A/S SHANNON LEADS U.S.-CHINA LATIN AMERICA

C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 004152

SIPDIS

E.O. 12958: DECL: 11/06/2028
TAGS: PREL PGOV ETRD CH XL XM
SUBJECT: A/S SHANNON LEADS U.S.-CHINA LATIN AMERICA
SUBDIALOGUE

Classified By: Political Minister Counselor Aubrey Carlson, reasons 1.4
(b/d).

Summary
--------------


1. (C) China views Latin America as a stable region with
great economic potential, MFA Latin American Affairs
Department Director General Yang Wanming told Assistant
Secretary for Western Hemisphere Affairs Thomas A. Shannon
during the U.S.-China Latin America Subdialogue in Beijing on
October 16. Both sides agreed to take steps to
"institutionalize" the Subdialogue and ensure its
continuation. DG Yang said China is open to the idea of
cooperating with the United States on development assistance
in Latin America and asked for concrete proposals. China's
trade with Latin America has expanded greatly in the past
year, as has its military-to-military cooperation in the
region. A/S Shannon characterized political tensions in
Bolivia and the problem of narcotics trafficking and
organized crime in Central America as two major areas of U.S.
concern in Latin America. A/S Shannon asked for China's help
in conveying to the Cuban Government the importance and
usefulness of the U.S. offer of relief and reconstruction
assistance following this year's hurricanes. End Summary.

Overview of China's Relations with Latin America
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2. (C) Latin America enjoys overall stability, and increasing
integration through regional organizations such as the Union
of South American Nations (UNASUR) and the Organization of
American States (OAS) has had a positive effect on the
region, MFA Latin American Affairs Department Director
General Yang Wanming told WHA Assistant Secretary Thomas A.
Shannon during the U.S.-China Latin America Subdialogue in
Beijing October 16. The region has been developing its
economic potential, and the sustained economic growth of the
last ten years is likely to continue. China and many Latin
American nations, as developing economies, have common goals
and interests, DG Yang said, adding that China appreciates
Latin American support on sovereignty issues such as Taiwan
and Tibet. Sino-Latin American relations have grown in
recent years, he said, citing frequent high-level visits as
evidence. China pays close attention to U.S. initiatives in
the region, such as the Pathways to Prosperity program and
counter-narcotics efforts in Latin American and Caribbean
nations, Yang said. A/S Shannon stressed that the United
States and China are not competitors in Latin America, as
both share the goals of political and economic stability and
shared prosperity for the region. He noted that China's
engagement with Latin America can be conducive to the
stability of both the region and the world at large.

Institutionalizing the Subdialogue
--------------


3. (C) Both sides agreed that the U.S.-China Latin America
Subdialogue is worth "institutionalizing" and that its
continuation is in the best interest of all parties. Yang
noted that the dialogue is important for China's
comprehensive understanding of the region, while A/S Shannon
stressed that Secretary Rice supports the dialogue.

Potential Cooperation in Latin America: Development
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4. (C) China is open to future cooperation with the United
States in Latin America, Yang said, so long as the opinions
of the concerned Latin American nations are fully considered.
He suggested the United States and China "tackle easy issues
before thorny ones," and implement cooperation gradually. He
noted that previous cooperation, including U.S. support for
including China in the Inter-American Development Bank
(IADB),was successful. Embassy USAID Development Counselor
outlined possible themes for development cooperation in Latin
America on issues such as health or the environment. Other
possibilities include collaboration on education or
employment projects to help youth in Latin America. She
noted that private companies operating in the region are
willing to participate in such projects because they, too,
have an interest in increasing social stability. Yang
reiterated China's willingness to cooperate and asked for
concrete proposals to consider.

