China-Latin America

By Kevin P. Gallagher, Boston University

As Western-backed development banks and the private sector are on the retreat from Latin America, China’s development banks are coming to the rescue, at least for now.

China’s two development banks, the China Development Bank and the Export-Import Bank of China, provided upwards of $29bn to Latin American governments in 2015, according to new estimates published by Boston University’s Global Economic Governance Initiative and the Washington-based think tank The Inter-American Dialogue.

A three-fold increase from 2014, China’s 2015 finance to Latin America was more than the World Bank, Inter-American Development Bank, and the Development Bank of Latin America combined. Read more

While the word has focused on China’s disastrous stock market bailout and the devaluation of the currency, a far larger crisis is brewing in China’s hinterland.

China’s property bubble has sagged in the big cities like Beijing and Shanghai – but it is on the verge of popping completely in the country’s heartland. After spending a week in Sichuan Province, it is clear that land sales, prices and transactions are all declining in double digits.

Sichuan province is one of China’s largest, in the heart of the country. We spent some time at a residential project called Universal City Centre, about 20km from Chongqing. The 1.08m sqm property has seen prices fall one-third from 4,000 to 5,800 psm one-third to 3,000 to 4,000 psm. Read more

To many South American leaders, Chinese Premier Li Keqiang’s visit this week couldn’t come at a better time, and from a better country. China has been busy with Latin America, surpassing the United States as South America’s leading export destination outside of the region, according to the China-Latin America Economic Bulletin.

What is more, the ink is barely dry on big loan agreements to Venezuela and Ecuador, or a major China-Latin America cooperation plan signed in January that pledges to increase trade by $500bn and investment by $250bn and to cooperate on science and technology, trade, and environmental protection. Read more

Arguably the most revealing English translation of the French verb ‘étonner’ – at least in the context of Napoleon’s famous quip about China – is ‘to astonish’. “Ici repose un géant endormi, laissez le dormir, car quand il s’éveillera, il étonnera le monde” so the Corsican is said to have noted. “Here lies a sleeping giant, let him sleep, for when he wakes, he will astonish the world.”

Some 200 years later, that giant has awoken and Napoleon was right: China is now astonishing the world. In the past three decades, it has roused itself from a slumber to a state of almost unimaginable vibrancy. The roll-call of economic trophies it now claims is daunting: largest exporter, importer, foreign exchange reserve owner, commodity consumer, luxury goods market, most car sales, most internet users, even (in purchasing power parity terms) biggest economy. Read more

By Kevin P. Gallagher and Margaret Myers

Despite the economic slowdown that is gripping Latin America, Chinese finance to the region rose to $22bn in 2014, a 71 per cent jump over 2013. These latest estimates from the China-Latin America Finance Database put 2014 as the second highest year on record for Chinese lending in Latin America and raise the stock of Chinese finance in the region to $119bn since 2005, when China’s banks started reaching out to the Americas.

This new finance couldn’t come at a better time. After a decade-long commodity boom, the International Monetary Fund (IMF) estimates that Latin America’s economic growth may only reach 2.2 per cent in 2015. As the economy cools, the region’s traditional sources of capital are turning to the United States, beckoned by faster growth and rising interest rates. Read more

By Eric Farnsworth, Council of the Americas

Expanding global economic engagement is an important but underappreciated aspect of the “Abenomics” agenda to reflate Japan’s long-stagnant economy while laying the groundwork for future growth.

As Prime Minister Shinzo Abe’s recent trip to Latin America and the Caribbean highlighted, the Americas offer an intriguing complement to the strategy, from using trade negotiations to open protected markets at home and abroad, to gaining access to new sources of raw materials including energy and to seeing off new competitors in existing markets.

Arguably overdue, it was the first visit in a decade by a Japanese Prime Minister even as others in Asia, primarily China but also South Korea and Singapore, have moved into the region with purpose and resolve. Read more

China’s interest in Latin America is clear: the region supplies the raw materials it craves and handily also provides markets for its manufactured goods. But Latin America, understandably, doesn’t want that to be a one-way street.

Enter José Mujica, possibly Latin America’s bluntest-talking president, and current chair of the South American Mercosur trade bloc. What Mercosur needs, he reckons, is a common external tariff on Chinese goods because otherwise, the bloc has no hope of competing. Read more

In uncertain times – and no time has looked more uncertain recently for Brazil’s president Dilma Rousseff given her crumpling popularity – the long view of history can provide some guidance.

