Saturday, January 16, 2021

China Outclasses the US in Latin America; Trade Imbalance a Major Concern

Should the US be worried about China’s growing influence in Latin America? With US attention on Iraq and Afghanistan, China has all too willingly filled the void in Latin America that the US has created. But experts that EurAsian Times talked to state that China’s trade does not encourage diversification of Latin American’s exports into more value-added goods; whilst Latin America’s exports to the US are more diversified and remain fairly balanced.

China has managed to emerge as Latin America’s biggest trading partner, where once the United States enjoyed overarching influence, major economic partner with bilateral trade standing at more than US$200 billion. At a time when China is aggressively campaigning for the success of its Belt and Road Initiative (BRI), Latin American countries are welcoming giant infrastructure investments and aid from Beijing.

Latin American leadership is keen on the prospect of becoming part of the comprehensive infrastructure plan, as evident in the presence of the Chilean and Argentine presidents at the Beijing Summit in 2017. And Brazil can’t be overlooked either.

As China and the United States fight each other over international trade and Washington apparently retreats from its role of the global champion of free trade, Beijing has increasingly turned to Brazil to fill the void, pouring money into a diversified portfolio of investments.

Besides food and energy, the Chinese have expanded into telecommunications, automotive, renewable energy and financial service sectors. Moreover, research by Eurasian Times shows that Chinese companies, between 2012 and 2016, invested in Brazil more than twice as much as its US counterparts did.

Experts view the Brazil-China partnership as a ‘marriage’ between two emerging economic powers, with China being the fast-rising industrial, economic and political leader, and Brazil the agricultural and natural resources powerhouse.

According to the China Research Centre in South America, China has found some of the most well-endowed partners in the world. “China is devouring Latin American commodities and eyeing market of about 500 million (or more) people.”

Merco Press stated Wang Yunkun, the deputy director of the Agriculture and Rural Affairs Committee of the National People’s Congress saying “Countries in South America have arable land and need technology and investment, and they welcome our companies.

It’s a win-win solution.” China is in cooperation with Chile, Brazil, Venezuela, Ecuador, Argentina and Peru. The Asian giant’s thirst for natural resources, in search of sustainable supplies of oil, soy and iron ore to the South American region.

Deutsche Bank researcher Tamara Trinh said China’s agricultural demands have risen sharply in the last decade, no doubt attributed to the nations growing population. China is a major exporter of soy from Argentina and Brazil.

Data shows that China accounts for almost 40 per cent of the world’s soybean imports; Latin America’s vast agricultural sector is a perfect match for China’s needs. Trinh says “China is also the world’s leading importer of metal ores, a large percentage of it coming from South America. Brazil is China’s third largest supplier of iron ore and the largest exporter of iron ore in the world.”

On the infrastructure side, China is partnering with Brazil to improve the nation’s railways and establish a rail link to the Pacific to cut transportation costs of iron ore and soybeans. Beijing has also proposed a rail link in Colombia to rival the Panama Canal.

But some Brazilian experts worry that the country’s relationship with China is presenting a large trade imbalance that could negatively affect Brazil’s industries outside of agriculture and mining.

The experts further say that China’s trade does not encourage diversification of Latin American’s exports into more value-added goods; whilst Latin America’s exports to the US are more diversified and remain fairly balanced. But it has to be said that United States failure to be an effective regional partner has incentivised China to deepen cooperation with Latin American countries.

More News at EurAsian Times

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