As U.S. pulls back, China makes Latin America deals
BUENOS AIRES | Venezuela may be in a meltdown, Brazil consumed by corruption scandals and Argentina fresh out of a recession. But for China, whose investments in Latin America top $100 billion, it’s just business as usual.
Largely immune to the region’s volatility thanks to its commercial pragmatism and long-term vision, Beijing is viewed as a key strategic partner and source of money in capitals from Mexico City to Buenos Aires. And with the region still adjusting to President Trump’s more assertive foreign policy, analysts say the region will increasingly look to the east rather than the north for crucial infrastructure funding.
“China has demonstrated great interest in playing an active part in what’s famously called the United States’
backyard, in a provocative way,” said Enrique Dussel Peters, an economist at the National Autonomous University of Mexico. And in the face of the Trump administration’s sometimes rocky early dealings with America’s nearest neighbors, “China is proving to be a more reliable long-term ally.”
Mr. Trump and his aides insist the president’s “America First” agenda is not isolationist, but rather a way to retool the country’s individual and multilateral alliances to benefit the U.S., its economy and its workers. But many see China rushing quickly into the vacuum on issues such as climate change and free trade.
Beijing is clearly feeling emboldened, said Benjamin Creutzfeldt, a fellow in the Foreign Policy Institute at Johns Hopkins University’s School of Advanced International Studies.
“The fact that now, suddenly, the U.S. is looking inwards — that may give the Chinese [a] push to accelerate a little, to be a little less worried about stepping on U.S. toes in Latin America,” he said. “It’s nothing new; it’s just [that] suddenly another gate has opened. It’s easier.”
China’s insatiable demand for raw materials while industrializing over the past three decades has fueled commodity export-dominated prosperity for countries across Central and South America. Even while China’s growth rates have slumped in recent years, the investment boom has picked up.
China is spearheading more than 100 major infrastructure projects across Latin America, including solar power in Baja California and satellite monitoring in Patagonia. It’s the region’s secondlargest lender and source of foreign investment, and it has surpassed the United States as the single biggest trading partner of Brazil, Chile and Peru.
“The growing complexity is very important; China is much more than just trade,” Mr. Dussel Peters said. “It reflects the seriousness and short-, mediumand long-term strategies with which China views Latin America. [And] China continues to increase its financing, investment and infrastructure projects.”
Presidents, parties — and even constitutions — have come and gone in the past decade, but China has remained nonjudgmental as it deals with governments led by left-wing firebrands and center-right millionaires alike. Latin American leaders of all political stripes, in turn, have been all too happy to take Chinese money with few strings attached — and at times kowtowed to Beijing in comic synchronicity.
Concerning U.S. relations, for instance, Argentine President Mauricio Macri never saw eye to eye with his predecessor, Cristina Fernandez. He called a recent meeting with Mr. Trump “wonderful,” but she once insinuated that Washington was capable of assassinating her. But when it comes to China, the two may well have shared a speechwriter.
During a February 2015 trip to the Chinese capital, Ms. Fernandez lauded a “strategic alliance” and “comprehensive association” between Beijing and Buenos Aires. Her successor, during his own visit, echoed her almost verbatim, underlining his pledge to “deepen [our] comprehensive, strategic association.”
Mr. Macri made those comments after a meeting with Chinese President Xi Jinping in May, less than three weeks after an Oval Office encounter with Mr. Trump where the biggest “deliverable” was a tacit agreement on Argentine lemon exports. From Beijing, by contrast, Mr. Macri returned with $17 billion worth of Chinese commitments to build nuclear reactors, railway lines and a power plant.
“China is fundamental for our region: Growth in Latin America is unthinkable today without China,” said Gustavo Cardozo, the Asia-Pacific coordinator for the Argentine Center of International Studies in Buenos Aires. “When the majority of countries put their cards on the table [to reveal] the principal generator of financing and global trade, it’s China. The United States has somewhat lost that protagonist role.”
With continental powerhouses Argentina and Brazil facing slumping economies, weakening currencies and falling government revenue, China has not hesitated to move.
Since 2015, Chinese companies have spent a total of $21 billion to purchase 21 Brazilian electricity companies, the private intelligence service Stratfor noted in a recent analysis, including a majority stake in Brazil’s third-biggest power company.
