Table of Contents
Chapter 1. Introduction 1
1.1. Background 2
1.2. Problem Statement and Research Questions 4
1.3. Purpose 4
1.4. Scope of the research and delimitations 5
1.5. Thesis structure 5
- Literature review 6
- Development of the political and economic relations between Colombia and China 6
3.1. Trade balance 6
3.2. Agreements 6
3.3. Current projects 6 - Theoretical background 6
4.1. Foreign direct investment theory 6
4.2. Dependencia theory 6 - Case Study 6
- Results 6
- Conclusion 6
- Delimitations 6
- References 6
- Appendices 7
A. Statement of Authorship 7
Chapter 1. Introduction
1.1. Background
In September 2013, Chinese president Xi Jinping introduced during a speech in Kazakhstan the Silk Road Economic Belt, a cooperation plan to reactivate the ancient Silk Road between China and Central Asia. One month later, during a speech at the Indonesian parliament, the 21st Century Maritime Silk Road strategy was proposed as an investment plan to reinforce ties between China and the ASEAN Community. Finally, in November 2013, the strategy was further elaborated and the Belt and Road Initiative was created under the name OBOR-One Belt One Road, it aimed to strengthen cooperation and to promote trade and development between China, Asia, Africa and, Europe.
On November 17th, 2017, 5 months after establishing diplomatic relations, the government of the Republic of Panama and the government of the People’s Republic of China signed the memorandum of understanding on cooperation within the framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative, making Panama the first Latin American country in joining the massive project and opening a door to all the countries from Latin America and the Caribbean, which require infrastructure development and connectivity to consider their adhesion.
To date, more than 19 out of 33 Latin America and the Caribbean countries have joined the Belt and Road Initiative, increasing China’s presence exponentially and turning it into the main trading partner for several countries of the region and second trading partner in Latin America. Nonetheless, Brazil and Mexico, LAC’s largest economies, have been reluctant to sign the BRI, expressing their wishes to strengthened ties with China and to create a strategic association adapted to specific needs that will bring mutual gain, without adhering the Belt and Road Initiative. Argentina’s former government was also reluctant to join the initiative, until December 2019, when Alberto Fernandez, Argentina’s new president manifested his intentions to renew the bilateral relations of the third LAC’s largest economy with the Asian giant, and expressed his interest in joining the Initiative. Meanwhile, Colombia, fourth LAC’s largest economy and the only Andean country without a signed Memorandum of Understanding within the framework of the Belt and Road Initiative, is still studying the possibility to join it in 2020, after signing several contracts to develop infrastructure projects.
Since its launch, the Belt and Road Initiative has generated great controversy and the United States has been one of its biggest detractors. American politicians have accused China of having intentions to create debt in the developing countries that will lead to economic dependency, and have warned the LAC countries of accepting loans from China (Churchill, 2018).
For a century, the United States has been Colombia’s largest trading partner and investor. The two countries established diplomatic relations in 1822 and keep close ties to cooperate in the fight against transnational crime. Colombia is the closest ally of the United States in Latin America, through the years the United States has aid Colombia to support order, security, and development. The Colombian government wants to preserve the strong traditional links with the United States, nevertheless, the current governmental instability with the Trump’s administration has created a general feeling of uncertainty, plus the weak global economic growth, and the global politics that have reshaped the market demanding for innovation, integration and, variety, caused companies and entrepreneurs to lobby for the integration into the Belt and Road Initiative, as it offers great opportunities of diversification.
1.2. Problem Statement and Research Questions
Considering that Colombia has the smallest Chinese investment and the lowest percentage of trade with China in the region, the problem statement of this thesis is:
“What are the implications of China’s Belt and Road Initiative in Colombia?”
To solve this question it is necessary to deepen understanding of the magnitude of the Initiative in Colombia, to ascertain the opportunities and potential effects of the BRI on society, economy, development and, environment, and to determine the potential geopolitical consequences that the region could face under the initiative. To achieve the previous objectives, the following questions have to be solved:
“What are the benefits and risks of the Belt and Road Initiative to Colombia from a geopolitical and economic perspective?”
“What are the challenges Colombia will face under the initiative?”.
1.3. Purpose
The Belt and Road Initiative is changing Latin America’s traditional dynamics. Its detractors accuse the strategy of being debt-trap diplomacy and its supporters claim it is a mutual benefit project that will bring prosperity to the regions. Therefore, the purpose of this thesis is to examine the economic and geopolitical effects of the Belt and Road Initiative on Colombia, as well as the challenges the country will face after its accession in the Initiative.
Based on a literature study of the Dependencia Theory and the Foreign Direct Investment Theory and a case study based on the evaluation of other emerging markets’ experiences in projects made within the framework of the Belt and Road Initiative, the goal is to evaluate the possible positive results of the project in Colombia and suggest solutions to avoid the negative consequences.
1.4. Scope of the research and delimitations
The thesis is primarily focused on geopolitics, bilateral trade, society and, development, between the Republic of Colombia and the People’s Republic of China. To conduct the research, secondary data will be used, figures will be mainly taken from the National Administrative Department of Statistics (DANE) and the Bank of the Republic from Colombia, and Bloomberg.
1.5. Thesis structure
Chapter 1 will be focusing on the introduction and background of the subject, it contains the purpose, research questions, scope and, delimitation of the study. Chapter 2 will contain the literature review. Chapter 3 will present and analyze the development of the political and economic relations between Colombia and China. It contains the trade balance between Colombia and China, Chinese direct investment in Colombia, agreements signed by those two nations and, current projects that will be developed in Colombia by Chinese companies. Chapter 4 will explain the two theories that are going to be used to analyze the case study, the foreign direct investment theory and, the dependencia theory. Chapter 5 will be a case study. Observing the experiences of other emerging markets that join the Belt and Road Initiative earlier and have finished projects, the goal is to evaluate if the strategy has colonialists purposes or if in reality will be a mutual gain for Colombia and China. Chapter 6 will be an assessment of the results from the case study and a discussion about the possible geopolitical consequences Colombia could face with neighboring countries and the United States. Chapter 7 will have the answers to the research questions and the problem statement.
- Literature review
- Development of the political and economic relations between Colombia and China
- Theoretical background
4.1. Foreign direct investment theory
4.2. Dependencia theory - Case Study
- Results
- Conclusion
- Delimitations
- References
Churchill, O. (2018, October 20). Mike Pompeo warns Panama and other nations about accepting China’s ‘belt and road’ loans. Retrieved from South China Morning Post: https://www.scmp.com/news/china/diplomacy/article/2169449/mike-pompeo-warns-panama-and-other-nations-about-accepting