North Korea Uncorked

Policy

North Korea swims in Chilean wine regardless of Pence’s warnings

By: Alex Freeman
Photos: Alex Freeman

North Korea’s leaders have long held a penchant for collections of exotic products from around the world, including everything from Chinese dolphins to fine cheeses and NBA memorabilia. One lesser-known product on this curious list?

Chilean wine.

Based on trade data from ProChile and average wine prices, at least 6,000 bottles of Chile’s sanguine delicacy flowed into the capital city of Pyongyang in 2015.

Yet, the two nations are exchanging more than bottles of Cabernet Sauvignon. La Tercera, one of Chile’s top newspapers, recently uncorked a slew of new data that showed the nation’s bilateral trade with North Korea to be worth approximately 27 million United States Dollars annually.

North Korean elites also have an affinity for blueberries, red squid, cuttlefish and copper— Chile’s principal export. Chile has not demurred in terms of importing goods from North Korea either: In 2015, Chilean industry deposited $25 million into Pyongyang’s coffers via its steel, iron and industrial-grade primary resource imports.

The Trump administration has been vocal about its discontent with this practice. Vice President Mike Pence already visited to Latin America earlier this year to urge Chile, Mexico, Brazil and Peru to support the United States in its diplomatic and commercial “isolation” of North Korea’s Kim regime.

According to Pence, one way Chile could support this isolation effort would be to classify its wine exports as luxury goods. This would dry up the supply of wine to Pyongyang due to a United Nations Resolution that has prohibited member states from selling jewelry, fine tapestries and similar goods to the North Korea since 2013.

Pence said Chilean officials should consider the reclassification effort immediately. He suggested the regime is using the wine as a medium of exchange to obtain hard currency, a valuable asset to Kim Jong Un, whose regime relies on international exchange to obtain goods for both military and civilian purposes.   

Yet Pence’s plea in Chile seems to have fallen on deaf ears, where Foreign Minister Heraldo Muñoz signaled he has no intention of heeding overtures from the United States government.

“We respect the request of the United States, but Chile maintains relations,” Muñoz said following Pence’s visit.

The higher ups of the Chilean government acknowledge North Korea has been both a habitual threat to global security and egregious violator of human rights, and have signed condemnatory resolutions alongside the United States. Thus, the fact that Pence’s formal announcement to halt commerce with the regime was met with such refusal might seem confusing. However, Chile’s response can be understood as the product of two primary factors: history and raw economics.

Historical evidence suggests that Chile’s relationship with North Korea ripened during the wave of left-wing radicalism that flooded South America in the sixties and seventies. Mauricio Phelan, Political Scientist in the Asia Pacific Program of Chile’s Library of the National Congress describes Communist and Socialist parties in Latin America as “very pro-North Korea since the 1970s,” and as having significant “soft power,” or influence to advance North Korea’s own objectives without having to use force, during the Salvador Allende years of abrasive left-wing leadership in Chile.

 

These soft power inroads in Latin America are not insignificant. There is a case to be made that although the Kim regime has wasted any soft power it once had in Latin America, today traces of its expired influence take the form of limited economic relationships. Political inertia is powerful; once a practice is established it can be difficult to reverse.  This means Pence has good reason to be skeptical of Chile’s trade relationship with North Korea, despite its transactional nature, may represent more than just trade and allude to a historical relationship of ideological influence.

This is not to call on the United States to begin a hysterical crusade against any Latin American nation doing business with the Kim regime, for the continuation of these may be considered equally beneficial to raw economic realities as remnants of history.

Phelan explains that, aside from the political and historical roots of what he calls “unethical” Chile-North Korea trade, the relationship could also exist in light of the fact that “If you don’t stop entrepreneurs from doing business with other actors, many of them do not care about where the money comes from. They just want to do business.”  

ProChile trade data from 2010 to 2015 supports Phelan’s point. During this time, commercial exchange between North Korea and Chile increased by thirteen percent. The largest spike happened in 2013, when the total value of the relationship surged to $35 million from just $16 million the year prior.

Sebastian Piñera, a center-right free market enthusiast, was the president of Chile in 2013. So, while a shred of residual ideology might explain the existence of limited trade links, Chilean firms’ willingness to import North Korean products is enough to keep bilateral trade humming along under both conservative and liberal leadership.  

This economic logic also goes for Chilean exports; particularly, wine. Phelan explains that wine producers in Chile have one of two production goals: quality or quantity. Those striving for the former are often luxury producers who push for a “rebranding” of Chilean wine through the microphone of the interest group called Wines of Chile.

Since the 1990s, Chile’s wine export strategy has emphasized shipping high quality bottles abroad at low prices— and it has some producers feeling like they are leaving money on the table.

Formally classifying Chilean wine as a luxury good, Phelan suggests, would “help the image correspond with a higher price.”

Quantity sellers, meanwhile, comprise the bulk of Chile’s firms, and would be harmed by the reclassification measure. These high-volume sellers rely on the reputation of their wine as being cheap but superior to attract big time buyers, such as China.

In 2015, China purchased $48.016 million, or about eight million bottles, of Cabernet Sauvignon from Chile.

Phelan finds this alarming, who posits it is “very possible” that China is reselling some of this wine across the Yalu River to the Kim regime. This prospect is concerning, for private enterprises do not exist in North Korea.

Thus, “if a Chinese wine seller is selling our [Chilean] wine to North Korea,” Phelan explains, “They would be supporting the North Korean government with our wine.”

Pence’s luxury reclassification proposal would eliminate or minimize this practice— but at the price of some critical Chilean wine producers’ competitive advantage in their largest export market.

Regardless of its historical and ideological roots, Chile-North Korea trade still presents a troublesome situation. While Chile does benefit from its questionable trade relationship with the Kim regime, it also shares a vital interest in preserving stability in the Asia Pacific, with over sixty percent of Chile’s economy travels through the Pacific Ocean.  Any conflict there could put a bottleneck on its commerce with its two biggest trading partners: China and the United States.

Therefore, if both the peril of Kim Jong Un’s nuclear program and pressure from the United States continue, there may soon be a critical juncture that will force officials to decide whether or not to end the link between Chile and this rogue regime.

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