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Latin America and China: The economic and debt situation and the U.S. discomfort

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Latin American countries have no relatively good room for fiscal and monetary policy adjustment like China, and basically lack the ability for governmental countercyclical adjustment. This is mainly reflected in their room for fiscal and monetary policy.

From a fiscal viewpoint, the taxation ability of Latin American governments is generally weak. Taxation accounts for 16-18% of GDP, which is obviously lower than the 30-35% level of developed countries.

In terms of monetary policy, since the currencies of Latin American countries are directly correlated to the U.S. dollar exchange rate, the dollar fluctuation also entails the reduction of their room for monetary policy adjustment. These countries have continuously borrowed and cut interest rates. Hence there is little room for further steps.

The Federal Reserve has adopted the policy of unlimited quantitative easing which, in practical and easy-to-understand terms, is one of the unconventional ways by which a central bank intervenes in a State’s financial and economic system to increase the amount of debt money in circulation.

Although the U.S. stock market went into a slump several times, it should be noted that Nasdaq reached a new high. Ultimately, money has become more circulating. Interest rates in Latin American countries, however, have become very low and there is little room for further cuts.

At the same time, their foreign debts are also relatively high. For example, Argentina has recently approved a 70billion dollar debt restructuring plan and its debt accounted for over 50% of GDP.

The first solution to the debt crisis is to delay repayment, and the second one is to cancel interest or partly write off the debt. The creditor has no choice but to be forced to agree if one of the counterparts is unable to repay it. This is an endless cycle that, once the debt restructuring plan is approved, will only alleviate and mitigate Argentina’s crisis.

Argentina’s debt crisis occurred nine times in history, and this is the third time in the new century. Inflation in Argentina has caused its currency to depreciate by over 70%. According to statistics from the United Nations Economic Commission for Latin America, over 12 million people were jobless in Latin America in 2020. Poor people in Latin America will increase from 118 to 130 million and the extremely poor people will rise from over 60 million to over 90 million.

Faced with some new difficulties and challenges, we need to explain and assess China-Latin America relations at the current historic juncture. The development of China-Latin America relations has shifted from a period of high-speed growth to a period of stable growth. Quantitative and extensive development is shifting to a qualitative and specific one.

Initially China-Latin America relations took off suddenly and even exceeded expectations. Instead, a steady, efficient, stable and effective approach is currently preferred. The orderly progression of diplomatic and commercial relations is more advantageous than a context of actual speed.

This is especially the case in the context of intensified strategic competition between China and the United States. The political situation in Latin America, and the further impact of the Covid-19 pandemic, mean that certain changes need to be made to China-Latin America relations.

Firstly, the U.S. influence on China-Latin America relations needs to be assessed. Sino-U.S. relations are the most important, sensitive and complex bilateral relations in Chinese diplomacy.

Recently, there have been many major changes in Sino-U.S. relations, but one of them is often overlooked: from the Latin American countries’ perspective, the relationship between Latin America and the United States is the most important one. China’s interests in Latin America have not surpassed the United States’ in terms of political and economic development.

Here are some data. In the field of economy and trade, the United States is still Latin America’s main trading partner. The same applies to investment. The United States has great advantage over China.

In 2017, trade between the United States and Latin America exceeded 760 billion dollars, almost three times the volume of trade between China and Latin America. In 2019, trade between China and Latin America was about 270-280 billion dollars, while the volume of trade between the United States and Latin America was almost 800 billion dollars.

From an investment perspective, U.S.A.’s and Latin America’s direct engagement in 2017 was 45 billion dollars, almost double that of China. Therefore the United States outperforms China in terms of trade and investment.

However, benefiting from the advantage of China’s economic growth and the structural complementarity between China and Latin America, the acceleration of China’s economic and trade investment in Latin America is higher than that of the United States. Therefore, China has an incremental advantage in Latin America, but the United States enjoys an ‘equity’ primacy.

For example, outgoing President Trump has never visited Latin America, but this does not mean that the United States does not pay attention to it. Quite the reverse. If we look at the reports on Sino-Latin American relations issued by U.S. think tanks, scholars and experts are particularly worried.

The U.S. Congress holds several hearings on Sino-Latin American relations every year and invites not only local experts, but also experts from Mexico, Brazil and other countries. We can see that the United States attaches great importance to the development of China-Latin America relations.

We wonder, however, why has the United States not taken propagandistically political positions in Latin America as it does towards China, the Middle East, South-East Asia and the South China Sea.

