THE CHINESE INVASION IN LATIN AMERICA
The economic growth that many countries in Latin America have gone through in the past few years has brought many positive aspects. Besides the obvious aspects, such as an improvement in the social condition, economic stability and planning capacity, among others, the economic expansion also brought new issues for which Latin-American countries should find a standpoint.
Historically, as an extension of Europe in the New World, Latin America became commercially (and several times politically) tied to the USA and Europe. Also in an important scale, countries depended on their neighbors to keep certain strategic sectors of their economies actively functioning.
The economic success the last decade brought to some countries, like Brazil, Chile, Peru and Colombia, among others, has enlarged the commercial view of each one of these countries. Previously, the economic dependence on the USA and Europe would restrict and decrease the negotiation power of any Latin American country. That was the main “fuel” to turn the useless rhetoric that “we are exploited by the imperialist yanks and colonizers Europeans” into something permanent among the pseudo-intellectuals that did not recognize the incapacity of our negotiators, but only the advantage foreigners took from us.
Today, this situation is pretty different. The world has diversified its production capacity and its group of consumers. Brazil, for instance, has increased its sale of products (and diversified the set of exported products) in Latin America, maintained the USA and Europe as important consumers and has China as a potential “customer” with capacity of causing a com a tsunami in the Brazilian trade balance.
Commercially and economically all of us already know about the benefits brought by the market diversification and how this generates a sensational potential of production growth. Politically, the coming of new players changes a bit the geopolitical perspectives in Latin America:
1. The coming of a new player increases the production demand, maintaining the economic growth in a virtuous circle that is in expansion;
2. The Latin American countries’ capacity to bargain with older buyers increases, since a new buyer is the guarantee that product can leave a destination and find another;
3. Thus, the USA will need to check their negotiation policies with countries like Brazil and Peru, for example, for they demand interesting counterproposals so that this continues to be the destination of choice for certain products;
4. Trade negotiations, such as the Doha Round, for instance, have a new dynamics, once viable and interesting alternatives may come without the presence of big economies, such as the USA and Europe.
Naturally the biggest of these players is China. Still weak in terms of perception, but statistically giant, the presence of the Chinese in Latin America offers an alternative that implies a total change of conduct by those Latin American countries that wish to have strong ties with China. The region, particularly Brazil, may abundantly provide vital items for the survival of a country throughout this century:
Food, energy and water.
The food issue is already pretty active. Brazil exports a considerable quantity of rice, soy, corn and other products to China. Peru and Argentina are also increasing their exports to the East. If previously the big markets were divided between the USA, Europe and national market, a country with the population and appetite of China completely changes the perspective of negotiations. We already see the Chinese interest in buying land in Latin America to manage a production here and, little by little, take hold of shipment logistics to China. This is both dangerous and counterproductive for Latin Americans. The logistic chain must always be in the hands of local governments, so that the negotiation power is not lost.
Energy is still as important as food for the Chinese. This may be a great opportunity to attract direct investments for the infrastructure of each country. It is worth remembering that the “energy” issue has put Latin America in the map of the global geopolitics, both by the positive points, such as the pre-salt and Hugo Chavez’s adventures financed by petrodollars. In this sector, we will see a stronger and more evident Chinese presence. China will present projects of plants and companies to explore oil and natural gas fields. Once again, if the logistic process is lost and stays totally in the hands of the Chinese, the China of tomorrow will be interpreted as the USA of yesterday in Latin America. Biofuel is the “apple” of the Brazilian Government’s eyes and, if properly used, it will be the main object of bargain and negotiation Brazil will have to obtain what is convenient not only from China, but also from the USA and Europe. For this, there must be a domestic regulation, which should be transparent from production to distribution to the end customer abroad. Only by doing this there will be trust and foreign mass investment in the area.
Finally, water is a sensitive and highly strategic point. However, this is a sector that will have a dominant role in the future. The world recognizes the need for drinkable water grows by the day, but it is not enough to actively act in the political relations among countries yet.
Nevertheless, the protection of the environment and ecosystems where this asset is found is far from being well done. Thus, the world does not trust Latin America as a safe region to manage this resource in the next years.
