayton-Johnson and Rolando Avendano and their work “Central America, China and the US: What Prospects of development?” Avendano R. Dayton-Johnson J. Central America, China and the U.S.: What Prospects for Development?// OECD Development Centre, 2014 and Constatino Urcuyo “ China's Strategy in Central America” Urcuyo C. China's Strategy in Central America// Rice University's Baker Institute for Public Policy,2014 P.5. Negative attitude belongs to Kevin Gallagher Gallagher K.China and the Future of Latin American Industrialization//The Frederick S. Pardee Center for the Study of the Longer-Range Future, 2010 which he expressed in all of his works and Sanjay Badri-Maharaj Sanjay Badri-Maharaj China's Growing Influence in the Caribbean//Center for Security Studies Zurich, 2016 who thinks that USA still enjoys greater influence on the region than China does.

It should be mentioned that negative attitude can be seen in works that were written after 2011 and later but all the reports written earlier had more optimistic approaches. One can guess that slowdown of Chinese economy influenced greatly on authors and from that moment on they got rid of illusions. But still both approaches are very important for the work because they look to the problem from different angles.

The work “Central America, China and the US: What Prospects of development?” Avendano R. Dayton-Johnson J. Central America, China and the U.S.: What Prospects for Development? // OECD Development Centre,2014 written by Jeff Dayton-Johnson and Rolando Avendano took special place in our research. It is hard to find detail information about Central American countries and their cooperation with China but this particular work is the best place to find it. It was published under the aegis of OECD Development Center and Monterey Institute of International Studies in 2014 that points to its reliability and accuracy. The work is very consistent and logic. Authors separately discuss countries of the region and share their opinion. They prove their conclusions with figures, statistics, graphs and charts which are extremely helpful because it shows the information clearly. They provide a descriptive analysis of Central America's China trade. Statistics provided in the text are free from the political agenda and seems very reliable.

However, despite all the advantages of this work it is hard to read because of abundance of special economic terminology. Authors use special formulas which made it hard to understand for a usual people. It would be much better for them to explain the phenomenon in more simple way and pay more attention to geopolitical side of the problem.

The report “China's Growing Influence in the Caribbean” by Sanjay Badri-Maharaj Sanjay Badri-Maharaj China's Growing Influence in the Caribbean//Center for Security Studies Zurich, 2016 briefly analyzes existing trends in the Caribbean Region. The author shares his opinion on the question whether it is profitable for Caribbean countries to cooperate with China. His work was published within the frameworks of the conference “The Caribbean Challenges after the Global Crisis” organized by International Monetary Fund and University of West Indies. The author is very concise and clear in describing his opinion which made it easy to follow his thoughts. He wrote the paper in 2011 however, his work is still very relevant and does not look out-of-date. Followings the trends of that time he looks into future collaboration very positively. He hints that Caribbean countries can find a reliable partner and friend in China. But we wonder what he could say about it now - 7 years later. The thing is the work was written on the wave of euphoria. But now we see that for 7 years almost nothing have been done and the scales fell from our eyes.

Among the secondary sources which influenced greatly on this research we can name such articles like “China vs. Taiwan: Battle for Influence in the Caribbean” China vs. Taiwan: Battle for Influence in the Caribbean // Coha,2 012, “Major Central American infrastructure projects” Major Central American infrastructure projects//World Highways, 2012, “Chinese FDI in Latin America: New trends with global implications” Avendano R. Chinese FDI in Latin America: New Trends with Global Implications//OECD Development Center,2017 P.23 and “Trade and Investments between Central America and China” Trade and Investments between Central America and China // Centro Latinoamericano para la Competitividad y el Desarrollo Sostenible, 2014. These articles somehow stand out of the whole bunch of works, they are written about different aspects but in general they all are dedicated to our topic.

Geopolitical side of the problem is overviewed by the article China vs. Taiwan: Battle for Influence in the Caribbean” China vs. Taiwan: Battle for Influence in the Caribbean // Coha,2012 written under aegis of the Council on Hemispheric Affairs (COHA). The article discusses development of the region, its opportunities towards cooperation. Most of the countries of Central America and the Caribbean region established diplomatic relations with Taipei but now the situation is changing and the report somehow tries to predict who will win the diplomatic war: Taiwan or China. This aspect is very important for our research and this article brings certain understanding and sheds the light on the topic.

