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Presidents Pedro Pablo Kuczynski of Peru and Xi Jinping of China. Xi has made three trips to Latin America since he took office in 2013. (Photo: Peru President's Office)
Tuesday, December 6, 2016
Perspectives

Latin America: Trump Boosts China


China filling void left by the United States in Latin America, experts say.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue

Chinese President Xi Jinping visited Ecuador, Peru and Chile in mid-November during a trip that also included his participation in the Asia-Pacific Economic Cooperation summit in Lima. The visit was Xi’s third to Latin America since he took office in 2013. What did he accomplish for China during the trip, and what was the trip’s significance for the Latin American countries he visited? What is the future of Chinese influence in Latin America as compared to U.S. influence in the region as the world looks ahead to Donald Trump assuming the presidency of the United States? How is China’s economy and the country’s currency, currently trading at multi-year lows, factoring into Latin America’s economic outlook?

Jorge Heine, Chile’s ambassador to China: President Xi’s third visit to Latin America in four years is significant for two reasons. At a time of a growing backlash toward globalization and free trade (forces that have benefited Latin America) in Europe and in the United States, China remains one of the last bastions against protectionism and beggar-thy-neighbor policies. This was a message that Xi conveyed with great verve in Quito, Lima and Santiago. On the other hand, in the region there is a shift from governments on the left to those of the center or the right. The latter tend to look first and foremost to Washington, but in the current environment, with a $35 billion development fund and a friendlier discourse and disposition, Beijing may be seen as a more attractive option. Thus, Beijing’s influence in Latin America, already on the rise, may receive a further boost. Yes, trade between China and Latin America and the Caribbean (LAC) is down, from $267 billion in 2013 to $235 billion in 2015. But Beijing is now adding two drivers to the equation: financial cooperation and investment. By extending the One Belt, One Road (OBOR) initiative to the Americas through projects such as the proposed 19,000-kilometer, trans-Pacific fiber-optic Internet cable from China to Chile (a first between Asia and South America) and by having a number of South American countries join the Asian Investment and Infrastructure Bank (AIIB), China can help to enhance the region’s connectivity to the rest of the world. It is factors such as these, rather than the fluctuations of the yuan or of the Shanghai stock market, that will set the course of Sino-LAC links in years to come.

Ray Walser, retired U.S. foreign service officer and former analyst at the Heritage Foundation: It seems ironic that more than a century ago, when the United States was an emerging economic powerhouse, we sought to break the mercantilist stranglehold of European empires in China by advancing the policy of the ‘Open Door.’ American traders worked to capitalize on the promise of Asian markets. Today, the shoe apparently is on the other foot. Statist, communist China still sees in the Americas economic opportunity and ready trade partners while the free-market, democratic United States inches back toward old-style protectionism and latent economic nationalism. An aggressive U.S. anti-free trade agenda that includes canceling the Trans-Pacific Partnership, of which Chile and Peru are signatories, and renegotiating NAFTA can only send a chill down the spine of South America. Under these circumstances, it is not surprising that Xi Jinping would find a receptive audience along the Pacific Rim where economic growth has substantially slowed. While China’s growth has also decelerated and the commodities boom no longer lifts all boats, there is still ample market space and time for engaged Chinese attention to overtake a distracted and seemingly disinterested United States. The Chinese leadership used the three-nation visit to unveil a revised trade policy paper promising a ‘new relationship’ with Latin America. The evolving focus includes emphasis on more value-added investments, job creation, respect for local conditions and no political conditionality. Targeted sectors for Chinese investment in the region, which now exceeds the lending of the World Bank and the Inter-American Development Bank, include energy, mining, infrastructure and manufacturing. Overall, one can expect the Chinese to hold center stage until the United States can literally get its trade act together.

Margaret Myers, director of the Latin America and the World Program at the Inter-American Dialogue: Xi Jinping’s recent trips to Ecuador, Peru and Chile were by most accounts very successful. China’s paramount leader was warmly received in all three countries. Xi’s statements during various phases of the trip—discouraging protectionism, encouraging broader multilateral trade and noting the challenges and mutual opportunities associated with climate change and other environmental issues—were especially timely given the outcome of the U.S. presidential election and resulting concerns in Latin America and elsewhere. Chinese announcements during the trip, though somewhat short on big-figure financial offerings, would appear to be supportive of commitments made in association with the ‘1+3+6 cooperation framework’ and other diversification-promoting policies. These included MOUs encouraging investment and technology transfer in IT, energy, telecommunications, astronomy and other areas. China’s just-released Policy Paper on Latin American and the Caribbean—the first since 2008—also highlights these policies, along with other features of a so-called ‘New Stage of Comprehensive Cooperation.’ Despite slowing growth in China, Xi’s trip and this new policy document are intended to communicate that the Latin American region will be an increasingly important partner for China in the coming years. Latin American nations should of course continue to monitor the extent to which Chinese engagement will result in technology transfer, economic development and the sort of ‘international cooperation, equity and justice’ promoted by China’s new policy. In any case, a possible lack of productive engagement on the part of the Trump administration will undoubtedly generate more openness in Latin America to Chinese engagement.

Matt Ferchen, resident scholar at the Carnegie-Tsinghua Center for Global Policy in Beijing: The key headline from Xi Jinping’s recent trip to Latin America, repeated in many major western and Chinese media outlets, was that China was taking over the role of economic leadership in the Asia-Pacific just as the United States is setting to embark on a new period of isolationism and protectionism. Even before Xi’s trip, the official Chinese press was trumpeting a ‘new era’ of China-Latin America relations. Yet, what these headlines missed was that the end of the commodity boom, from about 2003-2013, had already ushered in a new period of China-South America economic relations. China-South America trade, dependent as it has been on the export of South American mineral, energy and agricultural goods and the import of Chinese manufactures and capital, has been a case study in both the upsides and the downsides of classic comparative advantage relations. All the discussion about Chinese-led efforts to promote greater Asia-Pacific trade misses the point that South American exports to China, and most Chinese investment in the region, will continue to be largely focused on raw materials. Neither in the immediate wake of the end of the commodity boom nor during Xi’s recent trip has there been much serious discussion about what Latin American governments, citizens and businesses propose as a more sustainable, development-enhancing relationship with China. Such discussions might begin with a focus on region-wide efforts at standardizing environmental and social protocols for extractive industry and infrastructure investments from China and elsewhere, and ensuring those are consistent with similar protocols in Chinese-led institutions like the AIIB and the New Development Bank.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor

 

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