Relations with China must be carefully considered. If there is a total opening for the coming of the Chinese in form of investments, physical presence of companies and specially control of the strategic logistics in some sectors, we run the risk of regressing and become dependents on one country once again. We must give China and other countries the opportunity to invest in the country, as partners and never as vital players. Thus, Brazil, Mexico, Argentina and Colombia may diversify and increase their productions and have as their vital buyers not only the Chinese, but also the North Americans, Europeans, Russians and Indians.
Comment (0)Resuming
Dear Readers,
For a while I`ve been absent from publishing, since I was undergoing things related to my actual work (political strategy). Anyway, tomorrow I will publish again some articles and views from Latin America.
Best,
Thiago de Aragao
Comment (0)Obama: The first hundred days and a new stance with Latin America
By Thiago de Aragão - thiago@arkoadvice.com.br
Elected in the crowning of a historical moment, President Barack Obama took many positive steps during his first one hundred days of administration. With a high approval rate (more than 60%), Obama has managed to obtain more than conveying confidence to the American people. He is also trying to change the global feeling towards the United States. The USA and the rest of the world have shown significant signs of recovery from the economic crisis. This has certainly played a crucial role in assuring that Obama’s charisma is still an efficient fuel for success in the countries and events to which the president is invited.
Regarding Latin America, Obama seems to have elected an efficient strategy, different from that practiced by his predecessor. The natural choice of Lula as Obama’s “partner” in the continent, widely recognized as a praiseworthy choice, was no surprise. The Department of State acknowledged that Latin America has been neglected by the USA as a low priority region throughout the decade of 2000. It is easy to understand why. September 11, and the USA’s many actions in the Middle East and Asia all greatly limited Latin American inclusion on the country’s foreign agenda. At the same time, Latin America has been experiencing a boom period in its regional geopolitics. Countries which used to only consider their domestic issues, working hard to solve problems like economic instability, lack of institutional solidity and serious crises of corruption have now managed to find a balance, giving way to a “rebirth of regional geopolitics”. This rebirth allowed Venezuela to use a new national energy policy to become a regional player in an attempt to create a realm of political influence. Most regional leaders have come to understand that their energy sources are the key to accessing neighbor countries.
Thus, Bolivia began to take advantage of its status as a natural gas supplier in order to renegotiate its international and domestic contracts, as well as its relation with Argentina and Brazil. Not only that, but highly important political matters in the country, such as the exit to the Pacific Ocean, may be considered null and void as a component of the energy supply strategy. Ironically, Chávez’ Venezuela benefited from the much criticized war in the Middle East, by seeing its oil reserves raise a good amount of capital, thereby allowing it to intervene in policies of other countries like Ecuador, Bolivia, Paraguay, Argentina and Nicaragua. Paraguay also realized that they could take advantage of the “energy geopolitics” trend and demanded a renegotiation of its Itaipu Treaty with Brazil. Chile, suffering from a lack of natural gas, sees in the Pacific Ocean a possible solution for its problems. And Argentina, with its industry almost ruined by a lack of energy infrastructure, is scrambling to find suppliers at any cost.
In this scenario, Brazil is a standout once again with its pre-salt discovery. Obama knows that in order for the United States to regain its respect and a certain degree of influence in Latin America, he must appoint a strong, well-respected “representative”. Approaching Lula is a strategic move, just like other decisions that the Department of State has made.
My remarks concerning the USA’s political behavior and these signs of change, as well as the USA’s understanding of the current moment, bring us to several conclusions:
1. Differently from what had been expected, Brazil’s relationship with the continent’s “radical” leftist countries did not evolve to a level of fraternity;
2. The Gasoduto do Sul (South Gas Pipeline), Unasul and other ideas of partnership involving strong political ties did not go forward, showing that Brazil is following its own agenda;
3. Anti-Americanism is concentrated in the Andean region. The oil production crisis and stagnation faced by Venezuela should be enough to prevent such feelings from thriving; Obama believes that it may be the right time to change this situation;
4. Brazil needs an ambassador who is more politically than commercially talented; Tom Shannon is one of the possible choices;
5. The USA government is intensifying its contacts with Brazilian analysts in an attempt to understand the scenario as a whole in time to design strategies, instead of acting only in matters in which the country is specifically involved;
