China pivots to Latin America

Emanuele Scimia in the Asia Times on 18JUL12 reports on China’s pivot to Latin America:

China is Latin America’s third-largest trading partner, immediately after the United States and European Union (EU). Beijing’s commercial exchanges with Latin-American countries were worth more than US$241 billion in 2011, according to data released by the Chinese Trade Ministry in April.

BUT

Of US$153 billion from foreign direct investments which Latin-American and Caribbean nations attracted in 2011, $8 billion came from China (down $7 billion compared with 2010), the Economic Commission for Latin America and the Caribbean (ECLAC) reported in May. That puts Beijing well behind the EU, US, Latin America and Caribbean and even Japan. The EU, top investor in this region, has funneled an average of $30 billion a year into Latin America since 2002.

Yet there may be room for China:

In June, Beijing signed with Brasilia a currency swap deal worth $30 billion. The agreement is part of a broader attempt, along with the other BRICS (Russia, India and South Africa, to shield signatory countries from potential financial crises.

Moreover, while he was touring South America late last month, Chinese Premier Wen Jiabao outlined a proposal for a free-trade agreement (FTA) between China and Mercosur, the Southern Cone Common Market, which includes Brazil, Argentina, Uruguay and Paraguay (Venezuela is set to join the regional trade bloc as well). In the words of Wen, Beijing aims at redoubling overall trade with Mercosur up to $200 billion by 2016

Yet again what about China’s Trade Imbalance where:

China exports almost exclusively manufactured goods towards the region in return for natural resources and raw materials. Countries like Brazil, Mexico, Chile and Argentina have the potential to export more value added products and Mexico, much more than Brazil, is a trade rival of China in the US market. South American countries also complain about the inflow of substandard Chinese goods.

Let’s not forget that many LA states are lining up with the US and EU against Beijing on the undervalued exchange rate of the yuan and pooling their resources. For instance, Brazilian and Argentine industrial lobbies are making joint efforts to set up a new bilateral body “fighting off growing competition from China”, according to a June 27 report by the  Economist Intelligence Unit.  (viewed here)

Ergo, China’s proposed FTA with Mercosur may be wishful thinking. The EU has sought in vain to strike a free-trade pact with the South American common market since 1995.

Then there’s shifts in strategic directions with new blocks to contend with:

In June, Chile, Peru, Mexico and Colombia inaugurated the Pacific Alliance which pits China somewhat off the US in the region. The bloc is pushing further integration among the partners and may be a powerful bloc to contend with as its members account for 35% of the Latin America’s gross domestic product (GDP) and 50% of the overall Latin-American trade.

More on the Pacific Alliance: here

Wilson Report from January 2011 on China, LA, & the US: here

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