Forestry Investment Blog

Like a debutante out for the first time Latin America finds itself surrounded by many suitors. Recently China’s Hu Jintao and Russia’s Dmitry Medvedev have been paying court to Latin America with the US as ever a constant presence.

With so many countries vying for its commodities and friendship Latin America is now one of the most popular belles of the global economic ball.

In the same week that the Chinese President Hu Jintao was in Brazil to negotiate investment deals his Russian counterpart President Dmitry Medvedev was in Argentina (the first such trip by a Russian head of state) before going on to Brazil for a meeting on the emerging world economies, known to you and me as the BRIC countries.

Not to be left out the US signed a major military deal with Brazil before US Secretary of Defence Robert Gates took off on his own Latin American tour to strengthen ties with allies and improve the promising friendship with Iran’s President Mahmoud Ahmadinejad.

Most agree that the attention is a good thing and has helped to buoy several economies during even the worst of the global financial crisis. Despite this there are several questions as to whether Russia’s vigorous sale of weapons, China’s large appetite for soy and iron ore, or Iran’s search for allies in the Western Hemisphere is good for the region. With so much attention from these countries it could be that the US is missing out.

“One dynamic we are beginning to see is resource competition between China and other external powers in the region, when we are used to the US telling everyone to keep their hands off of Latin America,” says Evan Ellis, a professor of national security at the National Defence University in Washington. “There is new engagement in the region, and the emergence of competition between multiple outside players.”

Leading the pack of suitors is China who became Brazil’s top trading partner in 2009 taking over from the US. According to Brazilian government figures trade surged between the two from $6.7 billion in 2003 to $36.1 billion last year.

Not far behind China in the commodities race is Russia, who boosted their arms sales to Venezuela as well as others in the region during President Medvedev’s visit to Argentina, where he discussed deals on nuclear energy, space and transportation. In addition Russian Prime Minister Vladimir Putin put forward a series of deals that could top $5 billion with Venezuela earlier this month.

It isn’t just Latin America’s commodity market that is attracting suitors; Iran’s President Ahmadinejad has discovered a wealth of common ground with several countries in Latin America. In particular his friendship with Brazil’s President Lula is especially important to Ahmadinejad as the South American superpower is a keen supporter of Iran’s nuclear programme.

Obviously this is of extreme concern to the US, which the US Secretary of Defence tried to mitigate by playing down fears during his South American trip that took in Colombia, Barbados and Peru among others.

But if such alliances in Latin America don’t represent a geopolitical threat to the US, they may highlight a lost opportunity for US business.

“Domestic politics, historical baggage, and sensitivities between Latin America and the US really stand in the way of the US taking advantage of opportunities in the region,” says Michael Shifter, the president of the Inter-American Dialogue in Washington.

As the US is stuck on issues such as energy, immigration, and trade, “China and Russia are completely unburdened by domestic political constraints.” Shifter added.

Editor-in-chief of Americas Quarterly in New York, Christopher Sabatini said that in terms of markets, Latin America’s partnerships around the globe kept it afloat during the recent economic crisis. But some analysts worry about the destabilising effect of an arms race in Latin America with countries buying arms to modernise their armies at the right price from Russia.

“The attention is good because it provides an engine of economic growth,” he says. The region overall is expected to grow by 4% this year, he says, and “a large part of that has to do with China’s rebound.”

However one cannot help but question whether this is simply economic imperialism with richer nations exploiting developing nations for cheap commodities. It wouldn’t be the first time either as the US was condemned for this in the last century.

“China, in the name of being a leader of the third-world movement, is saying, ‘Hey, we’re helping you out by buying your commodities,’ and then they are selling back ever-higher-value manufactured goods,” says Mr. Ellis.

Economies are boosted in the short term but become vulnerable again once commodity prices drop. Latin American nations need to realise that China has a huge internal market that for one reason or another is not being tapped, according to Rodrigo Maciel, executive secretary of the Brazil-China Business Council.

“We only sell primary goods, but that is because Brazil doesn’t have a strategy for China; we don’t see it as a consumer market,” Mr. Maciel says. “We need to learn more.”

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This entry was posted on Thursday, May 13th, 2010 at 10:20 AM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.