VZCZCXRO5795
OO RUEHC
DE RUEHBJ #7229/01 1070846
ZNY CCCCC ZZH ZDK CTG RUEHCZ 9100
O 170846Z APR 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3109
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHWH/WHA DIPLOMATIC POSTS COLLECTIVE PRIORITY
RUEHUL/AMEMBASSY SEOUL PRIORITY 9233
RUEHKO/AMEMBASSY TOKYO PRIORITY 0575
RHHMUNA/HQ USPACOM HONOLULU HI PRIORITY
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUEHUB/USINT HAVANA PRIORITY 0040
RUEHIN/AIT TAIPEI PRIORITY 5433

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 007229 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/FO WHA/EPSC 
 
E.O. 12958: DECL: 04/17/2026 
TAGS: PREL ETRD EINV CH XM VE CU TW
SUBJECT: WHA A/S SHANNON MEETING WITH BEIJING BASED LATIN 
AMERICAN AMBASSADORS 
 
Classified By: Deputy Chief of Mission David S. Sedney.  Reasons 1.4 (b 
/d). 
 
¶1.  (C) Summary:  During a luncheon hosted by Ambassador 
Randt for visiting WHA Assistant Secretary Shannon, 
Beijing-based Ambassadors from Argentina, Brazil, Chile, 
Mexico and Peru discussed their bilateral relations with 
China and its influence in Latin America.  Most agreed China 
is primarily interested in regional stability and continued 
growth in trade and investment rather than political 
adventurism.  In the region, China is seen as a partner as 
well as a competitor.  There is little region-wide dialogue 
with China due to China,s continuing focus on Taiwan 
recognition issues.  The Ambassadors agreed that China is not 
supportive of Venezuelan President Chavez,s politically 
charged anti-American rhetoric.  Several said China might be 
willing to engage Cuba on political reform using China's 
recent experience as an example. Others cautioned, however, 
that Cuba still holds special value for the Chinese 
Government.  End Summary. 
 
Taiwan Recognition Issue Clouds Regional Dialogue with China 
--------------------------------------------- --------- 
 
¶2.  (C) In response to A/S Shannon,s query about the 
likelihood of regional talks between Latin American countries 
and China, Chilean Ambassador Cabrera commented that the 
MERCOSUR-China dialogues had not been substantive.  China is 
mainly concerned with getting Paraguay to switch diplomatic 
recognition from Taiwan to China, he stated.  Brazilian 
Ambassador De Castro Neves added that Taiwan pays Paraguay 
handsomely to maintain ties.  Cabrera also commented that 
Panama now has a representative office in Beijing and that 
the Panamanians are trying to assess the impact of a possible 
change in recognition. 
 
China Not Supportive of Venezuelan Rhetoric, Say Latin 
American Ambassadors 
--------------------------------------------- --------- 
 
¶3.  (C) A/S Shannon expressed concern that Venezuelan 
President Chavez,s anti-U.S. rhetoric is aimed at provoking 
a rupture between North and South America.  He planned to 
explain U.S. concerns about Venezuela to the Chinese and 
would urge them to steer clear of the issue, lest they feed 
suspicion in the United States regarding their regional 
intentions.  There are concerns in the United States that 
China may become a political adventurer in the region, he 
added, but China seems more interested in regional stability 
and access to markets and resources.  Latin American 
countries could help explain the regional context to the 
Chinese, he stated. 
 
¶4.  (C) Both the Brazilian and Mexican Ambassadors, citing 
direct conversations with Chinese Government officials, said 
China does not support Venezuela,s anti-American rhetoric. 
A Chinese Vice Minister had said the rhetoric does nothing to 
help the situation of the Venezuelan people, according to 
Mexican Ambassador Lopez.  Brazilian Ambassador De Castro 
Neves concurred that the Chinese are concerned about 
Venezuelan rhetoric and want trade relations with Latin 
America without harming United States-Latin American 
relations. 
 
¶5.  (C) The Chilean Ambassador suggested that the United 
States take a cautious approach with the Chinese about 
Venezuela.  While still a Communist country, China is trying 
to implement political and economic reforms, he said.  The 
Chinese are cool to the idea of influencing politics in the 
region, he added, and are mainly interested in Venezuela,s 
oil and gas. The Peruvian Ambassador cautioned that the 
Chinese are not concerned about anti-American rhetoric in the 
region, adding that their definition of democracy is 
different from that of the United States. 
 
China - Cuba Relations 
---------------------- 
 
¶6.  (C) A/S Shannon commented that Cuba's policy of 
succession will have disastrous consequences.  Without a 
 
BEIJING 00007229  002 OF 003 
 
 
transition to democracy the regime is too brittle to survive. 
 Shannon then suggested that China, since it is going through 
an opening process now, could teach the Cubans about reform. 
 
¶7.  (C) The Chilean, Brazilian, and Argentinean Ambassadors 
said Cuba holds a special place in the minds of the Chinese 
for historical reasons.  Every high level Chinese visitor to 
the region must stop in Havana, they observed.  According to 
the Chilean Ambassador, an official of the Chinese Communist 
Party told him Cuba is still considered a jewel by China 
because it is one of the last remaining Marxist-Leninist 
regimes. 
 
¶8.  (C) Brazilian Ambassador Neves commented that China 
won,t insert itself in this issue but would like to see a 
Chinese-style transformation in Cuba.  Based on a 
conversation he had with a Chinese official, China would like 
Cuba to "understand the world better." 
 
