While Washington rips up trade deals, Beijing sees the region as a “land of vitality and hope.”
Latin Americans can’t afford to wait four years to see when the United States will be willing to have an honest and reciprocal conversation about economic prosperity in the Western Hemisphere. Luckily for the United States’s southern neighbors, over the past decade Latin America has found a new major trading partner: China. With economic ties with the United States more uncertain than ever, Latin America would do well to solidify those ties with China, but with caution.
In 2016, Latin American economies contracted for the second year in a row and are projected to grow by just over one percent in 2017 — barring any big surprises. What is more, the international private sector is retreating from the region at an alarming rate, with net capital flows to Latin America negative for the first time since 1998.
Traditionally, in turbulent times the region looked to the United States for trade and finance to help it through — whether from financing from Washington-backed institutions like the World Bank and the Inter-American Development Bank, or through trade and investment negotiations.
Today, though, neither seems certain after the election of Donald Trump. It is still too early to see what the president’s policies toward development banks will be, but even before we do know that lending to the region has been dropping from the traditional U.S.-backed institutions.
And of course we also know that President Trump wasted no time in withdrawing from the Trans-Pacific Partnership (TPP) and announcing plans to re-negotiate the North American Free Trade Agreement (NAFTA).
Many Latin Americans would welcome a chance to renegotiate the TPP and NAFTA if such an effort would be on equal terms and in good faithMany Latin Americans would welcome a chance to renegotiate the TPP and NAFTA if such an effort would be on equal terms and in good faith. Chilean negotiators to the TPP felt like they did not get a great deal with the TPP. In particular, provisions that would force the country to deregulate its financial markets and its intellectual property laws would have given large U.S. firms an open field to do business in the country with little competition or government interference.
As for NAFTA, the 1994 trade deal helped increase Mexican exports to the United States sevenfold, and foreign direct investment jumped to four times pre-NAFTA levels. Yet with all that trade and investment, on average Mexico’s GDP growth has hovered stubbornly at one percent in per capita terms post-NAFTA, and the country lost at least two million agriculture jobs, as cheap imports of corn and other commodities flooded into Mexico due to NAFTA.
But of course, countries of the region are understandably wary of negotiating anything with a government that has denigrated them and called their citizens “bad hombres” and worse. Enter China, which just days after the election released a new white paper calling Latin America and the Caribbean a “land of vitality and hope.” The plan promises to implement earlier pledges of trade and investment, but without the U.S.-strings attached in terms of deregulation and name-calling.
Read more from the source article published in The Foreign Policy.com Mar. 6 2017