This means that the United States still considerably trust Latin American bonhomie, good nature, patience and tolerance. The U.S. media merely claim that China’s influence in Latin America has increased and its soft power has enhanced but, overall, China’s influence in Latin America is far less than that of the United States.

If we ask in Brazil what they think of U.S.-China, U.S.-Brazil and Brazil-China relations, we get the following answers. The United States is a model for Brazil’s development and the values and ideologies of both Brazil and the United States are close. China is an important trade and investment partner for Brazil. From an economic viewpoint, Brazil’s development should seek to establish a better partnership with China, but in terms of ideology and values, the Forbidden City is further away than the White House.

For Latin America, maintaining stable relations with the United States is a primary interest. After the outbreak of the Covid-19 pandemic in Latin America, China – thanks to some of its medical equipment – did its best to help those countries mitigate the impact of the disease. A Chinese state-owned company responded to the call and promised to build a hospital with an in-patient module in a conference and exhibition centre in Panama to help infected patients, for only a small sum of money from the State.

Panamanian President Laurentino Cortizo Cohen, however, rejected the proposal outright. In the end, Panama spent 12 million U.S. dollars and built 100 hospital beds and 26 intensive care units, without taking advantage of Chinese aid.

On April 16, Cortizo presided over the hospital’s opening ceremony, announcing that it was his own decision. Conversely, when former Panamanian President Juan Carlos Varela (2014-19) was in power, he visited China, and Chinese Foreign Minister and State Councillor Wang Yi reciprocated by travelling to Panama.

At the time, President Varela said that the landmark project for the expansion of the Silk Road passed through Panama, as did the 4 billion dollar plan to expand the canal and railway from Panama to Costa Rica.  The new President in power, however, has not followed the philosophy of his predecessor, terrified of displeasing the United States. Unfortunately, this news is not reported in the Italian press.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Transition 2021: How Biden is likely to approach the Middle East

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In terms of foreign policy, the new President of the United States, Joe Biden,is likely to face numerous challenges, especially when it comes to the Middle East because of the disastrous policies of the former President, Donald Trump, in the region. Even in his inauguration speech, Biden made it clear that it was going to be testing time. Some of the challenges that the new administration would be facing includethe nuclear deal with Iran, the ongoing war in Yemen, issues of human rights issues and the current deadlock between Israel and Palestine. There is some possibility that Biden’s foreign policy towards the Middle East would either be a revival of Barack Obama’s former policies or new strategies would be formulated based on the nature of the challenges faced. However, it is certain that Biden will address or undo Trump’s terrible policies in the region. 

The Biden administration’s top foreign policy agenda is the policy towards Iran. The Iran nuclear deal (2015) or JCOPA was considered to be a milestone in multilateral diplomacy that was irresponsibly abandoned by Trump in 2018. Trump’s “maximum pressure campaign” of sanctions against Iran aimed to please the traditional allies as they faced a common enemy in Iran. Biden has promised to return to the 2015 JCPOA agreement, and he would also discuss Iran’s nuclear program and exchange for sanctions relief. In this process, it is expected that Washington might pressure Iran to withdraw its support for regional proxies in Iraq, Syria, Yemen, Lebanon and the Palestinian territories. Moreover, the US would also seek to curb Iran’s export of precision guided missiles to her regional allies. Iran though, has already made it clear that these issues would not be discussed in the event of a renegotiated JCPOA. Furthermore, this plan may be complicated by the recent assassination of Iran’s top nuclear scientist, which was not condemned by the White House that Iran blames on Israel. Public outrage had not even subdued at the point due to the assassination of Qasim Sulemani. Currently, the architecture of the Middle Eastern region is even more complex and challenging than it was four years ago butthe fact is that Iran cannot afford military conflict at this point when its economy is already crippling amidst the COVID-19 pandemic along with the sanctions imposed by the US.

Trump administration’s “Israel-first” approach in the region brought severe criticism at the global level. The Abraham Accord, signed in September of last year,which normalized Israel’s relations with UAE & Bahrain, is widely seen as Donald Trump’s most significant foreign policy achievement. This Accord altered the decades long regional perception that Arab-Israel peace could not be achieved without first addressing the issue of statehood for Palestinians. Biden has said that he supports more countries recognizing Israel but at the same time Israel needs to work towards genuine solutions between the two states. Moreover, the new administration at the White House will not show the same tolerance for Israel’s settler expansionism as its predecessor. However, there are certain foreign policies by the Trump administration that the new US leadership does not want to renew. The normalization of Arab-Israel relations is something that enjoys bipartisan support. And also, the shift of the US embassy to Jerusalem seems unlikely to be undone.