Bilateral Perspectives 
---------------------- 
 
¶9.  (C) Chile:  The Chilean-China free trade agreement (FTA) 
negotiations had been very successful according to Chilean 
Ambassador Cabrera. The countries are now moving on to 
discussions regarding investments and services. 
Characterizing the investment negotiations as no easy task, 
he felt the services component is progressing well.  Chile 
pursued the FTA for strategic reasons, but the surge in 
Chinese exports of consumer goods had hurt some sectors such 
as footwear. Still, trade is developing quickly as 
exemplified by the recent Minmetals (China) and Codelco 
agreement that is expected to boost investment from USD 500 
million to USD 2 billion.  Chile is also talking with the 
Chinese Government about an open skies agreement.  Cabrera 
said Chile want to become a platform for services for the 
rest of Latin America. 
 
¶10.  (C) Argentina:  Ambassador Morelli commented that 
soybeans are Argentina,s major export to China.  After the 
2001 collapse of the Argentinean economy, the USD 4 billion 
in trade with China is extremely helpful.  Argentina 
continues to deal with China in a transparent way and is 
working on promoting anti-terrorism activities and human 
rights with the Chinese. 
 
¶11.  (C) Brazil:  Ambassador Neves highlighted the explosive 
growth in trade with China (1,000 percent over the last six 
years) that has made it Brazil,s number two trading partner. 
 He acknowledged the rise in domestic complaints as the 
Brazilian surplus with China declines, but felt that 
criticism of high value added imports from China and 
Brazilian exports of primary commodities should not be 
compared to previous North-South relations.  He clarified 
that Brazil is also exporting goods to China that are turned 
into intermediary products that return to Brazil for finished 
manufacturing.  While there had been calls for anti-dumping 
protection against Chinese imports, he stated, these are most 
often coming from noncompetitive companies.  He said China 
prefers to deal with trade frictions bilaterally rather than 
through WTO mechanisms as this could set a precedent for 
disputes with other countries.  Brazil feels the WTO 
mechanisms have been working so far and will not adopt 
safeguards to protect uncompetitive companies. 
 
¶12.  (C) Ambassador Neves added that for the first time trade 
with China had become a domestic political issue in national 
elections.  The opposition claims that the Government has not 
protected Brazilian industry and cites the example of 
China,s purchase of an automotive parts factory, the 
production lines of which were shipped back to China. 
 
¶13.  (C) Brazil,s investments in China (slightly larger than 
China,s Brazilian investments) are dominated by the aircraft 
manufacturer Embraer,s operations in Harbin and a 
Brazil/U.S./China joint venture between Embraco, Whirlpool 
and Snowflake for producing compressors.  There is also talk 
of investment in an electrical engine production facility. 
China,s low cost production is the driving force in these 
investments, according to Ambassador Neves, with labor costs 
 
BEIJING 00007229  003.2 OF 003 
 
 
30 percent lower than in Brazil.  He is convinced that the 
problems lie in Brazil rather than in China. 
 
¶14.  (C) Peru:  Ambassador Reyes said China is now Peru,s 
second largest trading partner as exports had been increasing 
rapidly from the USD 500 million five years ago.  While they 
had problems with China's Ministry of Commerce in the past 
regarding textile imports (Peru had used safeguards back in 
2001), relations had progressed smoothly since then.  Peru 
would like more Chinese investment but the going has been 
slow.  Politically, the Chinese Communist Party had close 
ties to all of the candidates in the upcoming election 
including Ollanta Humala who is currently leading in the 
polls.  He went on to say that Peru has a large ethnic 
Chinese population, most of whom came from Taiwan but who now 
support the mainland.  (Biographical note:  Ambassador Reyes 
mentioned that he is second generation Chinese.) 
 
¶15.  (C) Mexico:  Categorizing the China-Mexico relationship 
as love/hate, Ambassador Lopez described competition for the 
U.S. market as the main feature of their relationship. The 
main issue affecting Mexico-China relations at the moment is 
the great disparity in trade flows.  Real trade was USD 16.5 
billion in 2005 with imports from China totaling USD 14 
billion and Mexican exports only USD 2.5 billion according to 
Ambassador Lopez.  Mexico realizes that it can't stop the 
flow of trade even if it wanted to.  Mexico is focused on 
increasing exports and has received a positive response from 
China. 
 
¶16.  (C) The composition of Mexican exports to China, he 
continued, is primarily processed food and manufactured goods 
(including electronics, which they also import from China). 
Mexico would like to expand pharmaceutical and chemical, 
exports but constant pressure on China would be required to 
open China's market.  Since China,s economy is continuing to 
grow, Mexico does not want to be left behind, he added. 
Beyond trade, he noted that Mexico also maintains a human 
rights dialogue with China. 
 
¶17.  (U) This report has been cleared by A/S Shannon's 
delegation. 
 
Participants 
------------ 
 
Latin American Ambassadors 
 
Mr. Juan Carlos Morelli, Ambassador, Embassy or Argentina 
Mr. Luiz Augusto De Castro Neves, Ambassador, Embassy of 
Brazil 
Professor Pablo Cabrera, Ambassador, Embassy of Chile 
Mr. Ismael Sergio Ley Lopez, Ambassador, Embassy of Mexico 
Mr. Luis Vicente Chang Reyes, Ambassador, Embassy of Peru 
 
U.S. Government 
 
Mr. Thomas Shannon, Assistant Secretary of State for Western 
Hemisphere Affairs 
Mr. Clark T. Randt, Jr., Ambassador, U.S. Embassy Beijing 
Mr. John S. Creamer, Senior Executive Assistant to the 
Assistant Secretary, U.S. Department of State 
Mr. Paul Kreutzer, Political Officer (Control Officer) 
Mr. Brian Klein, Economic Officer (Notetaker) 
SEDNEY