As Trump talks wall, China builds bridges to Latin Amer­ica

Jamaica Gleaner - - MARKET REPORTS - – AP

AN EX­PECTED US economic re­treat from Latin Amer­ica un­der Don­ald Trump is caus­ing the re­gion’s lead­ers to look half­way around the world, to China, for help weath­er­ing the pos­si­ble fi­nan­cial head­winds.

They’ll have the per­fect op­por­tu­nity to make their ap­peal to Chi­nese Pres­i­dent Xi Jin­ping at the Pa­cific Rim sum­mit as part of a visit to Ecuador, Peru, and Chile.

This is Xi’s third time in Latin Amer­ica since tak­ing of­fice in 2013, and when he wraps up the tour, he will have vis­ited 10 coun­tries in the re­gion — the same num­ber as Pres­i­dent Barack Obama, who has been in of­fice twice as long.

Trump on the cam­paign trail pledged to break up trade deals such as the North Amer­i­can Free Trade Agree­ment, de­port il­le­gal mi­grants, and build a wall to keep out mil­lions from Mex­ico and Latin Amer­ica, send­ing shock­waves across a re­gion that for two cen­turies, has looked north­ward for pol­icy guid­ance.

Over the past decade, China has dis­placed the United States as the main trad­ing part­ner in coun­try af­ter coun­try in Latin Amer­ica as de­mand for the re­gion’s soy­beans, oil, and iron ore fu­elled the fastest growth in decades. But more re­cently, as China’s de­mand for raw ma­te­ri­als has been slow­ing, the re­gion’s economies have taken a hit, damp­en­ing the once-tor­rid love af­fair with the world’s sec­ond-big­gest econ­omy.


Mar­garet My­ers, a China ex­pert at the Washington-based In­ter-Amer­i­can Di­a­logue, said that most South Amer­i­can coun­tries have awak­ened to the pit­falls of de­pen­dence on com­mod­ity ex­ports and would pre­fer closer ties to the US, which buys the sort of man­u­fac­tur­ing goods that gen­er­ate more jobs.

“But the ques­tion is whether the US will re­cip­ro­cate,” she says. “No­body in the re­gion is ex­pect­ing much from Trump in terms of re­ally pro­duc­tive pol­icy. That leaves room for China to play a much more im­por­tant role.”

Some of China’s pri­or­i­ties and grow­ing prow­ess in the re­gion will be on dis­play dur­ing Xi’s trip.

In Ecuador, a dol­larised-econ­omy that is bat­tling a deep re­ces­sion, Xi will in­au­gu­rate on Fri­day the coun­try’s big­gest hy­dro­elec­tric dam, which was built by a Chi­nese firm and paid for with some of the nearly US$8 bil­lion lent to the coun­try since 2007.

From there he heads to Peru to at­tend a sum­mit of Asia Pa­cific Economic Co­op­er­a­tion group and a meet­ing with Pres­i­dent Pe­dro Pablo Kuczyn­ski, a for­mer Wall Street in­vestor who, nonethe­less, chose China for his first for­eign trip af­ter tak­ing of­fice in July. The week­long tour wraps up in Chile, which re­cently opened a branch of a state-run Chi­nese bank that will be South Amer­ica’s first clear­ing house for trans­ac­tions in the tight­ly­con­trolled yuan.

Else­where, in Venezuela, the head of state-run China National Petroleum Cor­po­ra­tion on Thurs­day signed a US$2.2 bil­lion ac­cord to jointly boost oil pro­duc­tion needed to lift the OPEC na­tion out of a cri­sis marked by se­vere food short­ages and triple-digit in­fla­tion.


“All of our thanks for all of the sup­port given Venezuela in the dif­fi­cult years – 2014, 2015 and espe­cially 2016,” a vis­i­bly pleased Pres­i­dent Ni­colás Maduro said at the sign­ing cer­e­mony. “Our older sis­ter, China, has not left Venezuela alone in these dif­fi­cult times.”

While Trump’s vic­tory has all but killed the 12-na­tion Tran­sPa­cific Part­ner­ship, which would have in­cluded Mex­ico, Peru, and Chile, China con­tin­ues to court the re­gion with of­fers to strengthen ex­ist­ing free trade agree­ments with Costa Rica, Chile, and Peru as well as ne­go­ti­ate new ones with Uruguay and Colom­bia. In the past decade, China’s two big­gest de­vel­op­ment banks have pumped in US$125 bil­lion to Latin Amer­ica – more than the Wash­ing­ton­based World Bank and In­terAmer­i­can De­vel­op­ment Bank com­bined.

Xi, in a col­umn for El Comer­cio news­pa­per, re­ferred to the emerg­ing ties with Peru as a “win-win” re­la­tion­ship en­com­pass­ing ar­eas as di­verse as in­vest­ment in in­fra­struc­ture and en­ergy to the shared her­itage rep­re­sented by the beloved “chifa” cui­sine cre­ated by Chi­nese im­mi­grants a cen­tury ago.

To be sure, a US-China trade war would have rip­ple ef­fects across Chi­nese in­dus­try that would also de­press de­mand for Latin Amer­ica’s raw ma­te­ri­als.

But for now Chi­nese busi­ness­men at­tend­ing the APEC sum­mit see noth­ing but po­ten­tial.

Tang Ning, founder and CEO of wealth manager and mi­crolen­der Cred­itEase, said Brazil and other parts of Latin Amer­ica are ripe for ven­ture cap­i­tal in the same way China was 20 years ago. Nonethe­less, he cau­tions that Trump’s dis­rup­tive elec­tion is not a driver of its in­ter­est in Washington’s back­yard.

“We take a very long-term view,” said Tang in an in­ter­view. Pol­i­tics “isn’t a ma­jor part of our con­ver­sa­tion”.


Chi­nese Pres­i­dent Xi Jip­ing and Ecuador’s pres­i­dent Rafael Cor­rea with the guard of hon­our dur­ing the of­fi­cial wel­com­ing cer­e­mony at Mariscal Su­cre Air­portin Quito – Euador, Thurs­day, Novem­ber 17, 2016. Pres­i­dent Xi Jip­ing was in Ecuador for two days be­fore at­tend­ing the APEC meet­ing in Peru.

A man dressed in tra­di­tional An­dean clothes walks past the logo of the APEC 2016 sum­mit in Lima, Peru, on Wed­nes­day, Novem­ber 16, 2016.

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