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How Trump Benefits China in Latin America

Growing Chinese engagement in the region will test Latin America's ability to adapt.
Xi jinping
Anderson Riedel (flickr - Michel Temer) November 7, 2013 CC by 2.0

The timing was perfect, and the symbolism could not have been stronger. A mere week after Donald Trump’s upset victory stunned the world, Xi Jinping traveled to Lima for the Asia-Pacific Economic Cooperation (APEC) summit and projected China as a bastion of stability, predictability and openness. With the U.S. increasingly skeptical of globalization, Xi promised that China would stand up for free trade. Faced with an emerging global leadership vacuum, Beijing was quick to recognize a window of opportunity. Compared with the abrasive U.S. president-elect, the Chinese president, with his avuncular charm, seemed to have a soothing effect on the gathering in the Peruvian capital.

No region in the world will remain unaffected by the unprecedented combination of the United States as a source of uncertainty and China as a potential stabilizer. The consequences for Latin America, however, are particularly important, as the recent political shift in the region has led to a growing consensus that greater openness to trade is a prerequisite to economic recovery. While trade negotiators in Brasília and Buenos Aires may have hoped for a deal with Europe or the United States, Beijing increasingly looks like the only partner offering a meaningful opportunity, building on already existing free-trade agreements with Costa Rica, Peru and Chile. Similarly, when it comes to attracting investors to modernize the region’s rotten infrastructure, no country offers as much as the Middle Kingdom. China, free to promote alternative trade deals now that Trump promised he would pull out of the Trans-Pacific Partnership (TPP), faces a world of opportunities in Latin America.

This trend may be accelerated if U.S. policy toward the region resembles that of former President George W. Bush. During his presidency, more pressing short-term priorities elsewhere (such as the “war on terror”) caused Washington to largely turn away from Latin America, allowing China to boost its influence. Much suggests a similar scenario will materialize again over the next four years. Chinese trade with Latin America has grown more than 20-fold over the past fifteen years. Xi announced that Chinese companies will invest a quarter of a trillion dollars in the region over the next decade, diversifying from traditional industries such as mining, oil and gas to areas like finance, agriculture and infrastructure (energy, airports, ports and roads).

Yet for Latin America, Beijing’s growing engagement is a mixed blessing. As China increasingly focuses on value-added goods, it now purchases fewer commodities from Latin America but sells more to the region, causing Latin America’s trade deficit with China to increase. Countries like Brazil face a risk of deindustrialization and face direct competition as they seek to export to its neighborhood. Chinese imports are affecting, among others, industrial machinery, textiles, footwear and clothing, while copper, iron, oil and soybeans account for the greatest share of the region’s exports to China. Many new projects that China may finance (such as the Trans-Amazonian Railway from the Atlantic to the Pacific Ocean) would help integrate the region, but also enhance Latin America’s dependence on China, in addition to posing threats to the environment and creating relatively few jobs.

Lack of preparedness

China’s growing influence is remarkable, but it should not come as a surprise. Brazil's former Foreign Minister Azeredo da Silveira argued as early as 1974 that China "had consolidated itself as an emerging power," urging then-President Ernesto Geisel to normalize diplomatic relations with the country. And yet, particularly in Brazil, the lack of preparedness and knowledge about China on most policy-making levels is remarkable. During debates in Brasília, comments often reveal a worrying degree of ignorance of Chinese affairs. Yet governments are not the only ones to blame. Thinkers both left and right of the ideological spectrum are often stuck in a 20th century Western-centric worldview, still regarding the United States as the source of most good and evil. The left still regards U.S. meddling in the region as the most urgent concern at a time when Chinese clout in capitals like Caracas now exceeds Washington’s influence even in countries that are seen as pro-U.S., such as Colombia. Mostly through the China Development Bank, Beijing now lends far more to the region than the World Bank.

Oblivious to these trends, it is not uncommon to witness dinner party debates among left-of-center Brazilian intellectuals about whether the Lava Jato corruption investigation and former President Dilma Rousseff’s impeachment are actually schemes by the FBI to destroy Petrobras (as a professor at USP, a leading university, recently argued in a newspaper interview).

All the while, Brazil’s Foreign Minister José Serra is said to have only a vague understanding of Asia, and was recently unable to name the members of the BRICS grouping during an interview. Add to that the absence of sinologists and Brazilian foreign correspondents based in China, the result is a disturbing unpreparedness for an increasingly Asia-centric world.

Designing a regional strategy

What is to be done? For starters, while Peru, Chile and others have already begun to adapt to new realities, foreign ministries in the region should coordinate their positions regarding China better to avoid competing for Chinese largesse, which will lead to a race to the bottom. That involves discussing and possibly aligning legislation regarding Chinese investments, transnational environmental rules for Chinese-financed projects that cross borders, and cohesive policies regarding bigger questions such as China’s role in the World Trade Organization.

This discussion should also include a broad debate, all ideological passions aside, about how the emerging global competition between Washington and Beijing can be used to the region’s advantage. That requires being as knowledgeable about domestic affairs in Beijing as in Washington, which, given the opacity of China, requires a far greater diplomatic presence than most countries possess today.

Considering the influence China already has on Latin American economics and politics (for example, the current situation in Venezuela is impossible to understand without making sense of China’s role as a lender), the lack of a regional debate over how to grapple with the implications of multipolarity is remarkable. The longer policy makers in the region wait, the smaller their capacity to learn to operate in the new environment.

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Stuenkel is a contributing columnist for Americas Quarterly and teaches International Relations at the Getulio Vargas Foundation in São Paulo. He is the author of The BRICS and the Future of Global Order (2015) and the Post-Western World (2016).

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.