China’s faith in LatAm does not wane, even in times of crisis

Even with Venezuela’s economic meltdown and Brazil’s underwhelming performance, the Chinese want to keep up investment in the region.

During the past decade China has become a main business partner for LatAm, multiplying its investments and duplicating efforts to build diplomatic bridges. Both through direct investment and partnership, China has grown to represent an indispensable trade partner for many countries in the region.

China itself is putting a lot of faith into LatAm. A significant part of its economy and market depends on performance and revenue from investments in LatAm and its other ventures into Africa and South Asia.

The way it has been so far, LatAm countries, especially Brazil, Chile and Peru, have been exporting raw materials and commodities amounting to over 7% of LatAm’s total export value. In 2010, 92% of LatAm’s exports to China came in this form.

In exchange, China’s exports to LatAm consist mainly of manufactured goods, and add up to over 5% of China’s total exports. Additionally, China has been making big efforts to build an economic relationship with LatAm through investment and loans, the vast majority of which, are aimed towards the extractive industry.

This poses a significant problem. The prices for commodities have plummeted in recent years, signifying less of a profit for LatAm. This however, should’ve served as an incentive for China to stockpile up, but it didn’t, instead China’s impressive growth spree started giving out, and with it, demand for raw materials and commodities.

The conditions described all pointed towards China cutting off investment and letting go of partnerships, but China’s will shows otherwise.

Chinese Foreign Minister, Wang Yi, has taken note of the difficulties, and has stated that despite it all, “China’s policy of enhancing cooperation with Latin American countries remains unchanged”.

This is probably to do with the end of left-leaning governments if the region, which although received full support from China (particularly in the case of Venezuela), were marred on several occasions by cases of fiscal irresponsibility and corruption, leading to unviable scenarios for China to develop continuous trade.

This moment, then, serves as a turning point in China-LatAm relations. As left-wing governments, strongly dependent on trade with China, leave the stage, right-wing parties in control work towards constructing a more stable framework upon which to build trade. China knows that this new framework in development benefits them, as it will normalize trade relations, or in other words, will give them less to worry about when dealing with LatAm.

The situation is clearly expressed by recent developments regarding China-Argentina relations. As Mauricio Macri’s government put an end to 10 years of left-wing Kirchner rule, both nations expressed a desire to revise agreements and strengthen ties.

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