As the U.S. overlooks Latin America, China steps in
Uncertain about EU, Mercosur turns to China

As the U.S. overlooks Latin America, China becomes more influent

It has been 20 years since Mercosur – the trade bloc that includes Brazil, Argentina, Uruguay, and Paraguay (and soon Bolivia) – first entered into negotiations over a free trade agreement with the European Union. The delay is owing to a number of obstacles that seem impossible to overcome, notably geographical indications for various food and drink products. Beef, cars, and access to the ethanol market also spark tensions on both sides of the Atlantic.

“The EU has not yet figured out what it wants from Latin America,” said a recent report by the Elcano Institute, a Spanish think tank.

Enough is enough – at least for Argentina and Uruguay.

Frustrated with the Europeans, both countries want to focus their efforts on another major partner: China. &#8220;We&#8217;re certain that the window of opportunity [to sign a deal with the EU] is closing. Argentina agrees with Uruguay on the matter and is willing to see what we could do [about a possible deal with China],&#8221; said Jorge Faurie, the Argentine Foreign Affairs Minister, during the inaugural meeting of the summit of Mercosur presidents, which takes place today in Asunción.</span></p> <p><span style="font-weight: 400;">Faurie&#8217;s words are noteworthy, given that Argentina seemed extremely enthusiastic about the EU deal just days ago. Now, it admits that a concrete partnership between the two blocs might never fully materialize. </span></p> <p><span style="font-weight: 400;">Brazilian diplomats have preferred not to weigh in on the issue, and Brazil&#8217;s Foreign Affairs Minister Aloysio Nunes Ferreira chose his words very carefully. &#8220;There are indeed other fronts of negotiation that are open; other perspectives.&#8221; Mr. Ferreira mentioned Singapore and the Pacific Alliance, a bloc that unites Mexico, Peru, Chile, and Colombia. But he never mentioned China.</span></p> <h3>How the U.S.-China trade war plays into the equation</h3> <p><span style="font-weight: 400;">For Argentina and Uruguay, the moment to act is now. The trade war between China and the United States creates a unique window of opportunity for Asia&#8217;s largest market &#8211; and one of </span><a href=""><span style="font-weight: 400;">South America&#8217;s most important partners</span></a><span style="font-weight: 400;">. </span></p> <p><span style="font-weight: 400;">The world&#8217;s two largest economies </span><a href=""><span style="font-weight: 400;">haven&#8217;t seen eye to eye</span></a><span style="font-weight: 400;"> lately. On Friday, U.S. President Donald Trump escalated tensions by announcing additional tariffs on USD 50 billion of Chinese exports. As Washington becomes increasingly more protectionist, Beijing could start setting its sights south of the border.</span></p> <p><span style="font-weight: 400;">The United States has overlooked Latin America, particularly Brazil. Donald Trump hasn&#8217;t visited a single country in the region since taking office, late in January 2017. Mr. Trump also didn&#8217;t attend this year&#8217;s </span><a href=""><span style="font-weight: 400;">Summit of the Americas</span></a><span style="font-weight: 400;">. Moreover, Mr. Trump insulted Mexico, El Salvador, and Haiti during the World Economic Forum in Switzerland.</span></p> <p><span style="font-weight: 400;">Meanwhile, China&#8217;s Foreign Minister Wang Yi offered kind words, proposing a &#8220;strategy of reciprocal benefits and shared profits.&#8221; The Asian country didn&#8217;t invite Latin America to join the One Belt, One Road strategy &#8211; an economic and diplomatic strategy to promote Chinese investments and influence in Eurasia and Africa. He did, however, the next best thing, saying that the region was &#8220;a natural extension.&#8221; </span></p> <p><span style="font-weight: 400;">President Xi Jinping has also promised to increase Chinese investments in the region by 150 percent, reaching USD 250 billion over the next 10 years.</span></p> <h3>China&#8217;s weight in Latin America</h3> <p><span style="font-weight: 400;">China is already the main trade partner for Brazil, Peru, and Chile. Trade between the region and the Asian giant has grown by 2,400 percent between 2000 and 2013. </span></p> <p><span style="font-weight: 400;">The amount of goods shipped between the two sides amounted to over USD 200 billion in 2014. It slowed down in 2015 and 2016, only to increase by 30 percent last year, according to data from the Inter-American Development Bank. In 2017 alone, Chinese companies invested over USD 21 billion in Brazil &#8211; including the purchase of a 23-percent stake at the country&#8217;s third-largest power company and a port for containers in northern Brazil.</span></p> <p><a href=""><span style="font-weight: 400;">André Cruz</span></a><span style="font-weight: 400;">, manager of international accords at Thomson Reuters, told the website </span><i><span style="font-weight: 400;">Comex do Brasil</span></i><span style="font-weight: 400;">: &#8220;China is entering Latin America so deeply that, if [the region] were to choose a side in the U.S.-China trade war, it might not really have a choice [but to side with Beijing].&#8221;

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MoneyJun 18, 2018

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BY Gustavo Ribeiro

An award-winning journalist with experience covering Brazilian politics and international affairs. His work has been featured across Brazilian and French media outlets.