China offers $20bn for LatAm projects

Chinese President Xi Jinping (left), Brazil’s President Dilma Rousseff (centre) and Costa Rica’s President Luis Guillermo Solis after a press conference in Brasilia on Thursday.  Xi proposed to create a $20bn fund to finance infrastructure projects in Latin America and the Caribbean.

AFP/MCT/Beijing

Chinese President Xi Jinping proposed to create a $20bn fund to finance infrastructure projects in Latin America and the Caribbean.

The fund was announced at the end of a summit hosted by Brazilian President Dilma Rousseff that marked the launch of the China-Latin America-Caribbean Forum on Thursday.

“They proposed to do it immediately so that it can be ready next year. This money is an exclusively Chinese proposal,” Rousseff told reporters in Brasilia, adding that the fund would have initial capital of $10bn.

Xi also offered to extend a credit line of up to $10bn to nations of the Community of Latin American and Caribbean States (CELAC) via the Bank of China.

In addition, a Chinese-Latin American co-operation fund of $5bn would be launched for investments in areas that have yet to be decided.

Venezuelan President Nicolas Maduro said foreign ministers of the new forum would meet in China next year to determine the mechanism to access the infrastructure fund.

Xi met with 11 Latin American and Caribbean leaders at the end of a three-day visit to Brazil before heading to Argentina, Venezuela and Cuba.

Cuba’s communist President Raul Castro attended the talks, along with Chile’s Michelle Bachelet, Colombia’s Juan Manuel Santos and Ecuador’s Rafael Correa.

On his visit to Latin America, Xi promised new trade and investment deals that he said will lift China’s booming economic ties with the region to new heights. Many Latin American leaders hailed it as great news amid their countries’ economic slowdowns.

But the latest trade figures tell a different story, and suggest that the biggest news about Xi’s visit may be political, rather than economic.

The latest trade figures show that, while China has already surpassed the US as the No. 1 trade partner of several Latin American countries, bilateral trade between China and Latin America is beginning to slow after a decade of phenomenal growth.

Latin America’s exports to China soared from 2.4% of the region’s worldwide exports in 2002 to 11.7% of the region’s worldwide exports in 2012, according to International Monetary Fund figures. But the percentage fell to 11.6% in 2013, and most economists expect that it will grow at a slower pace than in recent years.

Part of the reason is that China’s economy is no longer growing at the 10% annual rates of the past decade. It is expected to grow by 7.5% this year, and by a similar rate in the next few years.

And many economists doubt that we’ll see a continuation of last decade’s phenomenal growth in bilateral trade because Latin America is not high on China’s agenda. While China is special to Latin America, Latin America is not special to China.

During his ongoing visit to the region, Xi signed a deal with Brazil, Russia, India and South Africa - the fellow members of the so-called Brics group - to create a New Development Bank for emerging countries. He also proposed to build a trans-Amazonic railroad that would link Peru with Brazil, and announced dozens of other bilateral trade and investment agreements.

Less noticed, but equally or more important in the long run, was that he held talks with Latin American leaders that may lead to the first summit of China with members of the Community of Latin American and Caribbean States (CELAC) – a group that excludes the US – later this year in Beijing.