In prior post, much attention has been given to the recession/depression of 2008 in the United States. The attention was broken down into rippling effects such as unemployment, President Obama’s job visions and it’s combined contribution to the political change of the United States into a ‘Social Democracy’ and or a unified state within the ‘North American Union’ (USA, Mexico and Canada). Well the United States has more compounding economical concerns to consider these days. Primarily China, as the ‘Dragon Nation’ deploys sound and benefiting economical business to once forgotten nations of South and Central America.
I recently read an insert from a dialogue between Henry Kissinger (during the Nixon Administration) and Chile’s Foreign Minister, Juan Gabriel Valdes. The dialogue went as follows: ‘Mr. Minister, you made a strange speech. You come here speaking of Latin America, but this is not important. Nothing important can come from the South. History has never been produced in the South. The axis of history starts in Moscow, goes to Bonn, crosses over to Washington, and then goes to Tokyo… You’re wasting your time. ‘I said ‘; Valdes recalls, ‘Mr. Kissinger, you know nothing of the South.’ “No” Kissinger answered, “and I don’t care.” Well considering today’s rapid changing global economy. Mr. Kissinger may eat the words once stated. Today that axis has shifted, in regards to economics. Beijing is where the axis now starts, then it is swept over to Seattle and the Pacific Rim and where it finally ends, would be in any of the promising nations of South America.
It might surprise some as to how much growth and business relationships have occurred between China and South American nations. Well it shouldn’t, seeming China is a nation serious about business, and it is business it intends to continue doing with Central and South American nations. Between 2000 -2009 China has increased imports from Latin America from $5 billion to $44 billion and increased exports from $4.5 billion to $42 billion. In addition, from 2002-2008 China increased total exports from 4% to 10%, whereas the USA, declined from 48% to 37%. These numbers prove dramatic changes in the world economy, as it seems to be making shifts. So what is it that Chinese government attempting to acquire, by extending lucrative trade agreements to Central and South American nations.
Raw materials, to increase its mercantilism. By definition, mercantilism is the process by which a nation buys raw materials from another nation/region. Then engage in profit drive production at home, to produce a finish product. Then re-export the finish product to the same region that the raw material derived from. This is China at it’s best. And seeming Central and South America has an abundance of natural raw resources, it only makes good business sense to follow through with luring trade agreements.
For Chinese investors, the projection of a successful investment, is consider based on a long term certainty. For example China’s SINOPEC (China Petroleum & Chemical) recently has made deals with Brazils REPSOL Oil for $7.1 billion dollars and Argentina’s OPC (Occidental Petroleum Corporation) for $2.45 billion dollars. Agreement like these occur swift and fast, as Chinese business investor, act quickly when conducting, investments of certainty. Another factor that aids in rapid business agreements between China and Central and South American nations, is lack of socio-political involvement. Whereas the United States is wedged with socio-political factors and U.N. sanctions, such as labor rights, environment protection and human conditions. China enters these nation, care free of any socio-political concerns.
For example, currently an US Trade Agreement with Colombia signed in 2006, is still pending approval because of labor issues and protection of Colombian resident. Another factor impeding the United States is N.A.F.T.A. N.A.F.T.A, requires side agreements before Congress will approve any trade agreements proposed. While the United States, idle in bureaucracy, Chinese policy promises these potential nations, the same merchant relationship, without the political hurdles. For the Chinese, all things aside, “BUSINESS IS BUSINESS”.
There are some advantages and disadvantages, that must be considered in this global exchange. Some advantages that benefit, the Central and South American nations involved, are:
1.)Improved Infrustructure . This is especially true for Brazil as it prepares for the 2014 World Cup and 2016 Summer Olympics
2.)Improved technological advances
3.)Provide access to the global market
Some of the disadvantages for these nations, are:
1.) U.N. and USA efforts to support labor, human rights and environmental protection, could lead to sanction.
2.) Independence from the USA economical arena. The USA is the largest consumer market in the world, and exclusion from it is costly. 3.)Latin American economics are growing faster than Europe and could cause a hindrance on the world economy
4.)China lack to hire local workers. Chinese business agreements, require that Chinese Nationals occupy jobs, owned or invested in by the Chinese Government.
Interestingly enough, with all of this exciting news for Central and South America, Mexico is completely cut off from Chinese investments. Reason being, Mexico is attached with heavy (N.A.F.T.A) trade agreements with the USA, that prevent it from considering some of the offers, the Chinese propose. Under US trade agreement, Mexico is not allow to re-export finish products to the USA, unless the raw material was derived from the USA. This is especially hard on Mexico, seeming 80% of it’s external economy activity involves the USA. For example, in the textile industry. In order to have free trade agreement, within the USA, Mexico must require raw materials such as cotton from the USA. At this point they can mercantile with the USA market. But seeming cotton on the world market is much cheaper in nations such as India, Egypt and Asia. Mexico is bind to iniquitous trade agreements, globally. It is estimated that Mexico’s GDP drops 3% for every 1% drop in the USA.
However, Mexico is currently experiencing some counter revolutionary changes. From 2000 -2009, prior Mexico Presidents ( Ernesto Zedillo, Vicente Fox and Felip Calderon) have either been of the PRI or PAN Political Party, which primary platform was a democracy. It seems that these efforts have only resulted in a dysfunctional democracy and Mexican citizens in the up coming election (2012) could revert back to an Authoritarian Regime. Such a regime with the correct President could, remove the strangling economic hold, the USA has over the Mexican economy. Allowing Mexico to enter the world market as a free nation, by which I’m sure China will come with incessant offers.
As the United States looks towards the future and it’s position in the global economy. We must decide if we are going to let, garrote bureaucracy, erode our economy, as the world advances. I was very pleased with President Obama’s recently hospitality towards Hu Jintao during his recent visit to the United States. We can only pray, that more cooperative measures and agreements are made, to enhance both nations, as we face the future.
1.) Farnsworth, Eric “The New Mercantilism: China’s Emerging Role In The Americas” 2/2011 `Current History (Journal of Contemporary World Affairs) V.110, N.733 P.56
2.) Finan, W. William Jr. “Latin America: Next Top Model” 2/2011 `Current History (Journal of Contemporary World Affairs) V.110, N.733 P.83
3.) Gonzalez, Francisco “Drug Violence Isn’t Mexico’s Only Problem” 2/2011 `Current History (Journal of Contemporary World Affairs) V.110, N.733 P.68
4.) Sinopec of China buys $7.1bn stake in Repsol Brasil, 10/2010 http://www.bbc.co.uk/news/business-11453539
5.) Sinopec Agrees to Acquire Occidental’s Argentina Unit for $2.45 Billion 12/2010 http://www.bloomberg.com/news/2010-12-10/sinopec-agrees-to-purchase-occidental-s-argentina-unit-for-2-45-billion.html