While US dissipates its power in Asian sands, Asia focuses on Latin America.

Stupidity on steroids. Hugo Chavez outsmarts our rulers and masters.

While US politicians dissipate real power in the Middle East and create domestic programs fed by borrowing from Asia, Asia develops business and trade with the Americas. All for what?

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The dragon in the backyard
Aug 13th 2009
From The Economist print edition

Latin America is tilting towards China, Iran and the global “south”—and away from the United States


IF ALL goes to plan, by 2012 the first shipments of copper from Toromocho, a mine in the Peruvian Andes, will be sent by train and truck to a new $70m wharf in the port of Callao. From there, they will be shipped across the Pacific to China. The mine is being developed at a cost of $2.2 billion by Chinalco, a Chinese metals giant. Both it and the wharf will be the most visible symbols of the burgeoning trade and investment that are fast turning China into a leading economic partner for Peru and many other Latin American countries.

In the first six months of this year China became Brazil’s biggest single export market for the first time (partly because Brazil’s manufacturing exports fell sharply in the recession). During two days of talks in Beijing in May between Brazil’s president, Luiz Inácio Lula da Silva, and his Chinese counterpart, Hu Jintao (pictured above), an agreement was signed under which the China Development Bank and Sinopec, a Chinese oil company, will lend Brazil’s state-controlled oil company, Petrobras, $10 billion in return for up to 200,000 barrels a day (b/d) of crude oil for ten years from the country’s new deep-sea fields. Weeks earlier China offered Argentina a currency-swap arrangement involving use of yuan worth $10 billion, and lent cash-strapped Jamaica $138m to enable it to stave off a debt default. Chinese companies have bought stakes in oilfields in Ecuador and Venezuela, and are talking of building a refinery in Costa Rica. This week China National Petroleum Corporation and CNOOC, another oil firm, were reported to have bid at least $17 billion for the 84% stake in YPF, Argentina’s biggest oil company, held by Spain’s Repsol.


It is not just China that is taking a much bigger interest in Latin America. So too, in different ways, are India, Russia and Iran. These developments are prompting some to declare the end of the Monroe Doctrine—America’s traditional insistence, voiced by President James Monroe in 1823, that any meddling by outsiders in its hemisphere is “dangerous to our peace and safety”. Never mind that Yanqui dominance has always been disputed by Latin American nationalists as well as by Europe, and never mind that the United States (and Europe) are still far bigger traders and investors in Latin America as a whole than China, let alone India or Russia (see chart 1). What is clear is that there are new and potentially powerful actors in the region.

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Business and politics
Chinese officials insist that their closer relations with Latin America are driven by two things: a shared diplomatic interest in a multipolar world, and mutually beneficial economic and business ties. “We’re not seeking special influence. We have reiterated [to the United States] that our relations with Latin America aren’t a threat to anyone,” says Qiu Xiaoqi, China’s ambassador in Brasília. It is also of interest to China that half of the 24 mainly small countries around the world that still recognise Taiwan rather than China are in Latin America and the Caribbean.

Despite a flurry of presidential and ministerial visits in both directions, and mounting mutual curiosity, China and Latin America are hardly close. There are no direct flights between the two. Few Chinese are knowledgeable about the region (Mr Qiu speaks no Portuguese, though he is one of the relatively few Chinese diplomats who speak Spanish). But sooner or later China’s economic involvement in Latin America seems certain to have geopolitical ramifications, requiring it to make choices. That is because of political developments within Latin America, and in particular the rise of more or less anti-American governments in some countries.

Venezuela under Mr Chávez has sought closer ties not just with China but also with Russia and Iran. During the cold war the Soviet Union bankrolled Cuba for almost three decades, and supported left-wing movements and governments throughout the region. Last year Dmitry Medvedev became the first Russian president since those days to visit Latin America. Russia also sent a small naval flotilla to the Caribbean for joint exercises with Venezuela and Cuba. This was a tit-for-tat gesture after the United States sent ships to support Georgia after its brief war with Russia last summer.

Russia’s abiding interest in Latin America is focused on arms sales. Between 2005 and 2008 Mr Chávez bought Russian weapons worth $4.4 billion, including 24 Sukhoi fighters. As the oil price sank last year, shrinking Mr Chávez’s kitty, Russia offered a $1 billion credit line for further arms purchases. This month Mr Chávez said he would seek “battalions of tanks” from Russia on his next visit to Moscow, in response to an agreement letting America use military bases in neighbouring Colombia. But his most worrying purchase was of 100,000 Kalashnikov automatic rifles and a production line to build more. Colombian officials fear that some of these rifles will end up with the FARC guerrillas.

Mr Chávez has also gone out of his way to court his Iranian counterpart, Mahmoud Ahmadinejad. In 2007, in Tehran, he joined the Iranians in declaring an “axis of unity” against the United States. There has been talk of nuclear co-operation. Venezuela and Cuba, along with Syria, were the only countries to support Iran’s nuclear programme in a vote in 2006 within the United Nations’ International Atomic Energy Agency. Mr Ahmadinejad has made two visits to Latin America, taking in Nicaragua, Ecuador and Bolivia, as well as Venezuela on both occasions. His government has opened embassies in Chile, Colombia, Ecuador, Nicaragua and Uruguay. Under an investment programme sponsored by the two governments, Iranian firms are making tractors and cars in Venezuela, and building housing for the poor.

Iran this month offered Bolivia a loan of $280m, in addition to spending $200m on building two cement factories and three milk facilities. Mr Ahmadinejad also promised Nicaragua $1 billion in aid, and Iran has announced plans to invest in Ecuador’s oil industry. But as with many of Mr Chávez’s announced investments, little cash seems to have been disbursed.

Iran’s cultivation of radical Latin American governments appears aimed partly at securing diplomatic allies in international bodies, while irritating the United States. Some analysts see a more sinister dimension, pointing to the presence in Venezuela of sympathisers with Hizbullah, the Lebanon-based Shia militia. An Argentine judge, with government backing, has issued arrest warrants for seven Iranian officials and a member of Hizbullah in connection with the bombing of the Israeli embassy in Buenos Aires in 1992 and of a Jewish community centre two years later that killed a total of 114 people and injured more than 500. But there is no firm evidence of a continuing and active Iranian-inspired terrorist presence in the region.

For China, the international entanglements of Mr Chávez and his friends are a complication rather than an attraction. “China is not very interested in radicalisms,” says Pan Wei, a political scientist at Peking University’s School of International Studies who recently spent a sabbatical term at Lima’s Catholic University; “China is not going to stir up political troubles in this area, nor have a military presence.” He points out that China forged warm relations with Chile during the dictatorship of General Augusto Pinochet.

China makes much of its pragmatic, non-judgmental approach to foreign affairs. But that might just set it on a collision course, in which it has to choose between its strategically vital relationship with the United States and Venezuelan oil. Expect it to do everything possible to avoid being faced with such a choice.

(continue at the Economist)