On a swing through Latin America last week, Premier Li Keqiang of China wooed his hosts with potentially big deals. But Latin leaders shouldn’t let yuan fever blind them to their need to establish a more balanced relationship with China, one of their most important economic partners.
Li’s trip to Brazil, Chile, Colombia and Peru builds on the vision that Chinese President Xi Jinping laid out in January, when he pledged that Chinese direct investment in Latin America would reach $250 billion over the next decade, and predicted that annual bilateral trade could hit $500 billion. In the past 12 months, Chinese companies announced 37 percent more deals than they had in the previous year. China has already eclipsed the U.S. as the top destination for South American exports. And it’s now Latin America’s biggest annual creditor.
What’s wrong with closer economic ties to one of the world’s most dynamic economies? In principle, nothing. In reality, however, the pattern of Latin America’s dealings with China poses problems. Over the past decade, for instance, China has bought a lot of soybeans, wheat, iron ore and oil, but not a lot of the region’s manufactured exports (less than 2 percent, in fact), and China’s investments have been mostly in the extractive sectors. So exports to China have produced fewer jobs (and less skill development) than exports to other regions. Moreover, Chinese trade and investment have focused on products and projects that exact a heavy environmental toll in deforestation, greenhouse gases and water usage.
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