Another important source is the article “Major Central American infrastructure projects” Major Central American infrastructure projects//World Highways, 2012 which depicts the analysis of all infrastructural projects in the region. It does not contain any geopolitical knowledge but provides a lot of information about technical side of the problem. It contains a lot of data and figures which are really hard to obtain thus becoming almost the only source which could tell us dimensions, capacity and volumes of these projects. It is good in terms of availability but at the same time, it becomes hard to tell whether the figures are accurate because there are no other sources which could prove or disprove it. Judging by the portal where the article was published we can hope that information there would be precise and contains no mistakes.

Brief overview of current trends concerning foreign FDI's in the region is provided by the set of articles “Chinese FDI in Latin America: New trends with global implications” Avendano R. Chinese FDI in Latin America: New Trends with Global Implications// Avendano R, Melguizo A, Miller S.-OECD Development Center, 2017 P.23 written by Rolando Avendano, Angel Melguizo and Sean Miller. The value of this work lies in the fact that not so many authors represent Latin American school of thought. Majority of works belongs to authors from USA and UK and sometimes it is hard to find a reliable source which would represent another bunch of thoughts. In their report authors discuss effects of Chinese FDI in the world and in the region particularly, analyze investments by sectors and by countries and overview the Brazilian case as the most successful one in terms of Chinese investments and cooperation. The report is very well-written, logically constructed and easy to read. However, in our view, authors pay too much attention to cases of Argentina, Brazil, Venezuela and Peru. The emphasis only on these countries made it hard to distinguish it among the other works.

The report “Trade and Investments between Central America and China” Trade and Investments between Central America and China// Centro Latinoamericano para la Competitividad y el Desarrollo Sostenible, 2014 issued by Centro Latinoamericano para la Competitividad yel Desarrollo Sostenible plays a special role in the research. It focuses more on visual presentation of the topic and contains a variety of charts and graphics which made the whole source indispensable. It is written by several authors who are free from biases. They present several opinions on the topic and always confirm them with references. However, they tend to exaggerate the problems under discussion and they want to show the problems the way they see it but not the way they really are. In our opinion they do it in order to attract the audience and raise the amount of discussion of this problem.

Theoretical part of the work is based on the theories of Carlos Escude and his “periphery realism” Escude C. Peripheral Realism Revisited// Escude C.,Schenoni L.-Revista Brasileira de Polнtica Internacional,2016 URL: http://www.scielo.br/pdf/rbpi/v59n1/0034-7329-rbpi-59-01-00002.pdf [Accessed 24.04.2018] P.2, Flying Geese Model The Flying Geese Model//The New York Times, 2010, the theory of “soft power” Nye J. Soft Power: The Means To Success In World Politics//Public Affairs,2005 P.208 by Joseph Nye and articles dedicated to them. During the research also were used several famous books by Henry Kissinger “On China” Kissinger H. On China//the Penguin Press, 2011 P.840, K. Gallaher “The China Triangle” Gallagher K. The China Triangle: Latin America's China Boom and the Fate of the Washington Consensus.-New York: Oxford University Press.-2016, W. Kirby “Can China Lead?” Kirby W. Can China Lead?// Harvard Business Review Press,2014 P.2014, P. Midler “Poorly made in China” Midler P. Poorly made in China//Wiley,2011 P.272 and J. Studwell “How Asia Works” Studwell J. How Asia Works//Groove Press, 2014 P.400. Not all of the books are dedicated strict to the topic but they provide an understanding of what is going on in China, how does China promote its interests, what are its goals, demands and possibilities. These sources helped us to make several reliable conclusions and forecasts towards the future. Unlike scientific papers they explain the terms and notions in more common way that make them easy to read for every person.

Summing up evaluation of all the sources mentioned above we may say that this topic is urgent and up-to-date. We examined a lot of different opinions, theories and ideas and most of them argue Chinese presence in the region being mercy. Even taking into consideration opinions from all over the world it is hard to tell that Chinese Economic expansion in Central America and the Caribbean presupposes a win-win formula.