6. Brazil can and must lead initiatives to help the USA to regain prestige in the region.
These remarks will lead to some short, middle and long term changes in the relation with Brazil and consequently with the region:
Short Term
1. Ambassador with specific political skills;
2. Visits from high ranking government officials to Brazil;
3. Implementation of a continuous prospective view in the Brazilian and Latin-American political environment (instead of a factual view);
4. Dialogue strategy with opinion makers outside the government sphere.
Medium Term
1. Technological cooperation (to generate solid ties for the development of technological research);
2. Better acceptance of certain Brazilian products in the USA (like ethanol);
3. Monitoring of a contact network in the Brazilian Congress, civil society and the press;
4. Development of a Positive Agenda with the Brazilian Government.
Long Term
1. Potential support to Latin America in trade battles against the European Union;
2. Acceptance of the role as a viable and profitable alternative for future LA-China and LA-India partnerships;
3. Constant dialogue following a Positive Agenda, solid since its implementation.
All of this follows a basic rationale: for many years Latin America depended on the US and European markets to serve as the backbone of its raw material export platform. This always gave Europe and the USA the advantage in negotiations. Today, stable growth in Brazil, Peru, Colombia, Chile and other countries has provided Latin Americans with the powerful alternative of the domestic market. Besides, China, India and Russia have become the customers LA has always asked for. Thus, Europe and USA will have to adapt to a different reality at the negotiation table, where they are no longer the only alternatives for the Latin-American export market.
Comment (0)Brazil: Yet again, the idea of a third mandate surfaces
Minister Dilma Rousseff’s disease and difficulties in understandings with the PMDB have caused speculations to surface regarding the possibility of a change to the Constitution in order to enable President Lula to run for yet another mandate in 2010. In an interview to the Valor magazine (May 4, 2009), former President Fernando Collor even stated that Lula will only not run in the next elections if he doesn’t want to. That isn’t exactly true.
To amend the Constitution is a lengthy process. It would be extremely difficult to change it by October, notwithstanding the fact that the House Justice and Constitution Committee is controlled by the PMDB. This, coincidentally, is the party with which the government is currently facing difficulties to form a coalition. In the Senate, the CCJ (Justice and Constitution Committee) is commanded by the opposition (Democrats), besides the fact that support available for the government in the House is not abundant.
In Arko’s assessment, it continues to be highly unlikely that a proposition with this objective will have any chance of prospering in Congress.
Comment (0)Latin America: Politics and Economics divided
By Thiago de Aragão (*)
Politically speaking, the impact of the international economic crisis is expected to be extremely relative in Latin America. Contrary to what happens elsewhere in the world, here political and economic issues are easily sifted apart.
This, however, hasn’t always been easy to understand by Latin American peoples. As with when the region was under military dictatorships, logic seemed to be overthrown in times of dire economic problems. While the economies of certain dictatorship-led Latin American countries were running solidly and sustainably, political stability was threatened but for a handful freedom fighters. Brazil was a poster child of this era. In the 1960s and beginning of the 1970s the military government cracked down on political activists, which were those with enough education to grasp that certain social values were just as important, or even more important, than certain economic values. The poor, uneducated populace and those living in the backwoods didn’t see a clear distinction between a military regime and any alternative. Elderly people who avoided political involvement in those days now report that cities were safer and the economy worked more or less in order in those years. However, since no establishment will weather economic hardship out, practically every military regime in Latin America collapsed when faced with economic failure and chaos.
After the interlude of the late 1980s, 1990s and beginning of the 2000, many nations managed to “clear the deck” economically-wise. This, of course, was not the case for everyone: many a time we saw Argentina’s inability to keep reins on its own economy, Bolivia’s poor management of issues involving natural gas and the very own case of Venezuela. Brazil, Chile, Uruguay and Colombia on the other hand managed to achieve a level of economic stability that afforded these nations a certain “luxury”. Today the populations of these countries are in position to evaluate the course of political affairs. When I say “luxury” I refer to lower-income, low-class population, those who now fare better economically than ever before in their lives. Not only can they now plan and anticipate because of a somewhat more stable economy, they also have the opportunity to get involved in political affairs more directly.