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5. (C) Recent hurricanes and the cancellation of an
international donors conference in the wake of the Haitian
Government's collapse have left Haiti in a dire situation,
A/S Shannon said. He thanked Yang for China's contributions
to the UN Stabilization Mission in Haiti (MINUSTAH) and noted
that since Haiti has established a new, functional
government, there is room for Sino-U.S. cooperation there.
Yang responded that China donates USD 20 million for
peacekeeping operations in Haiti annually and has sent 7
tranches of peacekeepers totaling over 870 police. China
also provided humanitarian aid following the hurricanes. He
noted, however, that since the Haitian Government does not
have diplomatic relations with the PRC, Haiti might not be a
suitable venue for cooperation. The U.S. should propose
alternate countries for a joint assistance project. Yang
said that China is willing to stay in touch with the United
States on cooperation in Haiti.


6. (C) Asked how best to approach China's assistance
bureaucracy regarding cooperation, Yang said that the Untied
States should first approach his Department, the MFA Latin
America and Caribbean Department, and then he would bring his
colleagues from other MFA divisions and the Ministry of
Commerce (MOFCOM) into the process as appropriate.

Latin American Economic Situation
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7. (C) A/S Shannon attributed Latin America's to date minimal
fallout from the global financial crisis to the region's
strong central banks, sound fiscal policies and increasingly
diverse export markets. As China has been directly involved
in the diversification of Latin America's trade portfolios,
it has acted as a stabilizing force in the region, he said.
Despite the current level of economic stability, a global
recession could harm Latin America by decreasing commodity
prices and increasing the difficulty in obtaining external
financing, upon which more vulnerable countries in the region
depend for financing development.

Sino-Latin American Trade Relations
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8. (C) China's trade relationship with Latin America is
growing rapidly and continues to diversify, MOFCOM Americas
and Oceania Department Deputy Director General Xu Yingzhen
said. Trade surpassed USD100 billion for the first time in
2007, reaching USD103 billion split equally between imports
and exports. In the first eight months of 2008, two-way
trade volume reached USD95 billion, an increase of 40 percent
over the same period in 2007. Trade is progressing into new
higher-value-added areas such as aircraft from Brazil, wine
from Chile, and beer from Mexico. (Note: MOFCOM's official
trade statistics for Latin America are imprecise, as they
include trade with non-Latin American nations operating from
tax havens in the Caribbean.) Asked whether the Chinese
Government engages in preferential trade practices with
specific countries, Xu said that while Chinese companies may
pursue strategies based on discrete markets, since China is a
WTO member, it must treat all countries as equals, and as
such there are no major intraregional differences in China's
Latin American economic policies. MOFCOM has focused on
creating a positive environment for Chinese companies by
hosting commodity and trade fairs, investment forums and
other workshops aimed at increasing Sino-Latin American
understanding. The role of the Ministry of Commerce is to
facilitate overall economic engagement, despite differences
in purchasing power among nations in Latin America.

China's Military Cooperation with Latin America
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9. (C) Reading from prepared talking points, Ministry of
National Defense North America and Oceania Department
Director General Li Ji said that China has military attaches
in 11 Latin American countries and the PLA has conducted
military-to-military exchanges with 18 Latin American nations
to deepen friendship and to protect national sovereignty.
Frequent visits by defense ministers and military delegations
and growing training programs play a key role in deepening
military exchanges. Over 100 mid-ranking Latin American
military officers have studied in Chinese academies and
attended workshops at China's National Defense University.

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China has recently begun sending military officers, martial
arts teams and medical units to study in Latin America, Li
said. He asserted that China's military exchanges with Latin
American and Caribbean militaries are not aimed at any third
country.


10. (C) Queried by A/S Shannon, DG Li said China's military
relations with Colombia support the overall bilateral
relationship. He emphasized the role of high-level exchanges
and personnel training. Colombia's armed forces commander
will soon visit China. A/S Shannon applauded China's
cooperation with Colombia. Noting Colombia's difficult
relations with its neighbors, A/S Shannon expressed hope that
China will take a balanced approach to its military relations
in the region.

