SPEAKING
FREELY China pivots to Latin
America By Emanuele Scimia
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please
click hereif you are interested in
contributing.
The United States
keeps on looking to Asia, but it had better watch
its back, where China's penetration in Latin
America is intensifying. Meanwhile, region's
countries are taking their countermeasures to
minimize the Sino-Western dispute, using
multilateral regional and sub-regional
institutions as the first line of defense.
During her latest roadshow in Asia, US
Secretary of State Hillary Clinton shifted the
debate over the much-trumpeted United States
"pivot" towards the
Asian-Pacific region from military confrontation
to trade competition with China. Over the past
decade, trade assertiveness has turned out to be
the master key to another, often underestimated,
geopolitical pivot: that of Beijing to Latin
America - Washington's historical and geographical
backyard.
China's drive for enhancing its
vested positions across Central and South America
is not without pitfalls, much as those the US
faces in its efforts to protect its strategic
interests in East Asia.
China is Latin
America's third-largest trading partner,
immediately after the United States and European
Union (EU). Beijing's commercial exchanges with
Latin-American countries were worth more than
US$241 billion in 2011, according to data released
by the Chinese Trade Ministry in April.
Of
US$153 billion from foreign direct investments
which Latin-American and Caribbean nations
attracted in 2011, $8 billion came from China
(down $7 billion compared with 2010), the Economic
Commission for Latin America and the Caribbean
(ECLAC) reported in May. That puts Beijing well
behind the EU, US, Latin America and Caribbean and
even Japan. The EU, top investor in this region,
has funneled an average of $30 billion a year into
Latin America since 2002.
Recent trade and
economic tensions between the United States,
Canada and Europe on one side, and some
Latin-American countries on the other seem to be
playing into Beijing's hands. In May, the EU filed
a complaint with the World Trade Organization
(WTO) against Argentina's import barriers, after
it had already challenged Buenos Aires's decision
in April to nationalize YPF, the local energy
company which until then was controlled by Spain's
oil and gas major Repsol.
Left-leaning
governments such as Venezuela, Bolivia and Ecuador
have made numerous nationalizations over the past
years, which have affected mostly North American
and European companies.
Western investors
also have to deal with native populations in Latin
America whose claims to their ancestral lands have
been aggravated by environmental concerns. Among
them, demonstrators in the north of Peru are
standing out against the Conga project, a
multi-million dollar gold mining venture by
US-based Newmont, blaming it for the destruction
of water supplies in the area. Similar se,
environmental concerns are behind protests in
Malku Khota (Bolivia) against a silver-mining
project managed by Canada's South American Silver
Corporation.
In general, China is busily
working to deepen ties with countries south of the
US-Mexican border. In June, Beijing signed with
Brasilia a currency swap deal worth $30 billion.
The agreement is part of a broader attempt, along
with the other BRICS (Russia, India and South
Africa, to shield signatory countries from
potential financial crises.
Moreover,
while he was touring South America late last
month, Chinese Premier Wen Jiabao outlined a
proposal for a free-trade agreement (FTA) between
China and Mercosur, the Southern Cone Common
Market, which includes Brazil, Argentina, Uruguay
and Paraguay (Venezuela is set to join the
regional trade bloc as well). In the words of Wen,
Beijing aims at redoubling overall trade with
Mercosur up to $200 billion by 2016.
In
spite of its significant economic gains in recent
years, China's fast-growing influence in Latin
America may backfire, a situation it also faces in
Africa. The main sticking point is the same: a
trade imbalance, with China exporting almost
exclusively manufactured goods towards the region
in return for natural resources and raw materials.
Countries like Brazil, Mexico, Chile and
Argentina have the potential to export more value
added products - Mexico, for instance, as often
underscored by ECLAC, and much more than Brazil,
is a trade rival of China on the US market. South
American countries also complain about the inflow
of substandard Chinese goods.
With this
backdrop, Latin American countries are gearing up
to safeguard their own economies from
overdependence on China. Notably, they are lining
up with the US and EU against Beijing on the
undervalued exchange rate of the yuan and pooling
their resources. For instance, Brazilian and
Argentine industrial lobbies are making joint
efforts to set up a new bilateral body "fighting
off growing competition from China", according to
a June 27 report by the Economist Intelligence
Unit.
In light of the ongoing
protectionist trend in Latin America's trade
policy, China's proposed FTA with Mercosur appears
to be wishful thinking. The EU has sought in vain
to strike a free-trade pact with the South
American common market since 1995.
Regional and sub-regional institutions in
Latin America could play an active role in
containing the impact of the Sino-Western race to
the continent's riches, notwithstanding their
compulsive proliferation and overlapping nature -
it is unclear whether organizations such as the
Union of Latin American Nations, the Community of
Latin American and Caribbean States, and Mercosur
will in future be "clearing houses" or talking
shops for grievances with regard to competition
between Washington and Beijing along the
south-eastern rim of the Pacific Ocean.
The Pacific Alliance perhaps best
epitomizes the complexity of the geostrategic game
that pits China against the United States in
Central and South America: this is yet another
sub-regional bloc, which Chile, Peru, Mexico and
Colombia inaugurated in June, and which accounts
for 35% of the Latin America's gross domestic
product (GDP) and 50% of the overall
Latin-American trade.
This new
multilateral grouping is a meeting point of
Washington and Beijing's trajectories in the
region, with Chile - for example - which is both a
founding member of the Trans-Pacific Partnership
(the TPP is a project of regional economic
integration that involves nine Pacific countries,
including the US, but not China) and an important
trading partner for the Chinese Red Dragon.
Emanuele Scimia is a journalist
and geopolitical analyst based in Rome.
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their
say.Please
click hereif you are interested in
contributing. Articles submitted for this section
allow our readers to express their opinions and do
not necessarily meet the same editorial standards
of Asia Times Online's regular contributors.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
