China Is Forcing The US Out Of The Region
By Sergey Manukov
In Latin America, China is conducting the policy it has successfully tested in Africa: using soft power – multibillion loans and investments – for expanding into new regions.
The last hope
“Information Clearing House” – Recently, the population of the Uruguayan resort of Punta del Este almost redoubled: as many as 2,500 businessmen from dozens of countries arrived there on Nov 30-Dec 2 in order to attend the 11th China-Latin America-the Caribbean Business Summit.
Just to compare, over 600 Chinese businessmen attended the Punta del Este summit against just 150 businessmen during the previous summit in Guadalajara.
Until recently, when in trouble, Latin America has appealed mostly to the United States through the World Bank and the Inter-American Development Bank. But after Trump’s victory, things got worse as the new U.S. President does not yet have a clear stance on Latin America.
The Latin Americans cannot wait for three years just to see if the Americans will elect a more tolerant president or not. So, they are looking for alternatives. And China with its huge financial and human resources is the best option.
For the Chinese, Latin America is not only the region where they can get raw materials and food. They have a much bigger goal in view: to force the United States out of the region and to establish their influence there just like they did in Africa.
At least sympathy if not love
The Chinese like Trump if not love him even though he keeps threatening them with a trade war and is reluctant to recognize China as a market economy. This is not something new to them: Trump’s predecessors were no better. What makes Trump better is his isolationism – focus on domestic policy and reluctance to take part in unprofitable economic projects.
This is good for the Chinese, who are there to fill the gaps. And one of the gaps is Latin America, where the Americans are losing ground.
In contrast, the Chinese are very active there: their President Xi Jinping has visited the region three times over the last five years.
As a result, since 2000, China’s trade with Latin American has grown by 22 times, while U.S.-Latin American trade has just redoubled. The United States is still the biggest trade partner of Latin America, but now that Trump has promised to withdraw from NAFTA and to build a wall on the border with Mexico, things may change – especially as China is already the key trade partner for Brazil, Chile and Peru.
Its trump is its money. In 2005, the Chinese invested $231mn in Latin America, in 2015, a much as $30bn. And the advantage of Chinese investments is that China does not ask anything (political concessions) in exchange. Its motives are commercial rather than political.
According to Gustavo Arnavat from the Center for Strategic and International Studies, sooner or later, China will force the United States out of the region.
Jinping has promised that by 2025, China will enlarge its trade with Latin America by a quarter of trillion USD. A few days after Trump’s victory, the Chinese published a book calling Latin America “a land of energy and hope.”
Today, Chia’s SDB and EIBC are investing in Latin America more than the WB, IADB and CAF, taken together.
The Chinese have also invested $35bn in multilevel financial platforms in Latin America. In 2015, they established new credit organizations: China-LAC Industrial Cooperation Investment Fund and China-Latin America Infrastructure Fund with respective assets of $20bn and $10bn and transferred $5bn to China-Latin America Cooperation, a fund established in 2014.
According to Margaret Myers, the director of the Latin America and the World Program at the Inter-American Dialogue, Trump’s unclear policy on Latin America will make it easier for China and some other countries to enlarge their presence in that region.
Right after Trump’s decision to withdraw from NAFTA, Mexico and China signed a car deal: JAC Motors of China has invested $212mn in the project to build a car factory in the Mexican state of Hidalgo. Its partner under the project is Giant Motors of Mexico. The factory is supposed to employ 5,500 people and to produce off road vehicles for the Latin American market.
“We don’t depend on NAFTA at all, not for exports or for supplies,” said Elías Massri, Giant Motors chief executive. “For us, this is where the opportunity lies.”
In Jamaica, the Chinese have built the so-called Beijing Highway, a road worth $730mn.
Chance to get rid of the United States’ influence
Experts from the London School of Economics point out four things that attract China to Latin America: resources, political and economic support at regional and international forums, recognition of China rather than Taiwan as the legitimate representative of the Chinese nation and new markets for Chinese goods. And one more attractive thing is that unlike Europe and the United States, Latin America does not have tough anti-corruption laws….more here