And what better day to do that than today, which is clearly an auspicious one in recent Brazilian history? Read more

Nicolas Maduro, Venezuela’s new president, could be forgiven for feeling a bit slighted after his opposite number in China, Xi Jinping, came within a few miles of Venezuelan territory last week but didn’t drop in to Caracas to say hello.

Instead, he spent two whole days in Trinidad and Tobago, Venezuela’s tiny Caribbean neighbour. Why? Read more

By Kevin P. Gallagher

This week Chinese President Xi Jinping will make his first official visit to Latin America since taking office. Xi will visit Trinidad and Tobego, Costa Rica, and Mexico. In a scramble the United States has sent Vice President Joseph Biden to the region on a goodwill mission at the same time.

The two leaders will spar over the airwaves, web, and blogosphere offering different visions of cooperation. The US should use this opportunity to strengthen ties with the region and take advantage of the fact that Latin America’s love affair with China appears to be cooling. Read more

Whenever the subject of partners for Argentina’s YPF to develop the Vaca Muerta shale deposits crops up, it isn’t long before someone suggests China as a potential investor.

So Carlos Bulgheroni’s admission that the Bridas group, in which his family and China’s CNOOC each own 50 per cent stakes, is planning to invest Vaca Muerta with YPF will have a lot of people sitting up. Read more

Buying banks is “no rose garden. We consider it a battleground”. So says Jiang Jianqing, president of China’s ICBC, the world’s biggest bank (by market capitalisation, deposits and credits).

So far, his takeover of 80 per cent of Standard Bank Argentina appears to have been more genteel – after all, ICBC has a stake in Standard Bank Group in South Africa. Read more

Pacific-rim Chile has long looked to the Far East for trade. Now Banco Santander Chile, the country’s second-biggest lender by assets, is sampling some financial dim sum.

The Spanish-owned bank became the first Chilean bank to raise money in China’s bond market by issuing RMB500m ($80m) in two-year renminbi-denominated paper, dubbed “dim sum” bonds. Read more

China is steadily winning hearts, minds and – more importantly – pocketbooks as it pierces the last redoubt of its once fiercely competitive diplomatic revival, Taiwan.

While Taiwan’s claim to be the authentic government of China has all but vanished in the rest of the world, Central American nations continue to support it. Only Costa Rica has broken diplomatic relations with Taiwan in order to forge links with Beijing. Read more

China’s burgeoning moneyed elite provides just the kind of international tourists many countries long to have – just look at the Olympics, where Chinse visitors have proved the biggest spenders.

But Argentina is missing out on as much as $5bn a year in Chinese tourist spending by having visa rules that are too rigid, warns the Argentine-China Chamber of Production, Industry and Trade. Read more

By Pan Kwan Yuk and Humay Guliyeva

In a couple of hours China will release second-quarter GDP figures and the numbers are likely to reinforce the view that the Chinese economy is slowing faster than the government would like.

A good time then for beyondbrics to take a closer look at the potential impact that a slowdown in China could have on Latin America – a continent that has vastly benefited from the Middle Kingdom’s dizzying pace of growth in recent years. Read more

It’s been a week to forget for Ecuador. On Monday, the Andean country startled investors by posting its weakest quarterly growth in two years. Concerns that falling oil prices could cause the country’s current account deficit to widen to unsustainable levels have prompted at least one analyst to speculate that President Rafael Correa might need to turn to China for help in avoiding a liquidity crisis.

On Thursday, Ecuador went cap in hand – not to China – but to the Latin American Reserve Fund, the Bogotá-based regional lender for a $514.6m loan. Read more

It sounds good – an emerging powers’ pact in the form of free-trade deal between China and members of the South American cutsoms’ union, Mercosur – some of whom are already big trading partners. But will it happen?

Well, China this week did dish out the promise of a $10bn credit line to Latin America for infrastructure projects, as well as hope aloud about the Mercosur pact. Read more

If there are fears that Brazil’s economy may have lost some of its lustre, Chinese companies are not showing it.

State Grid on Wednesday became the latest from China Inc to snap up a Latin American asset being disposed of by a European company. The world’s largest utility by asset size said it would buy the Brazilian electricity transmission assets of Spain’s Actividades de Construcción y Servicios for $531m plus debt of $411mRead more

It’s shopping season for China Inc. As banks in Europe and the US are forced to pare back their operations and shed assets to meet heightened regulatory requirements back home, Chinese banks are moving in.

The latest to shop abroad is China Construction Bank. According to Dow Jones, CCB, the world’s second largest lender by market value, is in talks to buy the Brazilian assets of WestLB, the troubled German bank, in a deal that could be worth $200m-$300m. Read more