Brazil

Don't cry for me Latin America. Yet.

While this blog is mostly devoted to issues surrounding the Sino-African partnership, one must not forget that China is similarly active in other regions of the world, most recently Latin America. China's strategies in Latin America seem to differ little from those employed in Africa, with 'oil-for-infrastructure' deals, tech investments, extensive bilateral trade agreements, and the influx of cheap Chinese goods as the wooing tactics of choice. Trade between China and Latin America soared from $10 billion in 2000 to $140 billion in 2008.


As is true of Africa, Beijing's main interest in Latin America is the guaranteeing of access to the region's raw materials - oil, soybeans, copper, iron ore, etc. - to fuel its continued rapid growth. Yet as is also true in Africa, China's ambitions are also grandly geopolitical. According to Tyler Bridges:

China is beefing up its embassies throughout Latin America, opening Confucian centers to expand Chinese culture, sending high-level trade delegations throughout the region and opening the door for ordinary Chinese to visit Machu Picchu, Rio, and other tourism hot spots.

Aiping Yuan came to Rio de Janeiro from Beijing in 1997 on a lark, fell in love with the city, and decided to stay. She studied Portuguese, and when Brazilian President Luiz Inácio Lula da Silva made his first visit to China in 2004, she opened a small school in Rio to teach Mandarin.

She began with six students and today has 300, including senior executives at Petrobras, the country's biggest oil company, and Vale do Rio Doce, the biggest mineral producer. Both have growing business with China.

"Chinese is the language of the future for Brazil," Yuan said with a big smile.

Chinese will be the language of more than just Brazil if Beijing's leaders have anything to do with it. As Bridges aptly observes, China is buying zinc from Peru, copper from Chile, and iron ore from Brazil. It's shipping equipment to Brazil, buses to Cuba, clothes to Mexico and cars to Peru. Chinese tech giants Huawei and ZTE are likewise grabbing business from established telecom suppliers across the continent, most prominently in Argentina, Chile and Colombia. Yet while China seemingly has a Latin America strategy (or perhaps a 'developing world' strategy more generally; it's hard to tell), Latin America doesn't appear to have a China strategy.

Writing in his excellent blog, Tom Pellman cites David Shambaugh who notes:

Latin America is acting toward China's expansion in the world in a reactive, disorganized or ad hoc fashion. When I asked Itamaraty (Brazil's foreign ministry) about its strategy on China, I got blank stares. There is no strategy.

Such a lack of strategy indubitably works to the detriment of Latin American states - as it does African nations which similarly lack much in the way of a policy of engagement with the eager Chinese - who stand to gain from Chinese investment. In Latin America, as much as in Africa, there are many benefits to be accrued from recent Chinese interest. Yet without a plan of action, it seems that China will walk away as the sole beneficiary when all is said and done.

Lula in Beijing to "defend a new economic order"

Brazilian President Luiz Inacio Lula da Silva arrived in Beijing today where it is expected that he and President Hu will strengthen bilateral relations between their two countries, promote oil contracts, strike deals on the sale of Embraer aircraft, and negotiate meat exports and biofuel for cars, among other top agenda items.

Already in March, China surpassed the U.S. as Brazil's biggest trade partner, and the trip seems to signal even further shifts in the global economic arena: namely, the U.S. out, China in. Or, perhaps more realistically - the U.S. down, but not (yet?) out; China up, and rising
"I think the trip that I am about to embark on... is one of the most important I am going on to defend a new economic order and a new commercial policy in the world," Lula told reporters before leaving Brazil.

Roberto Jaguaribe, a Brazilian foreign ministry official, said last week the trip represented a "reorganisation of the international scene" in which the top emerging economies were playing a bigger role in world affairs.
Among the more curious agenda items to be discussed between Lula and Hu is Lula's proposal that the countries conduct bilateral trade through each nation's currency, removing the U.S. dollar as an intermediary. Silva has been urging the end of the use of the American dollar in South American trade for some time now, suggesting such a move would reduce transaction costs for both exporters and importers, especially those operating on a smaller scale. Brazil and Argentina have agreed to trade with each other using their own currencies, and China and Argentina have likewise agreed to establish a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in Chinese currency. Might we be witnessing the gradual usurping of the U.S. dollar as the world's currency reserve by the Chinese yuan?

Such a reality may still be some way off, but the Chinese are slowly laying the ground for the yuan's ascendance, one bilateral negotiation at a time.