The Dawn of the Dragon

Since the emergence of China as a real economic competitor in 2005, China has not ceased the development within their borders, let alone outside of them. China has surpassed meager relations with the United States and has greatly expanded its global trading system, even to the exotic lands of Latin America.

According to CNN money reports, today China has the second largest economy; it has trampled Germany and Japan with a GDP of 10 trillion dollars. China, however, still follows behind the United States who has a total GDP of 17.5 trillion dollars.

With the world’s largest population, ~1.3 billion people, the Asian beast does not have a sufficient amount of oil, natural gas, copper, and other natural resources and foods that it needs to sustain a population as large as itself.

Although many African nations support most of China’s import needs, China has stretched out its tentacles to Latin America for resources. The countries China is strategically working with being: Argentina, Bolivia, Brasil, Chile, Ecuador, Mexico, Panama, Peru, Venezuela, and Cuba. China’s trade in 2012 with Latin America reached $261.2 billion and is expected to hit $400 billion in 2017 according to Trade Solutions by JP Morgan.

China’s need for resources to sustain their production as well as their population does not appear to be dissipating. From a 2005 Wilson Center study, China was Chile’s second largest export market, at the time importing 1/5 of its copper and 45 percent of its wine and grapes imports from Chile. Various other materials, like soy beans are mass exported from Brasil and Argentina, a total of 68 percent between the two countries alone makes up China’s soy bean imports. An even more outstanding number was in 2005, China depended on Peru and Chile for about 80 percent of their imported fish meal.

Brasil having the largest economy in Latin America is a key partner of China, as was emphasized by the global recession, when the importance of the Brasilian market and trade was made clear. China has also become one of the main funders of Brasilian exploration for newly discovered deep-water oil reserves.

However, attention has switched to Argentina’s mining and oil sectors. In 2003, the CNCP (China National Petroleum Company), made agreements with Pluspetrol, an oil and gas firm that works in northern Argentina and Peru. In 2010, China National Offshore Oil Corportation (CNOOC) invested $3.1 billion for 50 percent for Argentina’s Bridas Holdings (an oil and gas corporation based in Argentina).Latin America Export Destinations

The relations don’t stop solely with Brasil and Argentina, but continue on, creating new political pacts and introducing market battles to the region. Agreements such as APEC and BRIC further emphasize the mutual relations between the regions. Who benefits from this Chinese-Latin American relation? Is it all a geopolitical power dispute among the great powers? What Latin American economies are becoming more dependent on trade with China and why?

Current Strategic Relations: Cursory Explanation

New Exportation Partners

 

Although Latin America is commonly referred to as “America’s backyard,” within the past couple years, relations and favoritism have switched. According to the Center for Strategic and International Studies (CSIS), countries like: Venezuela, Bolivia, Ecuador, and Nicaragua have already begun to separate from U.S. relations and promote the ideology for less U.S. influence within their southern sphere.

“On the other hand, Chile, Mexico, Peru, and Colombia have warm relations with the United States; the United States has free trade agreements (FTAs) with the first three,” said Sydney Weintraub, CSIS analyst.

Other major players like Argentina and Brasil want to stay neutral within their continent and make any relations they can, as they are both economic leaders within the region.

Within the past decade, the economic situation of Latin America has greatly improved as their vast amounts of natural resources, among other things, have been sufficiently cultivated for exportation worldwide. Due to more boisterous problems in the Middle East or brash actions made by Russia in its former Soviet territory, the growth and deals made within Latin America are normally overlooked, as well as their increased relations with various strong world powers, like China and Russia.

“The gross domestic product of Latin American countries as a whole grew by more than 5 percent a year between 2003 and 2008.”

During those time slots of 2003 to 2008, Chile, Colombia, Costa Rica, Peru, and Uruguay were the leaders of this growth. However, other countries heavily dependent on U.S. trade and relations did not experience the same growth, bringing down the GDP average for Latin America. For example, Mexico suffered from their dependency on U.S. relations which negatively affected the Mexican economy during the Financial Crises of 2007-2008.

Overall, the 5 percent positive growth made by Latin America in this time span, “was made possible by the new economic policies, although abetted by China’s large demand for primary commodities, benefiting especially countries like Argentina and Brazil,” according to the CSIS report.

The subtle plummet in certain countries’ economies due to U.S. trade relations eventually resulted in indebted nations. These countries, along with others then began to turn to alternate partners to help them out. These precursor events help to explain recent increased aid and relations, given and created by the Chinese and the Russians governments.

This blog is a platform for the investigation of the economic situations and governmental transitions within Latin America and how these factors have increased activities with unusual trading partners.