China's Latin American November

 

The month of November will be a period of defining limits and decisions. Xi Jinping is preparing to visit Peru for an APEC summit with the objective of strengthening ties with the Latin American Pacific Rim by fostering closer relations with Colombia and Mexico. However, these countries are cautious about the potential impact on their relations with the United States, which is entering a pivotal period of elections that will shape global geopolitics.

If Kamala is elected, the status quo will be maintained, but Latin American governments will continue to pursue rapprochement with China.

In the event of a Trump victory, the outcome will be dependent on his strategy. Specifically, it will be crucial to ascertain whether he will adopt a conciliatory approach towards China, seeking mutually beneficial reshoring initiatives, or whether he will adopt a more assertive stance.

At this point in time, it is not possible to determine who will emerge victorious. The competition is intense, but it is clear that Latin American countries are seeking to gain an advantage over China. Argentina, which requires the dollar swaps that Alberto Fernández has maintained, is also engaging in this practice. Even Milei himself, who has demonstrated a unique ability to navigate the political landscape with a penchant for generating controversy, has a different perspective on China.

China, on the other hand, has indicated a willingness to engage in a more productive and less paternalistic relationship. These investments will be made with a clear understanding of the potential risks. This is evidenced by the agreement it has with Brazil, which is currently holding a BRICS summit. Notably, Lula's absence indicates that Venezuela will not be integrated as a full member.

In the Global South and the Belt and Road Initiative, solvency is of the utmost importance. While Venezuela will be close to becoming a full member, it is unlikely to achieve this status in the near future. It is likely that a new membership category will be created. However, until it is solvent with the Western world (i.e. free of sanctions and in good standing with the West), it is unlikely to be accepted.

China is currently deliberating on the optimal approach for negotiating with Mercosur countries: whether to engage with them separately or as a bloc. The Argentine and Brazilian foreign ministries are working to overcome the opposition between Milei and Lula and are optimistic that the negotiations will proceed as a bloc. The governments of Uruguay and Paraguay have also reached the same conclusion. There is a general consensus on this matter.

China is open to negotiating with individual countries but is also interested in discussing a potential agreement with the bloc. However, it has expressed concerns that ongoing negotiations could impede business activities at the country level. While it is not a necessity, the fact that Mercosur exists means that this is a distinct possibility. Should an agreement be reached with China and the EU in five years' time, and assuming that Kamala wins or that Trump does not pursue the reshoring of manufacturing, the Mercosur countries could emerge as a stronger nearshoring platform. Similarly, Colombia could be affected if Trump aims to reshoring (due to the US-Colombia free trade agreement). While there is still uncertainty in the market, these are the opportunities that are emerging.