“Beijing has taken advantage of the economic recession and decaying electricity sectors in Argentina and Brazil to increase its presence in the countries …,” the Stratfor analysts wrote. “And the Brazilian and Argentine governments are so desperate for cash that they’ve laid aside their concerns that Beijing could use the investments to insinuate itself in their most strategic sectors.”
Not butting in
Beijing’s long-term ambitions in Latin America are sustained in part by its agnostic willingness to engage with whoever happens to be in charge in local capitals. In fact, whatever the size of its loans and investments in a given country, Chinese diplomacy has made a point of staying out of local politics.
“It never acts [as a superpower]. It never makes Latin American countries feel that difference, even though it is one,” Mr. Cardozo said. “Ideological changes [in Latin America] sometimes complicate relations with the United States. [But] neither left-wing nor right-wing governments have ideological or political conflicts with China.”
In addition to political flexibility, patience is key, said Mr. Creutzfeldt.
“Because most of the money comes from state-owned companies and stateowned banks [with less] need to respond to shareholders, they have this very longterm perspective,” he said. “There is a bottom line. They’ve got to make ends meet. But maybe not tomorrow or next year, but in 20 years.”
Those time frames may help explain why even Brazil’s prolonged economic and political crisis has not stopped Chinese money from pouring in. If anything, University of Sao Paulo economist Heloisa Lee Burnquist said, it has made her country even more attractive.
“The goal of the Chinese strategy is to establish a global economic predominance. [And] weakened economies become even more interesting targets for countries with such a strategy,” Ms. Lee Burnquist said. “China surely interprets this Brazilian weakness as an enormous opportunity [for] foreign direct investment [and] high-risk investments.”
But the Chinese approach is not foolproof. Last year, Beijing cut off Venezuela from new loans as embattled President Nicolas Maduro seemed to lose what little grip he had left on the country’s free-falling economy.
Beijing’s long-standing backing of the authoritarian rule of Mr. Maduro and his late predecessor, anti-U.S. populist Hugo Chavez, has also created an image problem that comes with a “seeno-evil” attitude, Mr. Cardozo and Mr. Creutzfeldt said.
“A part of the [Chavez-Maduro] regime has survived because of its ties to China; that’s a reality,” Mr. Cardozo said. “We can stipulate that China often sets up commercial relations irrespective of the type of government in power, and that also has an important impact on human rights [and] human rights violations.”
That, in turn, has at least some in Latin America worried whether all that cash flowing in from the other side of the world may come with strings attached down the line.
“What would be the scenario we’d see with a power like China being predominant on a global level?” Mr. Cardozo wondered. “While there are many countries that criticize the United States’ methods, in terms of human rights, internal norms and so on, we have much more in common than [we have] differences,” he said.
But at least in Mexico, such theoretic dangers pale in comparison with concerns about Mr. Trump’s rhetoric, including his campaign-trail claim that the North American Free Trade Agreement “has destroyed our country.” Still, it would be foolish to believe that China could somehow replace a more protectionist neighbor to the north, Mr. Dussel Peters said.
“Just because there are difficulties in the relation with the United States and with the Trump administration doesn’t mean China automatically appears as the savior of Mexican exports,” he said. “Exporting a Ford automobile from Mexico to San Diego is not the same as exporting it to Shanghai.”
Stumbling blocks such as logistics and bureaucracy mean that cross-Pacific ties are not without challenges — especially when it comes to trade, the economist added.
“There are people who believe that because Trump is sticking out his tongue, we’ll export to China tomorrow,” he said. “[But] for 10 years, Mexico has been trying to export [to China] tequila — a product one would think is easy — with great difficulties, and until now without success. This is anything but automatic or immediate.”
But even if China is never able to entirely displace the United States in its own hemisphere, the niche it has carved out for itself in a little over a decade is so deep that there is no turning back, virtually all analysts agree.
“The United States has lost very important terrain in Latin America,” Mr. Cardozo said, “and relations with China have deepened and consolidated not just in the political and commercial spheres, but also from a cultural point of view.”
WORTH THE TRIP: Argentine President Mauricio Macri visited Chinese President Xi Jinping and returned with $17 billion worth of infrastructure commitments.