There are odd situations, such as Peru. Here, in spite of the economy’s best performance ever (which may change or plunge because of the crisis), president Alan Garcia faces one of the worst cases of popularity evaluation across the whole region. In Peru we now witness an overt cleavage between economy and politics that hadn’t been seen in Latin America for a while. The thriving economy has taken the Peruvians to unprecedented wealth levels, yet their president isn’t seem as someone capable of inspiring political and institutional stability.
In Brazil things are somewhat different. Both low-income and low-middle-class populations are now entirely catered for by the country’s economy. Since these ranks of Brazil’s population have subscribed to the notion that “politicians are all the same, they all cheat”, there is nothing to be worried about if the economy is in good shape. It isn’t that president Lula’s administration isn’t a reasonable one, but significant political advancements that are yet to be made (the political, tax and labor reforms) hardly affect the vast majority of the country’s population. This vast majority of people is quite content only to be able to plan ahead the purchase of, say, a household appliance in the beginning of the year, knowing exactly how many installments they will have to pay by December.
The Brazilian upper classes are the ones that care about political issues, specially those that affect them directly, i.e. the battles for the end of the CPMF, lower excise tax for cars etc. Issues such as education, health and crime rate are lost in the political limbo. The upper classes in Brazil can afford private schools, health insurance and safe neighborhoods. Because the low-income population is living their best economic moment ever, coupled to the fact that they lack political organization to demand improvements in such critical areas, things more or less are kept going by way of compromise.
Colombia, however, is a clear example of both political and economic advancement. The country’s economy is growing steadily, foreign direct investments increase year by year, industry leaders are constantly attracted by the country’s infra-structure modernization programs. Furthermore, there has been tremendous advancement in regard to Colombia’s worst political nightmare: the FARC. Nowhere has a government managed to reap good economic and political fruits and appraisals because of good seeds sown. However, it is important to acknowledge the mounting risk that this success can be adversely affected if the Colombian president attempts at running for a third term in office.
Except for countries drowning in social issues, such as Bolivia, in Latin America economic issues have an overriding role as far as a country’s stability is concerned. In Brazil, economic issues go hand in hand with everything else for the low-income population. Because for this part of the population, “if economy is right, then everything else is right, too.” In Peru we witness a dissension in opinion, in that “economy is well regardless of the president”, whereas Colombia as a whole, or at large, in any case, including the upper classes, perceives that both economy and politics are going very well.
Comments (1)Bolivia: A rival arises for Evo Morales
The attack of radical sectors of the “Movimento ao Socialismo- MAS” (Socialism Movement, Evo Morales’s party) to the Bolivian ex president’s house, Víctor Hugo Cárdenas, will be able to make modifications in the local politic scenery. On March the 8th, a group of peasants invaded and burned Cardenas’s residency with his family inside, luckily they were able to escape.
After this fact, the ex president announced he would run for president in the elections of December. On the contrary of other indigenous leaders, Cárdenas has national projection and for that, converted himself in reference for the opposition. In the recent referendum about the new constitution, he supported the “no” to the modifications.
Cárdenas pretends to be the leader of the indigenous people’s vote of middle class. According to the local press, the ex vice president classifies the actual government’s vision about indigenous people as racist and classisist. To his understanding, an indigenous doesn’t necessarily have to be poor nor illiterate.
According to those considerations, Cárdenas dreams in building an ideological proposal of national unity. He is as well, a strong critic of the Plurinational State defended by MAS, that according to his evaluation, is an anachronistic, fundamentalist and anti historical vision.
Different from the rest of the candidates, Víctor Hugo Cárdenas has possibilities of confronting Evo Morales. The ex vice is a respected intellectual and was a pioneer in the fight for the indigenous rights in Bolivia.
The months that precede the electoral dispute in the country are tense. There are rumors about ex-president Carlos Mesa’s house (2003- 2005) being a target for the radicals of MAS. The opponents evaluate that it would be a strategy to inhibit the opposition’s action during the elections.