The paper is not bound with any chronological frames. Most events under discussion took place from 2007 up to 2018 but there are also some historical data from the establishment and recognition of People's Republic of China and Taiwan.

The paper consists of three parts: introduction, main part and conclusion. In the first part we describe main aims of the work and give evaluation of the literature used in the paper. The Main part has two chapters where the first one is dedicated to the Chinese economic expansion in Central America and the Caribbean. It discusses diplomatic battle between the PRC and the ROC, its possible solutions and outcomes. The first chapter of the work is bigger than the second what could be explained by its purposes. It represents theoretical part of the work: firstly, gives strategic bases for research, then discusses political and diplomatic reasons for conducting the study and in the end makes forecasts for future. The second chapter discusses particular cases of Chinese growing influence in the region. We took six infrastructural projects namely Nicaraguan Canal, Highway 2000, Goat Islands Port, Chucas, Patuca III and Aqua Zarca projects as case studies for second part of the research. In conclusion we sum up the main aspects of the problem and made some forecasts for the future.

Chapter 1. China in Central America and the Caribbean: Reasons and Outcomes

1.1 Chinese Interests in Central America and the Caribbean

Chinese friendship with Latin America has been flourishing for 20 years already. China is an active supporter, money lender and a source of FDI to this region. In 2016 level of Chinese investments to this region reached almost 14 billion US$ and amount of deals stated at 35-40. Avendano R. Chinese FDI in Latin America: New Trends with Global Implications // Avendano R, Melguizo A, Miller S.-OECD Development Center,2017 P.1 This partnership is rather stable, however, it could not be called diverse. Biggest part of FDI traditionally was spent on extractive sector and from 2010 there could be seen a slow shift towards services. If we take the relationship between China and Central America as separate, we won't see such good results both in terms of FDI and cooperation. The biggest part of investments goes to Costa Rica, Jamaica and Panama. China-Latin America Finance Database//The Dialogue, 2018 The situation became even more complicated due to the fact that many countries of this region don't have official diplomatic relationship with Beijing. Sometimes this fact is being ignored but most often it possesses a serious obstacle.

There are many discussions on a question why china so persistently tries to conquer this market: there are no mines like in Peru, no huge arable lands like in Brazil, no friendly regimes like Venezuela. In terms of resources Caribbean countries are even less attractive. But why then China is going after them? There could be some possible explanations and assumptions on this topic. We could divide reasons in two groups: political and economic.

Political reasons are connected with Chinese image abroad. China tries to perceive itself like a reliable partner rather than competitor. Speaking about Chinese foreign policy one may conclude that it is well-thought, gradual, persistent and sometimes even harsh. The situation with the East-China Sea proves us that Chinese don't like hearing refusals and if they are up to something they will likely fight till the end. For Communist Party interests of China and its people are above all. However, even if sometimes Chinese government permits itself certain impudence in promoting its interests abroad, one cannot call their strategy “half-baked” and not consistent.

Central America and the Caribbean fit the overall mood of Chinese foreign policy and “Soft Power” strategy. China represents itself as an alternative to USA. Chinese somehow try to promote the image of “Good friend”. In 24^th of November 2016 Chinese authorities issued “China's Policy paper on Latin America and the Caribbean” China's Policy Paper on Latin America and the Caribbean//Ministry of Foreign Affairs of Peoples' Republic of China, 2016 where they made an attempt to explain what they expect from cooperation with this countries and which sectors they are target on. According to the document the core of the whole cooperation lie in win-win formula. The paper was supposed to show official position of Chinese authorities, to dispel all the doubts and calm down all those who worried about that. The document partially succeed in fulfilling these goals. Paper includes a lot of encouraging calls and slogans. For example, the word mutual with different endings such as trust, benefit, support, cooperation, respect and understanding is used more than 20 times. Those phrases are clearly standing out of the text and became prop words as they probably were intended to. However, this document could not be called 100% real in terms of implementation. It contains a list of goals and measures but sometimes goes very far from it. The phrase: “China will actively hold dialogues between civilizations to bring the hearts of our peoples closer, and make contributions to promoting the harmonious coexistence of different civilizations in the world” Ibid sounds more like a solemn hymn but not like a plan for real action aimed at cooperation. The authors of the document claim: “The development of China cannot be possible without the development of other developing countries, including countries of Latin America and the Caribbean”. Ibid We could take this phrase as an aspirational generalized reason to be present in the region. All in all, the paper may be considered as a “Declaration of Intention” which could partially explain us what China is up to.

