China’s Trade And The Perception Of Complementarity In The Automotive Sectors Of Chile And Brazil

The intensification of Sino-Latin American economic and political relations in the last decades has created two clear and opposite views concerning this new reality: optimistic and pessimistic. The Chinese government and scholars often spread the optimistic view, considering that the improvement of China’s ties with Latin American countries is complementary and benefits all parties.However, public opinion polls in Latin America show that the perception of Chinese influence is different in each country, suggesting that the idea of complementarity is not equally perceived throughout the region. In South America, Chile holds the less negative view of China, while Brazil had the most negative view. In this paper, I argue that the Chinese assumption of complementarity with Latin America is invalid for some cases and discuss the reasons of these different perceptions in Chile and Brazil.The first research question presented in this thesis is "Why Chile and Brazil hold different views concerning the influence of China in the region and how trade affects it?". Through the analysis of the history of Sino-Chilean and Sino-Brazilian relations, I argue that, on the one hand, Sino-Chilean relations have always been focused on trade, therefore, the economic penetration of China in Chile’s economy has been perceived as complementary to Chilean interests. On the other hand, Sino-Brazilian relations have been traditionally focused on other strategic areas, such as nuclear and space cooperation, multilateral diplomacy and others. Even though trade is part of Sino-Brazilian relations, Brazil is an industrial country and the economic penetration of China has been perceived as non-complementary by several industrial sectors.This research aims to suggest a new way of looking at Sino-Latin American relations. Instead of discussing whether the Chinese presence in Latin America is positive or negative I propose a focus on its diversity. According to this perspective, every country in the region owns sectors in which China is seen as a complementary partner, as well as others that oppose the intensification of relations with China. Therefore, it cannot be said that China and Latin America as a whole are complementary or non-complementary partners.Since the economic penetration of China is differently perceived by important Chilean and Brazilian interest groups, I analyze the cases of the automotive sectors of Chile and Brazil regarding the arrival of Chinese vehicles on their markets. This sector and these two countries have been selected because they show opposite sectoral perceptions of China in a region considered by the Chinese literature on Latin America as very complementary.My second research question, then, is "How this Chinese approach that ignores regional differences in Latin America affected the Chinese outcomes in the automotive sectors of Chile and Brazil?".To answer this question, I present the historical development of the Chilean and Brazilian automotive sectors. In Chile, governmental policies gradually weakened national producers along the last decades, welcoming imports from different countries, including China. Brazil decided for an opposite strategy in which the automotive sector was selected as one of the most important pillars of its economy. Nowadays, national producers represent20%of Brazil’s industrial GDP and have a strong lobbying power. In this context, the import of Chinese cars in Brazil was strongly opposed by important domestic actors.Even though the automotive sectors of Chile and Brazil had very different perceptions of imports from China, the Chinese approach was similar for both markets, trying to export its vehicles in the same way. Due to these different perceptions of complementarity, Chile recently became the top destination for Chinese cars in Latin America, while Brazil has approved several protectionist measures to obstruct their entrance into its large local market.After presenting the history, I argue that the historical development of the Chilean and Brazilian automotive sectors followed different ways, making Chile very friendly and Brazil closed to imports from China, which reflected in their governmental policies for the sector. In this sense, I believe the arrival of Chinese vehicles in Chile collaborated to improve the view of China as a complementary partner, and the opposite in Brazil.To analyze the perception of complementarity by the automotive sectors of Chile and Brazil regarding China, I use Robert Putnam’s Logic of Two-Level Games. I believe this methodology offers a valuable approach for understanding the dynamics between domestic interest groups and international pressures, especially because it helps to understand the factors affecting the domestic perceptions of China.According to this approach, the size of a win-set (the international agreements that would gain the necessary majority among the relevant domestic audiences) affects directly the likelihood of international agreements. Applying it to my cases, a larger win-set represents the domestic audiences’willingness to establish partnerships with China, reflecting their high perception of complementarity. On the other hand, a smaller win-set represents the unlikelihood of agreement with China, reflecting a domestic view of China as a non-complementary partner. A large win-set prevails in Chile, while a small one prevails in Brazil.To conclude, I suggest that, instead of focusing in policies for the whole region, China should explore the diversity of perceptions throughout Latin America. The Chinese success in the region is directly connected with its capacity to understand each country’s expectations and perceptions of China and, consequently, focus its efforts in areas in which both sides perceive each other as complementary partners. Moreover, I present some recommendations for future cooperation and fields perceived as complementary by Brazil.