Chile and the Ghosts of Cold Wars Past and Yet to Come


Chile and the Ghosts of Cold Wars Past and Yet to Come

Chart of the Pacific
Library of Congress, Geography and Map Division.

There are currently no subsea cables connecting Asia and Latin America. All data traffic between Latin America and Asia gets routed upwards to the United States before traversing the length of the Pacific. Chile hoped to change that. In September 2019, the Chilean government authorized a feasibility study to look into options for building a potential trans-pacific under-sea fiber optic cable. In the words of Gloria Hutt, Chile’s transport and telecommunications minister, Chile’s objective was “to make Chile a Digital Hub of Latin America.” The two routes under consideration were supposedly a 24,000-kilometer, ~$600 million route connecting Chile directly to Tokyo and a 23,000-kilometer, ~$500 million route connecting Chile to Shanghai. Huawei and NEC even submitted pre-feasibility studies to Chile in 2017, signaling China and Japan’s eagerness to win the status of becoming Asia’s fiber-optic gatekeeper to Latin America.

Chile’s Ministry of Transport and Telecommunications announced the results of that study last Monday. NEC won the contract to build the subsea cable, but not to Tokyo. Instead, Chile will connect directly to Asia via…wait for it…Auckland. Citing costs, relationships with customers, traffic projections, and a slew of other impressive sounding contingencies, Chile said a cable to Sydney via New Zealand was its most profitable option. No disrespect intended to the roughly 30-million people living in Australia or New Zealand, but on the face of it, this decision makes no sense. Instead of routing data flows to Asia through an English-speaking country to the north, Chile will now route data flows via two smaller English-speaking countries to the west.

Chile should save a little bit of money by choosing the Oceania route. Chile did not announce the sum of the discount but did reveal that the new subsea cable will traverse 13,180 kilometers. Assuming the price-per-kilometer is roughly the same, that would account for roughly $300 million in savings. That, however, means we are supposed to believe that Chile decided its ambitious, centerpiece strategy to embrace Industry 4.0 and become a data and business hub for Latin American-Asian entrepreneurship, business, and technology is not worth spending an extra ~$18 per Chilean citizen on. As they used to say back in the Old Country, if you’re going to have a wedding, it’s best not to be cheap about the flowers.

Of course, there is more going on here than meets the eye. In April 2019, U.S. Secretary of State Mike Pompeo caused a stir when he visited Chile on a broader tour of South America. During a brief, one-day visit to Santiago, Pompeo lectured Chilean President Sebastián Piñera on how he should not visit Huawei officials during Piñera’s upcoming visit to China (Piñera ignored this unsolicited advice) and stressed a strong U.S. preference for Chile to eschew all Chinese investment. Former Chilean Foreign Minister Heraldo Muñoz described Pompeo’s comments as “arrogant” and “nonsensical.” China’s ambassador to Chile, Xu Bu, went a step further: “Mr. Mike Pompeo has lost his mind.” A few months later, Chile’s Deputy Trade Minister, Rodrigo Yanez Benitez, said Chile would not ban Huawei from building out 5G networks in Chile even after having “listened carefully” to the concerns of its major trading partners.

We are ill-equipped to account for the state of Pompeo’s mind in April 2019, but his comments were stupefying. Pompeo told Piñera that “China injects corrosive capital into the economic bloodstream, giving life to corruption and eroding good government when they come to do business in places such as Latin America. They enter the house, set traps, ignore the rules, and propagate disorder.” That is quite rich coming from the top diplomat of a country with a history of intervening in Chile’s domestic affairs. A U.S. Senate study of CIA involvement in Chile from 1963-1973 concluded, for instance, that the CIA “financed activities covering a broad spectrum, from simple propaganda manipulation of the press to large-scale support for Chilean political parties, from public opinion polls to direct attempts to foment a military coup.” There are no museum exhibits in Santiago demonstrating China’s historical role in subverting Chilean democracy and propping up the dictatorship of a man like Augusto Pinochet. That “disorder” was “propagated” by Washington, not Beijing. Secretaries of State who live in glass houses shouldn’t throw stones.

Chile, like so many countries these days, finds itself caught between a dragon and an eagle. China and the U.S. are Chile’s two most important trading partners. China accounted for 31 percent of Chilean exports and 23 percent of Chilean imports in 2019, while the U.S. accounted for 14 percent of exports and 20 percent of imports. Presumably, those trade flows will begin to change once Chile’s Senate passes the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), though Chilean approval has been derailed by last November’s mass protests against inequality. Those protests led Piñera to promise a national referendum on a new constitution in April, which has since been delayed until at least October 25th due to COVID-19. The current constitution was bequeathed to Chile by Pinochet, the same dictator the U.S. had an indirect hand in installing as part of its monolithic Cold War mindset that viewed Communist leaders, even if democratically chosen, as worse than brutal authoritarian dictators.

On the bright side, the Chilean people are at least getting the opportunity to make these choices for themselves. Neither the U.S. nor China are attempting to foment coups or install puppet leaders in La Moneda. That was the last Cold War – and that is where the silver lining fades to grey. The new Cold War (the “Tech Cold War” as we have taken to calling it) is about who gets to be the gatekeeper to the all-important cables and satellites and radio access networks that promise to become the lifeblood of the economy of the future. In a globalized world, Chile’s plan to become a data-transit hub made perfect sense, physically tying Chile to Asia and the epicenters of 21st-century economic life in the way CPTPP was to accomplish economically. Instead, Chile is dragging its feet on the CPTPP, hedging its bets on technology investments, and struggling to contain COVID-19, after which looms a referendum to decide if Chile should embark on the long and torturous process of writing a new constitution.

These are the tough decisions facing small countries forced to pick a side in a world that is being consumed, not by software as Marc Andreessen predicted a decade ago, but by geopolitics. China promises wealth and prosperity; Big Brother will be a benign and prosperous partner and friend. The U.S. insists the only way to escape Big Brother’s corrosive traps is to run head-long into the arms of Bigger Brother, in whose loving embrace one can enjoy the benefits of freedom, as long as freedom means doing exactly what the U.S. says. 18 years ago, Christopher Hitchens (z”l) wrote that, “Like some other small or ‘faraway’ countries in our past, Chile is one of those which – to its glory and its misery – has produced more history than it can consume locally.” Satiated or not, here comes some more.