Among other political reasons we can name a wish to gain “revenge”. Historically being so Central American countries were the sphere of interest of the United States and supported Taiwan and thus ignored Peoples Republic of China. Taiwan always was an active sponsor and donator for this region but slowly this situation began changing. China already “lost” this region in terms of geopolitics and it doesn't want to repeat the situation once again. China can kill two birds with one stone: diminish American influence and give a strong response to Taiwan which dominated in the region for a long time. Howsoever the Dominican Republic, Belize, Haiti, Saint Lucia, Saint Kitts and Nevis, Saint Vincent and some other states still recognize Taipei--not Beijing. Ward J. Making Sense of China's Caribbean Policy// China Brief Volume17, 2017 We will discuss diplomatic competition between “two Chinas” more closely in the next paragraph of our research.

One more reason which is closely connected to geopolitical issues is the wish to resist and compete with the USA. American influence has long been crucial in this region. It started in 18^th-19^th centuries and never stopped till now. It will be illogical and silly for US to pay little attention to Central America and Caribbean because the region literally is on the American doorstep. Having influence there means controlling Caribbean Sea and Panama Canal which means a lot in terms of strategic planning. In the first and second decade of 21th century USA were not so friendly with Central America and Caribbean, they cut the spending and credits and focus more on domestic policy. China could catch up the moment and get into game.

Despite the fact that political reasons have very stable ground and really motivate China, we think that economic one may prevail. The thirst for profit sometimes may push even harder. Even if this profit may not be expected in a short term, Chinese firms and businessmen will go there one after one because they feel potential. According to the last policy paper: “China will encourage its enterprises to go to Latin American and Caribbean countries to carry out cooperation in such fields as automobiles, new energy equipment, motorcycles and chemical industry, which will cover the whole industrial chain, so that the two sides can complement each other, increase local employment, upgrade the level of industrialization and promote local economic and social development”. China's Policy Paper on Latin America and the Caribbean//Ministry of Foreign Affairs of Peoples' Republic of China, 2016 It is interesting that among priority spheres in the region Chinese officials did not mention agriculture. Since agricultural production is very important for all the countries of the region. In most cases it is the main products for trade.

Speaking more globally, China may prepare a certain “base for jump” in the Central America or in the Caribbean. After the global economic slowdown the things are going out not as good as they used to. When Chinese economy started booming in the 1980-1990^th country tried to use its own resources both human and mineral to develop its economy. But things had changed since then and the state will need something new to respond the challenges of the present and to promote economic boom once again. By means of favorable and profitable conditions of agreements China can not only reduce the aftermath of the crises but also “make itself great again”.

There are a lot of experts that claim that mineral resources play significant role in Chinese turn to Latin America which is true. But could this statement be applicable to Central America? There are minefields of Nickel, Gold, Silver, Sulfur, Stibium, Mercury, Aluminium and crude in Central America and Caribbean Islands. But those minefields are medium or small which makes the whole point of China wanting to catch up the resources questionable and controversial. For sure they may gain some profit from extracting mineral deposits but if we look on the Mineral deposits world map the territory of Belize, Guatemala, Nicaragua, Panama, Costa Rica, Salvador, Cuba, Jamaica and their neighboring countries will look almost “naked”. China itself would have 6-7 times more resources than those countries. Major mineral deposits of the world // USGS So South American and African tactics would be absolutely useless because amount of mineral resources there cannot be compared with the region under discussion. And thus this reason itself had a right to exist but it could never become the first in the list.

