Published by Poder 360
China’s insatiable appetite for commodities has opened the door to a fast friendship. Whether the relationship matures is another question.
|Illustration Isabelle Cardinal|
Like a new kid in school seeking acceptance and popularity, China has been making flirtatious overtures to Latin America, which has long been going steady with the rich, and mostly popular, but growingly neglectful class president, the United States.
After five decades of virtually non-existing relations, China’s newfound interest in Latin America seems mostly designed to establish economic ties and partly to dislodge the region’s longtime support of Taiwan. China’s increased outreach efforts has gained significant momentum since November 2008 when President Hu Jintao toured several countries in Latin America while his government simultaneously released its first-ever policy paper outlining its strategy for deepening its cultural, educational and most importantly, economic relationship with the region.
In 2009, China leveraged its significant checkbook to further its relationships in the region, lending Brazil’s Petrobras US$10 billion and extending a US$1.46 billion line of credit to Argentina as well as investing, lending or donating to various other projects and countries.
However, China’s courtship of Latin America has not been completely smooth. Although Latin America has by-and-large been open to developing and deepening its relationship with the “new kid on the block,” it does so with a tremendous amount of trepidation. Simply stated, when it comes to China, Latin America has trust issues.
While most of these trust issues can be attributable to a historic lack of interaction between the two, coupled with the tremendous cultural and communication differences, most are a result of China’s relative inexperience operating in global markets. Like an awkward teenager coming into his own physically but not necessarily emotionally, China still lags on the “soft” skills necessary to translate its burgeoning gifts into enduring popularity.
After multiple visits to China in support of a Shanghai-based client and undertaking an extensive research effort on the state of Sino-Latin American business relations, the extent of the challenge is readily apparent. China’s focus on Latin America remains limited, hindering its understanding of the region and its unique and complex business culture.
In Latin America, China’s interests have been viewed as mostly mercantilist, but as reflected in its recent membership in the Inter American Development Bank, the country is working to prove that it is in for the long haul.
While China will not supplant U.S. economic or political influence in Latin America anytime soon, it is poised to make significant inroads if—and it is a big if—it can develop trust and rapport by following through on its stated interest to help the region’s long-term development.
Despite its low-profile history in Latin America, China’s insatiable need for commodities has opened the door for the development of a fast friendship. In a report released last year on China Outbound investments by SinoLatin Capital, the dramatic increase in the speed and scale of the relationship has caught many analysts by surprise. The report highlighted how the economic relationship easily surpassed President Hu’s 2004 declaration that Sino-Latin bilateral trade would grow to US$100 billion by 2010, an amount many thought to be overly ambitious at the time. That goal was surpassed in 2007, a full three years ahead of President Hu’s predictions. Trade between the two regions rose from $8.4 billion in 1995 to an impressive $140 billion in 2008. Today, China is Latin America’s second largest trading partner—No. 1 for both Brazil and Chile and the second largest market for Peru.
The question then is, can the China-Latin America relationship mature from the flirtation of trade to the commitment of foreign direct investment?
Although the China-Latin America relationship makes sense on many levels, there are still significant obstacles to making it work. The primary issue is an utter lack of understanding of each other. Success is going to require the development of a cultural bridge that will allow the two sides to meet and getter better acquainted.
Like the office of the cool young school guidance counselor, the city of Miami is uniquely positioned to help play the role of Sino-Latin matchmaker, if—again, a big if—it can leverage its strengths and seize this nascent opportunity. As the most international of American cities, Miami is a town that welcomes upstarts and those seeking new beginnings through reinvention.
Miami could be just the kind of neutral, one-stop location for China, Inc. to court Latin America while Latin America can leverage its relationship and familiarity to find common ground with its suitor. The city, long known as the “Capital of Latin America” boasts an impressively diverse population, a major international air and seaport, and an infrastructure built for international banking and commerce. The fact that the city has a strong brand recognition in China could help lure a whole new set of visitors to come to work, invest and play, propelling Miami to an enviable level of global relevance.
However, in order for the Miami to seize this opportunity, it will need to expand its horizon beyond its current Latin roots and be ready to embrace China’s unique culture. This will require the support and buy-in of the local and federal government, as well as of the business and educational communities, never an easy proposition.
What is clear is that there remains much to do on all sides in order to move the Sino-Latin relationship forward. Despite the many challenges facing this new relationship, we should all agree that the new kid is here to stay and helping him fit in can be ultimately beneficial to all.