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  • Dec 23, 2014
  • Updated: 11:15am
BusinessEconomy
LATIN AMERICA

Rivals drawn to Latin groove

Once regarded as Washington's backyard, Latin America is playing Sino-US competition to its advantage as the superpowers come courting

PUBLISHED : Friday, 14 June, 2013, 12:00am
UPDATED : Friday, 14 June, 2013, 3:49am

Although the Chinese and US presidents heralded a "new model" of co-operation at their weekend summit, a growing competition looks more likely. The whirlwind of activity before Barack Obama hosted Xi Jinping in the California desert revealed that Beijing's and Washington's sights are set on a similar prize - and face differing challenges to attain it.

Their focus is Latin America and the prize is increased trade and investment opportunities in a region where economic reforms have pulled millions out of poverty and into the middle class. Latin America is rich in the commodities and energy that China and the United States need, largely stable politically and eager to do deals.

Consider the travel itinerary: Obama visited Mexico and Costa Rica last month. His Vice-President Joe Biden recently went to Colombia, Trinidad and Tobago and Brazil. Chile's president paid Obama a visit last week, Peru's leader arrived on Tuesday and Brazil's is due in October.

Meanwhile, just after Biden left Trinidad, Xi arrived, part of a tour that also took him to Costa Rica and Mexico to promote trade and co-operation.

Both US and Chinese officials, however, are finding a more self-confident Latin America, able to leverage its new strength to forge better agreements and find multiple trading partners. That will likely force Washington to work harder to maintain its leading trade position against China - which has money to burn.

"There is a more energetic tone, a more optimistic mood about the economic agenda in the second term than the first time," said Michael Shifter, president of policy group the Inter-American Dialogue. "There's something happening in the region and the US wants to be part of it. Whether there's a well-thought-out vision or policy remains a question. But there is more of an affirmation of the region and a willingness to engage."

The US, Latin America's largest trading partner throughout much of its history, still retains this position. Washington has now signed free-trade agreements with more than a third of the hemisphere's nations and annually exchanges more than US$800 billion in goods and services with Latin America - more than three times the region's commerce with China.

In Obama's first term, however, the administration was widely viewed as neglecting Latin America. And China has moved in fast. China built its annual trade with the region from virtually nothing in 2000 to about US$260 billion last year. In 2009, it overtook the US as the largest trading partner of Brazil, the region's powerhouse - largely through massive purchases of iron ore and soy.

Other data is telling: In 1995, the US accounted for 37 per cent of Brazil's foreign direct investment. That dropped to 10 per cent in 2011, according to the Council of the Americas, which seeks to foster hemispheric ties.

Washington's renewed ardour is at least partly because of the fear China will repeat in Latin America the economic success it has built in Africa. China has been able to present itself as a kindly partner, which has played well against the West's history of meddling in domestic affairs.

"It's about influence and leverage," said Eric Farnsworth, vice-president of the Council of the Americas. "The region matured and expects to be treated in real partnership rather than in the patronising way" of the past.

The challenges facing Beijing and Washington lie in how each approaches the region. Washington confronts lingering resentment about its historic regional interference, stretching back to the 1823 Monroe Doctrine, and its continuing desire to mix business with policy - which muddies its approach to trade and investment. Washington's domestic problems, its pivot to Asia and a host of global crises, also serve as distractions that could keep its actions in Latin America from matching its words.

China, meanwhile, approaches opportunities almost exclusively on commercial terms.

Biden, in a May 29 speech in Rio de Janeiro, gushed about the progress made by Latin America and trumpeted the region's growing international stature.

"In the US," Biden said, "the discussion is no longer what it was when I was first elected as a young man: What could we do for the Americas? That's long since gone. The issue now is: What can we do together? We want to engage more. We think there's great opportunity. We're optimistic."

As with many new starts, a recognition of past mistakes is in order. "For many in Brazil," Biden said, "the United States doesn't start with a clean slate. There's some good reason for that scepticism. But the world has changed. We're moving past old alignments, leaving behind old suspicions."

China has particular interest in Mexico, the region's second-largest market. It is looking to work with Mexico City - investing in infrastructure, mining and energy because of the expected reforms that would open the oil industry to foreign investors.

There are obstacles ahead. President Enrique Peqa Nieto told Xi that though Mexico posted a trade surplus with its global partners, it ran a big deficit with China.

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