China is not the only option for Latin America – 07/17/2023 – World

It was not an era without tensions, but as the perception was that almost everyone was benefiting, globalization —with China at its epicenter—was a success for 20 years.

Much of Latin America has profited from this, thanks in part to the rise of the Asian giant, with its voracious demand for natural resources and its inexhaustible financial capital. But the imposition of US tariffs on China in 2018, the distrust generated by Covid, the impact of the pandemic on supply chains and the Russian invasion of Ukraine transformed the world as we knew it.

It is precisely because of this economic and geopolitical situation that the summit between the European Union and the Community of Latin American and Caribbean States (Celac) that takes place in Brussels on Monday (17th) and Tuesday (18th) gains relevance.

It is true that the differences and complexity of the relationship between the two blocs have been evident. This has been the case for the last eight years, when summits have been suspended due to disagreements over Venezuela. And it has been like this with the trade agreement between the EU and Mercosur. Closed in 2019 after 20 years of negotiations, the treaty again ran aground due to Latin American resistance to accepting environmental demands and the protectionist impulse of European countries.

Likewise, the refusal of the Latin American bloc to accept the European condemnation speech about the conflict in Ukraine in the final declaration of the summit and, above all, its veto to the proposal that the Ukrainian president, Volodimir Zelensky, be invited, make it clear that the political differences are notable.

Not only with Venezuela, Cuba and Nicaragua, but also with Mexico, Argentina, Colombia, Bolivia and Brazil, which, led by Lula (PT), maintain a calculated ambiguity or support Vladimir Putin tacitly by blaming the West for the war in turbulent declarations that refer to historical recriminations of moralism, arrogance and inattention leveled at Europeans.

But, in addition to disagreements that need to be managed, the complex economic and geopolitical scenario that is envisioned points to the convenience of the two blocs betting on an essential understanding for both. The damaging effects of Europe’s dependence on Russian gas have finally made Brussels open its eyes. Thus, the EU now sees the imperative to diversify its supply of energy and strategic raw materials such as lithium, as well as having reliable partners to reduce its dependence on Chinese supply chains. Latin America can be that partner and must seize the opportunity.

The development crisis that plagues the region, resulting from a growth below the average of 1% in the last ten years, should already be enough incentive. Furthermore, having a strategic alliance with the EU, which, by the way, is still the largest investor in the region and the third largest recipient of Latin American exports, would allow Latin America to consolidate a healthy alternative to China.

Clearly, the two options are not mutually exclusive. But that would serve to protect Latin America from the risks inherent in throwing itself into the arms of the Asian country.

Let’s be clear: the EU and other countries have a hard time competing with Chinese state capitalism. It’s not just a question of magnitude. It is also why Chinese SOEs receive hidden subsidies, cheap and endless funding and favorable treatment in their market. For this reason, since they are entrusted with the strategic mission of guaranteeing the future supply of natural resources, their investments do not always follow business profitability criteria. Four out of every five Chinese dollars in Latin America go to extractive and infrastructure projects.

In this context, the EU is valuable to Latin America not only for its investments in the region and its imports of raw materials, but also because the infrastructures and economic alliances envisaged in its Global Gateway initiative —although still incipient and more modest than the initiative New Silk Road—offers an alternative development model.

The promotion of infrastructure linked to environmental sustainability and economic independence, as well as the digital, energy and ecological transition revolution, has among its objectives “contributing to the development of EU partner countries”, according to the European Commission.

It is paradoxical that certain Latin American sectors feel uncomfortable with European environmental requirements, but not with the terms of the relationship proposed by Beijing, with its low standards, bad practices, lack of transparency and lack of supervision.

It is already unquestionable that the relationship with China has consolidated a primary export pattern in Latin America. The region exports natural resources and imports ready-made manufactured products, without a minimum of industrialization or technology transfer.

The onus is on governments that view their relationship with China as a short-term transaction. Exports provide quick tax revenue that finances the state. There is no incentive to promote long-term projects that generate wealth or development, because the political return would revert to others. For this very reason, a change of mindset is urgently needed.

The EU-Celac summit is a good starting point.

Translated by Clara Allain