One more assumption connected with mineral resources can be the opportunity to change old suppliers and gain new one. Chinese industrial production is on the growth and hardly anything could be changed in the recent 10-15 years. Chinese companies still will produce a lot and thus need a lot of raw material. The cheaper it will be the more compatible Chinese production will become and the more profit manufacturer would get. This simple truth is pushing Chinese economy further to new markets and new suppliers.

Even if region has low potential in terms of natural resources, it worth paying attention in terms of human resources. More than 178 million people live in Central America and another 44 million in the Caribbean. The average age stands between 26-30 which is a good starting point for industrial development. Caribbean Population Live // Worldometers In condition of high unemployment a foreign investor opening venture there could easily find working force. But the thing is - human resources are good in quantity but not in quality. Level of education is low and hardly everything can be changed in the recent decade.

Thinking about China in terms of working force the logical conclusion will be that it doesn't suffer from lack of workers. The main privilege here may lie in the price of this working force. Those times when workers have extremely little salaries in China are far behind; now their income and life standards are higher and thus influence the price of the final product. Central American and Caribbean countries could become a very good place for production in terms of salaries. It could not become a center for advanced production but products which don't demand high skilled working force could be easily produced there. But there is a problem - would this working force be motivated to do their job properly? Usually the best results are gained from people who obtained feeling of mission, feeling of belonging to something common and global, feeling that they could help to fulfil a common dream. Will those workers be inspired working for a foreign venture we are not sure.

Mentality also plays a big role in work quality. Jamaican Minister of Labour Derrick Kellier discussing the criticism of Chinese investments said, “The culture of the Chinese is a little different from the culture of the Jamaican worker,” adding that, while a Jamaican engineer encountering a wheelbarrow on a worksite would “walk around it,” a Chinese engineer would “take it up and move it.” Lumsden A. Jamaicans must read China's record, not just its lips // Coha, 2015

Another stumbling stone is - does China really want to create new working places for locals? If one applies to statistic of Chinese companies building infrastructural projects in Africa, he or she will see that according to some sources in Angola Chinese companies hired 70 to 80 percent of their labor force directly from China. China's record in Africa suggests that its companies have little intention of providing employment to locals. Ibid Projects abroad may be beneficial for China in terms of employment. If inner capacities of the country don't allow employing all those who need, projects abroad could fill this niche. Doing so, in first term, China helps itself.

One more obstacle which may deprive from extra profit is infrastructure. Central America is covered with tropical rainforests, it has tropical humid climate, constantly suffers from hurricanes and floods. Moreover it is an earthquake-prone region. The climate of the Caribbean region is little different from Central America. It is a chain of islands which make it very sensible to the weather conditions. Countries of this region could not be called prosperous: some of the world poorest countries situated there. All these factors make it hard to develop economy itself not to speak about infrastructure. Bad roads, sea ports with low capacity, lack of railroads - all of it make cost of production higher and thus reduce potential advantage in price and cost of labor.

Summing up all the reasons for China to be present in the region and their pros and cons one may say that it will be much easy not to touch the region at all. Poor infrastructure, non-qualified working force, non-favorable climate, no mineral resources - how at all this region become a target for Chinese? But the answer will be simple - strategic location. Situated between two oceans, on the crossroads of several sees, close to the United States - It is hard to imagine a tastier morsel. Geographical location is something which no one could ever take away, ruin or loose. It is something where a way to prosperity for those peoples could start. Unfortunately, up till now authorities of this region did not take a lot of advantage from this - maybe they were busy building their own fortunes or maybe they spend money on wrong budget items but all in all there was only small rise in prosperity for the last 50 years in this countries. The answer to the question “why happened so?” probably will be the same as to the question why all those financial contributions donated to Africa did not make the situation in the continent better. When extra money comes to the country with no stable political culture and political institutions they came straight to the pockets of authorities and settle up there. Politicians are not motivated to spend them on people and their needs; they are interested in their own life. This vicious circle exists everywhere across the 3^rd world countries and up till now no one knows exactly how to break it. In 19^th and 20^th century necessity to fight for independence was a good excuse for poverty: we have problems because we are fighting for our freedom and after we gain it everything will be perfect. But in reality long-awaited independence did not change the situation much. In the end it all came down to question: “We fight bravely for independence and what now?”

