As Trump talks wall, China builds bridges to LatAM

Lead­ers seek ways to weather pos­si­ble head­winds

Kuwait Times - - BUSINESS -

LIMA, Peru: 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 this week when Chi­nese Pres­i­dent Xi Jin­ping at­tends a 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 US as the main trad­ing part­ner in coun­try af­ter coun­try in Latin Amer­ica as de­mand for the re­gion’s soy­beans, oil and iron ore fu­eled 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 awo­ken 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 dol­lar­ized-econ­omy that is bat­tling a deep re­ces­sion, Xi in­au­gu­rated on Fri­day the coun­try’s biggest hy­dro­elec­tric dam, which was built by a Chi­nese firm and paid for with some of the nearly $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 clear­ing­house for trans­ac­tions in the tightly-con­trolled yuan.

Else­where, in Venezuela, the head of staterun China Na­tional Petroleum Cor­po­ra­tion on Thurs­day signed a $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 Ni­co­las 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 12na­tion Trans-Pa­cific Part­ner­ship, which would’ve 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 $125 bil­lion to Latin Amer­ica - more than the Wash­ing­ton-based World Bank and In­ter-Amer­i­can De­vel­op­ment Bank com­bined. Xi, in a col­umn for El Comer­cio news­pa­per, re­ferred to the emerg­ing ties with Peru as a “win­win” 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 mi­cro-lender 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 longterm view,” said Tang in an in­ter­view. Politics “isn’t a ma­jor part of our con­ver­sa­tion.” —AP


LIMA: China’s Pres­i­dent Xi Jin­ping speaks dur­ing a ses­sion of the APEC CEO Sum­mit, part of the broader Asia-Pa­cific Eco­nomic Co­op­er­a­tion (APEC) Sum­mit in Lima yes­ter­day.

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