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China makes move on Latin America as Trump steps back from trade deals

U.S. President Barack Obama and Chinese President at the Asia-Pacific Economic Cooperation summit in Lima, Peru, last month.
U.S. President Barack Obama and Chinese President at the Asia-Pacific Economic Cooperation summit in Lima, Peru, last month. AP

Now that Donald Trump is preparing to take charge and has said he’ll withdraw from U.S. trade agreements, China is signaling that it plans to capitalize on the worries of Latin American leaders.

The Chinese government issued an 11-page policy paper on the “new era” of Chinese-Latin American relations following a South American tour by its president, Xi Jinping, last month.

Former U.S. and Latin American officials say that a retreat on trade could do long-term damage to American efforts to improve its relationships throughout the Western Hemisphere.

“The ground is clearly shifting under our feet,” said Eric Farnsworth, a former State Department official who is now vice president of the Washington-based Council of the Americas. “China is making a self-conscious play for leadership in the Asia Pacific, which includes Latin America. And the United States is broadly seen as being in retreat.”

The ground is clearly shifting under our feet.

Eric Farnsworth, Council of the Americas

The United State’s withdrawal from trade was big talk in the corridors of the Asia-Pacific Economic Cooperation summit in Peru that took place just two weeks after the election. Trump vowed in his first 100 days in office to withdraw the United States from the 12-nation Trans-Pacific Partnership that is intended to deepen economic ties among the signatories.

The summit was the climax of a Latin American trade tour de force for Xi, who hopped from Ecuador to Chile to Peru touting new strategic partnerships. According to Farnsworth, Xi got three standing ovations from Latin American business leaders during a summit speech where he made a direct play for trade and investment. He did not mention Trump, but the implication appeared clear that China was ready to step in.

“China will not shut the door to the outside world, but will open it even wider,” Xi told business leaders.

Shi Yinhong, a professor of international relations at Renmin University in Beijing, said there are trade opportunities with the uncertainty surrounding the new administration. While Latin America is not as strategically important to China as South Asia or East Asia, the country is looking to expand its political influence and needs Latin America’s oil, copper, iron and other commodities to feed its massive economy.

“China has become more externally dependent than it was 10 or 15 years ago.” Shi said. “Latin America has a lot of resources that China wants.”

China already is the region’s second-largest commercial partner. It imports 40 percent of the global production of soybeans – the vast majority of which comes from Brazil and Argentina – and a third of the iron ore, which also largely comes from Latin America, according to the Council on Hemispheric Affairs, a private research organization.

When you turn your back and say ‘We’re going to scrap everything,’ yes, that hurts.

Jorge Guajardo, Mexico’s former ambassador to China

In 2015, China lending to Latin America reaching $29 billion, more than the World Bank and InterAmerican Development Bank combined, according to the Boston University’s China-Latin America Economic Bulletin.

Kevin Gallagher, a Boston University professor who studies China’s interests in Latin America, said Trump’s election has given new momentum to what has been the communist nation’s approach for the past four and five years.

“In Latin Americans, their ears are more attuned for diverse possibilities,” said Gallagher, author of “The China Triangle: Latin America’s China Boom and the Fate of the Washington Consensus.”

“China’s got a long run view,” he said. “They have a billion people and they need lots of natural resources. And Latin America has sort of won the China lottery. They have got a lot of steel. They got a lot of oil. They got a lot of soybeans. Obviously, the Chinese really like soy.”

The new Chinese policy paper – only the second of its kind – outlines political, economic, educational and social benefits of closer cooperation and serves as almost a love letter to the region on what they can accomplish together.

“The development of China cannot be possible without the development of other developing countries, including countries in Latin America and the Caribbean,” the paper reads.

Jorge Guajardo, Mexico’s former ambassador to China, said Latin American leaders are aching from Trump’s angry rhetoric and promises to dial back trade. But Guajardo said China is not the answer, and he doesn’t see much new opportunity in the Chinese market, which already consumes major amounts of Latin America commodities.

But there’s no denying that Trump has caused hard feelings in Latin America, where many leaders took political risks to align their countries with the United States, in spite of its reputation for interfering in their politics.

“We just want to be able to trade,” Guajardo said. “So when you turn your back and say ‘We’re going to scrap everything,’ yes, that hurts.”

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