Comment (0)BRASILIA: Entrance of Venezuela in Mercosur receives ambassador’s support
Brasil’s embassador in Caracas, Antonio José Ferreira Simões, was mobilizing in favor to the addition of Venezuela to Mercosur. According to the Senate agency, he visited several senators last week to show the importance (especially economical importance to Brasil) of the entrance of a new partner in the economic block, in which Argentina, Paraguay and Uruguay are already part of.
Simões stayed in contact with the following parliamentarians: the senate’s president, José Sarney; CRE’S (Commision of Foreign Affairs and National Defense) president, senator Eduardo Azeredo (PSDB-MG); and the rest of the senators that are part of the commission.
The diplomat informed all the parliamentarians about the numbers of bilateral commerce: i) in the last 10 years, the exchanges between the two countries increased 850%, reaching a total annual of US$ 6 billion; ii) From that total, around US$ 5.3 billions are from Brazilian exports and only US$ .7 billions are from imports, forming the highest surplus of the Brazilian trade balance.
“Mercosur needs a new impulse and this impulse could be the entrance of Venezuela”, emphasized the embassador. In his opinion, Venezuela already became the first world-wide market of Brazil for powder milk and the second market for Brazilian meat.
Comment (0)Venezuela: Entrepreneurs criticize package anti crisis
The “Fedecamaras” (Federation of Entrepreneurial Chambers) understands that the economic plan announced by the president Hugo Chávez underestimated the crisis. The entity promises to present its own plan in the next 30 days.
For the entity’s president, José González, the effects of the world-wide economical crisis in Venezuela can only be solved by increasing the internal production. In its agreement, the measures announced by Chavez not only do they not solve the problems caused by the crisis, but they also put in danger the citizen’s economy.
Gonzalez positioned himself against the increment of 20% in minimum wage for considering it below expectations. He asked the entrepreneurs to provide a higher readjustment. In his evaluation, the inflation of 2009 will be of 35%. However, the Venezuelan government projects an inflationary index of 20%, les than 30.9% from last year.
Because of the inconsistency of the anti-crisis measures announced by Chávez, “Fedecamaras” will publish in 30 days an alternative plan to fight poverty and to improve Venezuelan’s quality of life.
Another criticized point by Gonzalez is the treaties of international cooperation, where the country offers economical aid to the less favored countries.
Comment (0)BOLIVIA: Evo Morales says that “fat” affects Alan García
The president of Bolivia, Evo Morales, said that “too much fat is damaging” his Peruvian colleague, Alan García, who joined Haya’s International Court of Justice with a demand about maritime limits against Chile. For Bolivian’s Chief of State, García is looking to improve his political image through this action.
According to Efe agency, Morales’s critics were done during his speech in the city of Cochabamba, during the presentation of titles of properties of lands and peasants. “Maybe too much fat is affecting the president of Peru, Alan García, and he’s not well informed. Bolivia is never going to resign the return to the sovereign sea”, he affirmed.
The president remembered that Bolivia did not resign to have an exit to the sea and says that the subject is being discussed in reunions with the Chilean government. In Evo Morales’s evaluation, the demand presented by Peru in Haya affected one of the solutions analyzed with Chile so that the country could obtain and exit through the Pacific.
Comment (0)VENEZUELA: Manuel Rosales does not discard competing in 2012
In the interview granted to the Spanish newspaper “El Mundo”, the mayor of Maracaibo, Manuel Rosales, left open the possibility of competing in the presidential elections of 2012, year in whichVenezuela’s president, Hugo Chávez, will try a new mandate. According to Efe agency “if the conditions were favorable it would be an honor to displace Chavez from his presidency”.
Questioning about the opposition’s options to defy Chavez’s hegemonic pretensions, Rosales said “there are many capable names”.
In his evaluation, Venezuela’s Chief of State has left victorious for the great volume of resources that came from petroleum exportations that finance social programs for families with extreme limitations from an economical and social point of view, manipulating them to vote for their project.
Comment (0)
Welcome! Latin America is becoming consistently more important for the world. As the region becomes more stable, the world sees Latin America as a potential business area. In order to understand te potential Latin America has to offer, the world must understand the unique dynamics that the local politics function. This blog already exists in Portuguese since 2005 and is widely read. I believe it can be an important instrument to understand this amazing region. Suggestions, criticisms and opinions are welcome. + learn more
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