The US policy inthe Middle East under the new leadership will be less ideological and would be more based on fundamental principles.  These principles will greatly focus on human rights as some analysts view human rights as the core foreign policy agenda of the Biden administration. Thus, it does not seem not to be good news for the traditional allies of the US including the Kingdom of Saudi Arabia and Israel. There are a variety of issues in addition to the human rights issues: the KSA intervention in Yemen, arms sales to Saudi Arabia, the lingering mistrust, the jailing of activists and Jamall Khashoggi’s murder case, which are creating uncertainties between the Washington and Riyadh. Hence, KSA is going to have a very difficult time with the Biden administration. Similarly, the new administration can also be expected to take a less tolerant view towards Moscow and Ankara because of the extraterritorial activities in the Middle Eastern region.

Certainly, returning to the Iran nuclear dealofficially, the Joint Comprehensive Plan of Action-will take a longer time to review because of the complexity of the issue and the domestic problems that the US is currently facing. There is also a possibility of a dangerous escalation without a nuclear deal due to Iran’s aims of buildingmilitary scenarios. Therefore, multilateral diplomacy is the best option for regional peace and security, which has been tried in the previous years.Even the JCPOA was a result of such diplomacy. The US ending its support to Saudi Arabia’s war in Yemen might turn away the traditional allies for some time but not permanently due to the common interests in the region. Biden is also likely to alter Trump’s decision to withdraw US forces from the region as it would decrease US influence in the region. The top priority of the US administration in the Middle East would be to try and manage Iran’s problems and to maintain reasonable relations with Israel. Traditional allies of the US in the Middle East were content and supportive of Trump’s policies in the region but they view Biden, not as a President, but Vice President of the Obama Administration. Trump’s bilateral relations were often based on personal ties with the foreign leaders while Biden is expected to adopt a more multilateral approach in engaging with the allies. Still, scholars believe that there would be no fundamental change in the US foreign policy towards the Middle East, especially when it comes to protecting its vested interests in the region.

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Rejoining the UNHRC will be the State Department’s first diplomatic mistake

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As over the last days US Vice President Harris swore in Linda Thomas-Greenfield as the new US Ambassador to the UN, US Secretary of State Blinken announced in parallel that the US is now seeking election to the UN Human Rights Council, in an attempt to rejoin the UN system. But that’s not the right first move back at the UN that the US should be making. And that’s not what the progressive left had in mind when the real left groups put in office the new Biden Administration.

My perspective comes from having worked in the UN human rights system and as a finalist for UN Special Rapporteur on freedom of speech last year – but also as a progressive left voice.

The days when UN engagement defined Democrats vis-a-vis Republicans are over.

Shunning the UN has always been a Republican hallmark but backing and pouring so much funding into an old style, corrupt bureaucracy that has little to do with “diplomacy” is not what the new, awaken progressive left wants either.

Several weeks ago, I made the estimate that the 10bln dollars which the US government pours into the black hole called the UN equals the Covid relief that 16mln struggling American people could be getting now. The Biden Administration’s State Department diplomats have to remember who put them in office.

Democrat centrist diplomats have more in common with the UN in terms of ways, goals, style and world view than they do with the progressive left. Backing the UN means backing the old, corrupt ways, which the real progressive left voted to break last year.

The decision to announce the US’s goal to rejoin the UN Human Rights Council comes in the same week when President Biden finally announced his real stance on the Black Lives Matter ‘defund the police’ goals. Biden, it turns out, unsurprisingly does not support that. That’s not what the progressive left signed up for, either.

The UN institutional funding inertia by the US government does not define the Democratic Party anymore. That’s not what the left voters want. 

The left’s reasons for not embracing the UN and the UN Human Rights Council have little to do with the usual Republican ‘go it alone’ at the international stage.

Yes to diplomacy and multilateralism. No to the corrupt, faceless UN. “International diplomacy” is no longer the same thing as the UN system.

The wave that rose across American political life last year, with so many young black activists and so many people voting for the first time, signaled a big resounding No to old ways and old institutions, which have little concern for the actual needs of the people.

