China New Latin Bad Boy Replacing the U.S

Commentary by Alexandre Marinis

June 30 (Bloomberg) -- For the past 50 years, Latin Americans had a love-hate relationship with the U.S. They loved American entertainment and hated U.S. foreign policies. They had particular disdain for Washington’s support for Latin dictators in the 1960s and 1970s, its campaign against Cuba and, more recently, just about everything associated with George W. Bush.

Fortunately, anti-U.S. feelings in the region are about to subside due to momentous changes now occurring. Think of them as C-3PO. I’m not referring to the android from “Star Wars.” This is an acronym for crisis, Cuba, China, protectionism, and Obama. Let’s take them in order.

-- The global economic crisis, born on Wall Street and exported to the rest of the world, has taught everyone a few things about the U.S. Namely, American economic policies and financial products aren’t risk-free and shouldn’t blindly be embraced by other nations.

Paradoxically, the worldwide recession will help improve relations between the U.S. and Latin America. Chastened by the economic crisis and Iraq War, the U.S. now is less arrogant. This resonates with Latin Americans in particular, following decades of being bullied by the superpower.

The world’s economic woes have made Latin Americans feel more pride and confidence in their ability to solve domestic problems. After all, for the first time in many years, a global monetary crisis wasn’t caused by the region’s debt default, currency devaluation or hyperinflation.

Rethinking Cuba

-- Though irrelevant in terms of the global economy, Cuba has been a powerful political symbol. Consider how much has changed. Fidel Castro retired. The Organization of American States agreed to readmit the communist nation after 47 years of banishment.

Also, the U.S. is likely to lift its trade embargo against Cuba in the near future. Once that happens Cuba won’t be able to blame the U.S. for its economic backwardness.

Over time, these developments will bring closure and psychological comfort to leftist Latin leaders who built their political careers in the 1960s and 1970s believing that communism represented a viable alternative to the U.S.

It’s getting more difficult for Latin leaders to blame U.S.-backed policies for their own misfortunes. Case in point: The demise of the so-called Washington Consensus, a package of economic policies the U.S. foisted on developing nations starting in late 1980s. American politicians argued the measures promoted the benefits of the free market. Their Latin counterparts said the measures worsened economic instability.

Here Comes China

-- Latin Americans share this deep-seated belief: their region’s social inequality and economic underdevelopment have been largely due to the exploitation of its vast natural resources by the developed world, first Europe and then, after World War II, the U.S.

This explains why Venezuela’s President Hugo Chavez gave Barack Obama a copy of Eduardo Galeano’s “Open Veins of Latin America: Five Centuries of the Pillage of a Continent” during the annual Summit of the Americas in April. The well-publicized gesture boosted the 1971 classic to No. 2 on Amazon.com’s bestseller list, up from No. 54,295.

Too bad Chavez presented it to the wrong president. China, not the U.S., looms as the region’s largest and most feared investor and trade partner.

China has already surpassed the U.S. as the largest buyer of Brazilian exports. It’s taking advantage of the world credit crunch to buy Latin American companies and provide loans to the continent’s nations in exchange for the guaranteed supply of raw materials -- oil, iron ore, soy beans -- the Chinese need to sustain economic growth.

Protectionism Increases

-- Latin Americans are already wondering when China will replace the U.S. as the latest economic powerhouse to plunder the region’s natural resources. Brazil’s Vale SA, the world’s largest iron-ore exporter, already sells 70 percent of its production to China and was pressured by Chinese clients to lower prices.

While China becomes the largest buyer of raw materials and commodities produced in Latin America, low-priced Chinese goods flood the region. Local makers of shoes, textiles and toys have been forced out of the market by Chinese competitors and are pressuring government officials to file antidumping cases against China.

Although only 13 percent of Brazil’s imports come from China, the Asian country is the target of 35 percent of the 123 antidumping investigations opened by the Brazilian government as of late March, according to the National Confederation of Industry.

The Obama Effect

-- Don’t be surprised if some Latin leaders who now oppose the U.S. -- including Venezuela’s Chavez, Evo Morales in Bolivia, Rafael Correa in Ecuador and even Cristina Fernandez Kirchner in Argentina -- suddenly soften their stance. You may even hear them parrot Obama’s rhetoric encouraging developing nations to adopt better environmental and labor practices.

Obama already appeals to many Latin American presidents as a completely different kind of U.S. leader. “Obama is the first U.S. president in many decades who looks like us,” said Brazilian President Luiz Inacio Lula da Silva.

The sooner Obama lifts the U.S. embargo on Cuba and reinforces trade ties with Latin America to prevent China from becoming the region’s new looter, the sooner leftist Latin leaders will see him as an ally rather than an enemy.

(Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist. The opinions expressed are his own.)

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