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There are important differences between China's and Japan's priorities and behavior in Latin America, the author argues. (Latinvex collage)
Wednesday, October 8, 2014
Perspectives

China & Japan: Two Competitors in Latin America


China's and Japan’s investment
s run parallel in Latin America, as an echo of the region’s differences between free markets and state controls.

BY SUSAN KAUFMAN PURCELL

In late July, President Xi Jinping of China and Prime Minister Shinzo Abe of Japan visited several Latin American and Caribbean countries within a few days of each other. Both visits show that the competition between China and Japan, which until recently was mainly focused on Asia, has now spread to Latin America and the Caribbean.  The visits also are evidence that the historic economic dominance of the United States in the region is much reduced, leaving a vacuum that the two Asian giants seem happy to fill. In addition, the Sino-Japanese economic competition seems to be beneficial to the region, providing it with access to investment capital, loans, technology, and management and labor that promise to make a significant contribution to its economic growth.

There are, however, important differences between the two countries’ priorities and behavior in the region. The first involves the countries each chose to visit. Although both spent time in Brazil, the Chinese leader pointedly focused his visit on the most anti-American and least market-friendly countries: Venezuela, Cuba and Argentina.  Japan’s leader, in contrast, spent more time in the countries that are friendly to the United States, such as Mexico, Colombia and Chile. In addition, China’s president was mainly accompanied by government officials, while Japan’s Prime Minister brought a delegation of 70 Japanese business leaders.

Both signed a number of important loan agreements and investment deals; these were often targeted at different sectors and types of projects.  For example, the agreements signed by Xi Jinping related to the development of Venezuelan oil and agriculture, providing a $4 billion line of credit in return for Venezuelan oil and oil products. The Chinese also made available $691 million to explore Venezuela’s gold and copper reserves. Like China, Japan needs to import more energy, but Abe focused more on Mexico’s energy sector, which is in the process of opening up to domestic and foreign private investment. And in Brazil both countries are investing in those sectors and projects in which they have a comparative advantage.  China is emphasizing big infrastructure projects, with a focus on

Chinese workers to build them, while Prime Minister Abe is pushing Japanese technology in shipbuilding and the construction of offshore platforms to help develop the energy sector.

Despite these differences, China and Japan have the common goal of increasing their trade with, and investment in, Latin America and the Caribbean. And both are especially eager to lock in more energy supplies. There are also signs that China may be losing its patience with the dysfunctional economic systems that characterize its anti-American partners in the region. As a result, Xi Jinping may try to increase China’s trade with, and investment in, the more democratic and market-friendly countries of the region, thereby blurring, but not eliminating, some of the differences between Chinese and Japanese priorities in Latin America and the Caribbean.

Nevertheless, China and Japan have very different political and economic systems. China has an authoritarian political system and a state-controlled economy, while Japan has a democratic political system and a more market-oriented economy. China sees the United States as a global competitor and a potential threat, whereas Japan is a strong ally of the United States. Coincidentally, these differences between the two Asian countries resemble the recent split within Latin America between elected authoritarian regimes with state-centered economies and elected democratic regimes with market economies. As a result, while the current economic competition between China and Japan will contribute to the economic development of the region, it will unfortunately also help keep the region politically divided.

Susan Kaufman Purcell is the Director of the University of Miami’s Center for Hemispheric Policy. This article originally appeared in the September issue of AmericaEconomia magazine. Republished with permission from the author. 

 

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