As U.S. pulls back, China makes Latin Amer­ica deals

The Washington Times Daily - - FRONT PAGE - BY FRED­ERIC PUGLIE

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.

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