The new US Ambassador to the UN, Thomas-Greenfield, will have the tough job of reforming the UN, and in my opinion, even defunding the UN.

The days when love for the UN defined Democrats are certainly over. It’s time for the Biden Administration to do what it was elected for, which is to not simply go back to the same old, same old corrupt, faceless bureaucratic institutions swimming in money. This is not what we want. The progressive left voted for change and now that also includes the UN.

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U.S. Climate Policy Could Break the Ice with Russia

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Photo: Fiona Paton/ flickr

“In the midst of every crisis, lies great opportunity” — Albert Einstein

Within the climate crisis lies strategic opportunity for the United States. Climate change offers the chance to earn back the good will of allies, to prepare American cities for an urgently needed increase in immigration, and to reinvent U.S.-led institutions that have gone stale. Perhaps most of all, foreign policymakers should remain cognizant of how climate action can help the U.S. navigate relations with the other great powers.

As a recent report from the Center for a New American Security details, synergy between China and Russia is more problematic for U.S. interests than the sum of the challenges that each nation poses individually. Similarly, a recent Atlantic Council publication observed that “allowing Russia to drift fully into China’s strategic embrace over the last decade will go down as the single greatest geostrategic error.” Chinese and Russian interests do currently align on defense, economics, and the degradation of the U.S.-designed world order, but the nature of their alignment does not constitute an alliance.

In characterizing the relationship, this distinction is paramount. For as long as China and Russia remain merely convenient partners, rather than ideologically kindred allies, it is possible to keep these neighbors at arm’s length. To this end, the U.S. must reorient its approach to Russia. It is the Russian perception that world politics are rigged to benefit the U.S. at Russia’s expense that has prompted its support for China.

Russia’s national interests are rooted in the desire for respect. With this in mind, Russia could pull back from synergy with China if a better opportunity to advance these interests presented itself. Ultimately, the ability of the U.S. to offer a mutually acceptable alternative will hinge on two related factors: the Arctic and NATO. Critically, the issue of climate change is central to both of these factors.

In the Arctic, rapid warming removes barriers to resource exploitation, shipping activity, and great power competition. This has drawn many non-Arctic states to the region. Yet, even with China inserting itself as a “Near-Arctic State,” Russia has expressed the need for a hierarchy of regional influence in which the interests of Arctic states are prioritized over non-Arctic states. On this, American and Russian interests align.

Russian distrust of the U.S. complicates matters, however. Arctic military assertiveness from Russia is evidence of its sensitivity to the NATO alliance. In response, U.S. military branches have been releasing strategies for Arctic-specific forward defense. Such militarism is not conducive to improving relations, securing sovereign influence, or addressing climate change. 

In order to limit undue Chinese influence in the region and stabilize its relations with Russia by securing a multilateral agreement that formalizes an Arctic hierarchy, the U.S. will need to alter its foreign policy so that Russia perceives it to be a viable partner. The alteration should be sufficient for reducing friction with Russia’s core interests, but not so extreme that liberal values or American security are put in jeopardy. Such transactional considerations should include fashioning a new climate-positive role for the U.S. in NATO. After all, the permanent physical presence of roughly 76,000 U.S. troops on the European continent not only irks Russia, but this posture is also expensive, carbon-intensive, and perhaps not even the most effective approach to conflict deterrence. 

Indeed, research has shown that rapid deployment of new forces is significantly more likely to stymie aggression. This suggests that the U.S. should reduce its troop levels in Europe by at least 75 percent while bolstering rapid deployment readiness. This would allow the U.S. to simultaneously reduce its military’s fuel demand and greenhouse gas emissions, earn the good will necessary for stronger diplomacy with Russia, and still honor its security commitment to NATO in the event of a crisis. Moreover, the U.S. could then reinvest the potential savings into both Arctic sustainability and NATO’s capacity to manage climate insecurity.

Through the establishment of a bounded Arctic order and the greening of American leadership in NATO, the U.S. can dispel Sino-Russian synergy in the region and help maintain balance between the great powers. Specifically, these actions would both politically distance China from Russia and give the Kremlin substantial reason to begin feeling more optimistic about its relations with the West. To be sure, similar measures will be necessary in other regions to fully assure balance. However, the Arctic is a natural place for the U.S. to begin this endeavor. Usefully, the themes of climate mitigation and adaptation provide a blueprint for what countering Sino-Russian synergy elsewhere ought to generally entail.

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