Before the things did not go too far Central American and Caribbean countries should ask themselves: Whom should we trust? Is China a panacea? Everything looks very good and optimistic after reading joint communiquйs and “love and friendship” announcements but no one knows how things are going on in reality.

To understand better are there any hide motives in Chinese foreign policy, we will examine possible interests country by country. Speaking about Central American countries we mean the following: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Among Caribbean Countries we will touch upon Antigua and Barbuda, the Bahamas, Barbados, Cuba, Dominica, Dominican Republic, Grenada, Haiti, Jamaica, Saint Lucia, Saint Kitts and Nevis, St. Vincent and the Grenadines and Trinidad and Tobago. The Figure 1 will help us to understand level of Chinese Foreign Direct Investments in the region under discussion.

Figure 1 “Chinese FDI in Latina America, by country (2003-2016) Avendano R. Chinese FDI in Latin America: New Trends with Global Implications//Avendano R, Melguizo A, Miller S.-OECD Development Center, 2017 P.7”

Chinese interests in the region are varied from country to country. There are a lot of polemics around Chinese-Central American collaboration but only real figures can show whom China favors nowadays. According to China-Latin America Finance Database the biggest amount of Chinese FDI in this region went to Trinidad and Tobago and amounted for $2.6B. China-Latin America Finance Database//The Dialogue, 2018 However, those FDIs are not stable. Trinidad and Tobago received money in 2013 and 2014 but had nothing in 3 recent years. In both cases money was spent on infrastructure: building roads, port and hospital.

China may be interested in Trinidad and Tobago because of crude deposits. This country is a leader of oil production in the region. Proven crude-oil reserves in 2013 were estimated at 728 million barrels. An overview of the oil and gas industry in Trinidad and Tobago//The Caribbean Development Portal UN ECLAC The diplomatic relationship between two states exists for 44 years already which makes a good base for mutual cooperation. In 2013 the relationship between two states seems to be cloudless. In June 2013 Xi Jinping paid his first visit to the country. Even there were no loud announcements since then, both parties communicated with each other: issue communiquйs, send official messages and actively develop cultural exchanges. The relationship doesn't stand still - in January 23^rd 2018 Chinese Foreign Minister Wang Yi has met with Minister of Foreign Affairs of Trinidad and Tobago Dennis Moses. Chinese Ministry of Foreign Affairs gave a warm but noncommittal comment: “The Chinese side appreciates that Trinidad and Tobago supports and participates in the "Belt and Road" construction, and is willing to further deepen cooperation between the two sides so as to realize mutual benefit and win-win results.” Wang Yi Meets with Minister of Foreign Affairs and CARICOM Affairs Dennis Moses of Trinidad and Tobago//Ministry of Foreign Affairs of People's Republic of China

Another receiver of Chinese FDI in the region is Jamaica. For the recent 11 years, it has received $1.8B China-Latin America Finance Database//The Dialogue, 2018. In 2013 amount of FDI reached its highest point - $757M. As it was the case with Trinidad and Tobago, more than 60% from the whole amount of money went to Infrastructural projects - mostly roads.

Diplomatic ties between two countries were established in 1973 but their active development started only in 1990s. While visiting Trinidad and Tobago Xi Jinping has also met with the leaders of other Caribbean states among them was Jamaican Prime Minister Portia Simpson-Miller. Diplomatic ties are being strengthened by both sides. A lot of meetings on different levels are held annually.

Chinese entrepreneurs are also very active in the island. They open their own shops and companies and also buy local manufactories especially those which engaged in mining industry. In 2016 Alpart alumina refinery in Nain was sold to Chinese state-owned company Jiuquan Iron and Steel Company (JISCo). Chinese investment in Jamaica and region growing // Caribbean Council Active spread of Chinese firms and managers could not be left unnoticed. Local people and politicians often criticize Chinese. Despite the investments they bring to the region, they restructure plants and factories and don't hesitate to fire people. For example, Chinese-run Pan-Caribbean Sugar Company bought several sugar plants and fired around 400 people in the sake of restructuring. Lumsden A. Jamaicans must read China's record, not just its lips//Coha,2015 The answer of authorities is simple: anyone critical of China should first “show their level of investment in Jamaica” Ibid which is understandable because finding more or less reliable investor is not an easy task.

