Why has China snubbed Cuba and Venezuela?

Why has China snubbed Cuba and Venezuela?
Jun 6th 2013, 23:50 by H.T. | MEXICO CITY

XI JINPING'S first visit to Latin America and the Caribbean as China's
president, from May 31st to June 6th, took him tantalisingly close to
Beijing's strongest ideological allies in the region, Cuba and
Venezuela. Yet he steered clear of both of them. Instead of visiting
Cuba, as his predecessor Hu Jintao did on his first presidential trip to
the region, Mr Xi stopped off in an English-speaking Caribbean nation,
Trinidad and Tobago, which (as if to rub it in) is only a short hop from
Caracas. He then travelled to Costa Rica and Mexico (pictured)—two
countries that are at least as much a part of America's orbit as Cuba
and Venezuela are part of the "Beijing Consensus". Why this snub to two
friendly nations that have been lavished with Chinese largesse in recent
years, especially at a time when both are struggling to come to terms
with the death in March of Hugo Chávez, the Cuba- and China-loving
Venezuelan leader?

The short answer is: for simplicity's sake. Visits to Cuba and Venezuela
might well have raised distracting questions when Mr Xi meets Barack
Obama in Southern California on June 7th, and neither socialist
government was likely to express publicly any offence at being left off
the itinerary. The beauty of having a chequebook as thick as China's is
that if you give your friends the cold shoulder, you can always mollify
them with money. That may be why, on June 6th, Venezuela's oil minister
announced that he had secured an extra $4 billion from China to drill
for oil, in addition to $35 billion already provided by Beijing. Not
quite in the same league, but significant nonetheless, the Havana Times
reported this week that China was also planning to invest in Cuban golf
courses, the island's latest fad.

However, as our story on Mr Xi's visit to Latin America points out, he
may have had other reasons for picking the destinations that he did.
Firstly, he may be trying to respond to Mr Obama's "pivot" to Asia by
showing that China is developing its own sphere of influence in
America's backyard. China's business relationship with Latin America
gets less attention that its dealings with Africa, but in terms of
investment, it is much bigger. According to Enrique Dussel, a China
expert at Mexico's National Autonomous University, Latin America and the
Caribbean were collectively the second largest recipient of Chinese
foreign direct investment between 2000-2011, after Hong Kong. In terms
of funding, Kevin Gallagher of Boston University says China has provided
more loans to Latin America since 2005 than the World Bank and the
Inter-American Development Bank combined. The visits to Mexico and Costa
Rica may also represent a pivot of sorts in terms of the type of
economic relationship China has with Latin America. Up until now, China
has hoovered up the region's commodities, importing soya, copper, iron,
oil and other raw materials, particularly from Brazil, Chile and
Venezuela, while flooding the region with its manufactured goods. But
its relations with Mexico, a rival in low-cost manufacturing, have been
frosty: China accounts for only about 0.05% of Mexican foreign direct
investment, and it exports ten times as much to Mexico as it imports.

But as wages in China have increased and high energy prices have raised
the cost of shipping goods from China to America, Beijing may be looking
for bases such as Mexico and Costa Rica where it can relocate Chinese
factories and benefit from free-trade agreements with the United States.
This idea thrills the Mexican government, but does it pose an immediate
threat to Venezuela and Cuba? Probably not: China will continue to need
their staunch ideological support over issues like Taiwan, for one
thing. But it does suggest that China's economic interest in the region
is broadening, especially along the Pacific coast. If that proves to be
the case, Cuba and Venezuela, deprived of the charismatic Chávez to
court Beijing on their behalf, will have to work hard to stay relevant.

http://www.economist.com/blogs/economist-explains/2013/06/economist-explains-3