By Juan Spinetto/Bloomberg
China’s prominence in Latin America has sparked analysis, interest and a good deal of hysteria. Depending on who you ask, I see it as an opportunity, well The region could rebalance its alliances and benefit from China’s claims, to an economic invasion that represents a threat to the geopolitics of the hemisphere.
However, given China’s economic might, the composition of its regime, and the stakes in its ever-growing geopolitical rivalry with the United States, when analyzing this phenomenon it is best to take into account the favorite phrase of Deng Xiaoping, the former supreme leader of China: “Seek the truth from the facts.” And the facts are changing in such important ways that American politicians must pay due attention to them.
Chinese investment is declining; However, the Asian giant is much more dynamic in seeking investments in innovative sectors, such as renewable energy and technologies, which it considers fundamental to its economic ambitions.
According to a report by Margaret Myers, Ángel Melguizo and Yifang Wang for the Inter-American Dialogue, By 2022, China will allocate $6.4 billion for direct investment in Latin America and the Caribbean. which means a 17% less than the annual average for the period 2020-2021 and less than half the average of $14.2 billion invested per year between 2010 and 2019.
“These declines reflect a notable recalibration by the Chinese government and its companies.s,” according to the report released Monday.
At the same time, the authors point out that an increasingly important part of this decreasing volume is allocated to the so-called manufacturing industries. “new infrastructure”, such as information and communications technologies, alternative energy, electric vehicles and high-end manufacturing, among other strategic assets.
The Asian nation’s investments in these sectors amount to approximately 60% of total flows will be directed to the region in 2022, that is, approximately 3.7 billion dollars.
“In numerous cases, Chinese companies are strengthening their ties with Latin America and the Caribbean, albeit, on average, through smaller deals and in cutting-edge sectors that are directly aligned with Beijing’s economic growth goals.” , the report reads.
Myers, Melguizo, and Wang also found that China is specifically scaling back one of its favorite engagement tools: the credits of their huge state banks. Between 2019 and 2022 the region received little more 2.9 billion dollars in loans from the country’s major development financial institutions, a fraction of what they were lending in 2010, when only one of these banks issued more than 35 billion dollars for Latin America.
“China continues to issue credits, but through different financial mechanisms and with less overall focus on large infrastructure projects,” the document reads.
What conclusions can we draw from this set of transitions? First of all, that reflects a shift in global strategy on China’s part.
With rising geopolitical tensions, growing competition with the United States, a slowing domestic economy, and other challenges on its own soil, it’s understandable that China is rethinking how to participate in the great global game.
At the same time, especially in Latin America, this change is reflected the troubled past of promoting huge infrastructure projects with ambiguous results. Some of the big deals that Latin American countries made with China at the height of the investment frenzy have gone nowhere, especially in Venezuela, with the problem of repaying the Chinese loans.
I suspect the Chinese are closing in on “less is more” It is also a recognition of the need to exercise caution in a region known for its political volatility.
Instead of undertaking large investments that could be jeopardized by the departure of a friendly government and the entry into office of another with a rival ideology, chooses to focus significantly on creating connections with local authorities, from Jujuy province in northern Argentina to solar plants in Colombia. A lower profile also reduces controversy over new projects.
But none of this should be confused with a lack of ambition or an exit strategy. As the Inter-American Dialogue report highlights, interest in traditional sectors such as traditional mining and commodities remains strong, albeit in different formats.
Bilateral flows in the region have continued to grow and can reach $500 billion. Meanwhile, Chinese cars flood Santiago and Mexico City and China is preparing to inaugurate its first megaport in the region, in Chancay, on the Peruvian coast.
For the United States, and to a lesser extent the European Union, this strategic recalibration represents a further challengeespecially when it comes to access to high technologies such as 5G and artificial intelligence (see the fascinating No Limits: The Inside Story of China’s War with the West), by Andrew Small, where he describes the bitter political battles between China and its rivals developed for influence in new communication systems).
This new area of expertise will also pose new challenges to Latin American policymakers. Given the close links between these technologies and political and economic governance, China’s new direction will inevitably raise the stakes for regional leaders as they grapple with shifts in the geopolitical balance of power and chart the trajectory of their own societies.
Source: Clarin