Jamaica is a home for several global Chinese projects. Among them perhaps the Goat Islands Port and North-South Highway 2000 are the most famous one. China Harbor Engineering Company is in charge of both projects. But if the Highway project was successfully completed, the port in Goat Island is still only being discussed because of numerous protests of local people and ecologists. Despite all the obstacles we believe one day the port will be finished because it has an extremely important strategic position. It will serve as a base for Chinese ships on a way to Panama Canal and thus may become the most important reason of Chinese establishing their presence in this country.

A special place in Chinese foreign policy is booked for Cuba. Both states are communist and share the same ideas. The official site of Ministry of foreign affairs of the PRC declares that both sides “enjoy increasing political trust”. China and Cuba// Ministry of Foreign Affairs of People's Republic of China No other country in the region received such a positive characteristics. China has become the main export destination for Cuban goods, as well as the main importer on the island. Vargas Y. In Cuba, a Chinatown With No Chinese // the Diplomat, 2017 Cuban authorities actively buy Chinese trains, buses and cars. Ibid Huawei occupies the growing internet market. Recently it has been announced that Guangzhou Automobile Group Motor comes to the Cuban market. It will produce cars for rent ordered by Cuban Ministry of Tourism. From 2005 Sinopec together with Cuban companies explore oil deposits.

China may be interested in Cuba for several reasons: first of all, it is fellow communist state and reliable partner and secondly, it is a consumer of Chinese goods. In terms of FDI Cuba has already received more than a billion dollars from “Big Brother”. Traditionally Venezuela provided a huge amount of financial help to Cuba, but with the coming oil crises this help significantly decreased and China stepped up to fill this niche.

Another important state in the region is Panama. This state is a newcomer in China ally's team. Countries reestablished diplomatic relations in June 2017 and before that it was in Taiwanese sphere of influence. This strategic move demonstrated that Chinese impetus on spreading their influence is working. Beijing will make it worth Panama while. Due to the absence of diplomatic relations the amount of FDI to the country was very low - $2,525 in 2010 and $70 000 in 2011. Trade and Investments between Central America and China// Centro Latinoamericano para la Competitividad y el Desarrollo Sostenible, 2014 But recent events changed everything. In the end of last year Tiananmen Square was decorated with 2 sets of flags - the PRC and Panama which has a strong symbolic meaning. The first important deal between two countries is a construction of the port in the Amador Causeway. The new port will be able to receive large vessels and expected to be put into operation in 2 years.

Panama is also a country with extremely good geographical position. Panama Canal literally “feeds” country for more than a century up till now. But in terms of agricultural production Panama did not possess much advantage - it sells bananas, frozen shrimps, lobsters and beef. Ibid

Panama became a huge victory for Beijing. Establishment of diplomatic relations became the real proof of Chinese intentions and their strategy. Now there is no need for China to build a new canal in Nicaragua - they can just expand existing one in Panama. We may only guess what strategic moves will China take there but we consider Panama will be one of the most important destinations for China.

Another important partner for China is Costa-Rica. The diplomatic relationship between two states exists not so long - only 10 years but both sides manage to achieve good results in terms of cooperation for this period. Up till now Costa-Rica has been constantly receiving FDI originated from China. In 2015 it got the biggest investment -$395M from Chinese government and Ex-Im Bank for building a highway from San Josй to Limуn. China-Latin America Finance Database // The Dialogue, 2018 Well-known Chinese Company Sinohydro is now constructing Chucas Hydroelectric dam with 50 Megawatt capacity. Two units of the project are already operating successfully.

Costa Rica may become a very perspective consumer of Chinese technologies and devices. Authorities want to encourage usage of electric cars and renewable energy. In terms of trade the main products for sell are agricultural but there is a small number of more advanced production like instruments for surgery and dentistry. Costa-Rica is a perspective market for China. It is China's second largest trading partner in Central America while China is the second largest trading partner for Costa Rica. China-Costa Rica Free Trade Agreements // China FTA Network