Risks And Opportunities For South American Countries Posed By U.S.-China Trade Rivalry

Economies in Latin America have been left analyzing the risks and opportunities that could come their way because of the rising trade tensions between the United States and China.

The two countries moved a step closer towards full blown trade war as both the countries announced lists of products pf each other that they intend to tariff within a gap of just 19 hours. U.S. was the first to make the announcement for the latest tariff on Chinese goods. Earlier China had imposed tariffs on U.S. goods imported into the country worth $3 billion in retaliation to the Trump administration’s tariff on steel and aluminum.

“The U.S. is forcing countries in the region to choose between the U.S. and China,” said Margaret Myers, director of the Latin America and the World program at the Inter-American Dialogue. “It’s putting Latin American countries in a very challenging position while at the same time not offering a particularly attractive policy.”

For countries such as the largest economy of South America as also the largest exporter of soybeans – Brazil, as well as for tiny economies like Uruguay, China has emerged as the top trading partner as the domestic demands for raw materials in the country increased with the rapid economic growth of the Chinese economy overt he last decade.

Despite this fact, there was cautious response from countries like Brazil and Argentina to the ongoing trade crisis and tariffs form both sides – the U.S. and China on Wednesday. While there were no comments made by Brazil’s Agriculture Ministry to questions from the media, the official comment of the third largest soy exporter – Argentina was that it was “analyzing the situation.”

China could be forced to make purchases of more soy and soy products from South American sources because of the tariffs, said analysts in both the countries.

Despite the shift in U.S. policies towards South America, the role of China has alarmed Washington given that more and more Latin American countries are turning to China for financing.

China was seeking to “pull the region into its orbit through state-led investment and loans”, said the December 2017 national security strategy of Trump.

China’s hosting of next year’s IDB meeting “does not serve the interests of the Western Hemisphere”, said David Malpass, the U.S. Treasury Department’s undersecretary for international affairs, said at a March conference in Buenos Aires.

“We have found the best of all worlds”, said IDB President Luis Alberto Moreno adding that next year, the bank would hold a special meeting for the bank’s 60th anniversary in Washington.

Even those Latin American governments that are U.S. friendly have been disturbed by the rhetoric about immigration of Trump.

A U.S. foreign ministry official had said that the trade relations between the U.S and Brazil were in “uncharted waters.” Later the U.S. exempted Brazil from the planned steel tariffs.

Biodiesel import tariffs is a bone of contention between the U.S. and Argentina and the later has threatened to take the former to the World Trade Organization.

However, there is stiff opposition among South Americans about the social and environmental costs that projects entail as perceived by China.

According to the Adrienne Arsht Latin America Center, about $70 billion increase in Chinese FDI in the region has been noted since 2012. And the Economic Commission for Latin America and the Caribbean noted that there had been a fall in the share of FDI inflows in from America in the region from about 24 percent in 2012and 25.7 percent in 2015 to about 20 percent in 2016.

In 2015 and 2016, more than $20 billion was lent to the countries in the region by Chinese state-run banks according to the data from the Inter-American Dialogue and Boston University.

(Adapted from Reuters.com)


Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy

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