Regional Integration in Latin America
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11. (C) Regional integration has been important for the
overall stability of Latin America, A/S Shannon said, citing
UNASUR and the OAS as examples. He noted that while
increased regional cooperation is on the whole positive for
Latin America's development, it has also led to some
bilateral frictions, including between Argentina and
Paraguay, between Ecuador and Colombia, and between Ecuador
and Brazil. Brazil is increasingly taking a leadership role
in both Latin America and in the world at large, A/S Shannon
said. The United States has forged a strategic partnership
with Brazil and is actively exploring new areas of
cooperation. Past U.S. cooperation with Brazil has included
a bio fuels initiative, as well as joint efforts to eradicate
malaria in Africa.

Trouble Spots: Bolivia, Organized Crime
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12. (C) A/S Shannon noted that the overall political
situation in Latin America is stable. Every nation in the
region except one has undergone a peaceful democratic
transfer of power. However, areas of instability remain,
notably in Bolivia. He described the Bolivian and Venezuelan
Governments' declaring U.S. Ambassadors to both countries
persona non grata as regrettable and unjustified. A/S
Shannon said the U.S. response has been moderate and
emphasized that we have continued counter-narcotics
cooperation and development assistance with Bolivia, but
temporarily suspended trade preferences until such time that
we become satisfied with Bolivia's counter-narcotics
cooperation. DG Yang replied that China has been following
events in Bolivia closely and has encouraged Bolivia's
Government to resolve problems peacefully through dialogue.
A/S Shannon described the threat of organized transnational
crime in Central America, where national governments lack the
capacity to take effective measures against gangs. The
United States is helping to combat organized crime through
measures like the Merida Initiative and has pledged USD1.4
billion dollars over the next four years toward this end.
A/S Shannon conceded that deterrents created by the Merida
Initiative in Central America may shift the activities of
organized criminal groups into Caribbean nations. Thus, the
United States has recently begun a security dialogue with
Caribbean nations as well.

U.S. Elections unlikely to affect Latin Policy
-------------- -


13. (C) In response to DG Yang's question regarding a
potential policy shift in U.S.-Latin American relations
following the U.S. presidential election, A/S Shannon said
that while the style of relations with Latin America may
change, current policies have broad bipartisan support and
core policies will remain the same regardless of which
presidential candidate is elected. The Summit of the
Americas to be held in Trinidad in April 2009 will provide
the first major opportunity for the next U.S. President to
meet his Latin American counterparts. This event will lay
the groundwork for the next administration's policies toward
Latin America.

Cuba: Managing the Transition
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14. (C) Managing Cuba's transition will be a key challenge

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for the next U.S. President, A/S Shannon said. He emphasized
that current U.S. policy recognizes that the Cuban people
will decide the pace and scope of their transition to a
post-Castro system. Following the hurricanes that struck
Cuba in September, the U.S. Government offered humanitarian
assistance directly to the Cuban government for the first
time. Despite the U.S. offer to deliver aid via civil rather
than military aircraft, and our keeping the offer out of the
press as a sign of good faith, the Cubans ultimately rejected
U.S. aid and published their response in the Cuban press
before sending an official response via diplomatic note. A
second offer of reconstruction materials remains pending.
Given the positive Sino-Cuban relationship, A/S Shannon asked
the Chinese to convey the importance and usefulness of the
U.S. offer to the Cuban Government.


15. (C) Emphasizing the importance of letting the Cuban
people manage their internal affairs, Yang replied that
despite friendly relations with Cuba, China stands by the
principle of non-interference. He urged the United States to
lift its economic embargo against Cuba. A/S Shannon
emphasized that the hurricanes could lead to a strategic
threat to the United States by interfering with the ongoing
process of transition in Cuba or by creating a large-scale
migration to the United States. Yang noted that no one would
benefit from instability in Cuba.


16. (U) WHA cleared this cable.
RANDT