Asia-Pacific, Economy & Trade, Headlines, Latin America & the Caribbean

ARGENTINA-CHINA: Patience, Realism Needed in Forging Relations

Marcela Valente

BUENOS AIRES, Nov 15 2004 (IPS) - Much like Cinderella, whose fate was changed forever thanks to the intervention of a fairy godmother, Argentina is awaiting a visit by the president of China with exaggerated expectations of new business deals with the Asian giant, but without a clear strategy to achieve them.

Chinese President Hu Jintao arrives in Buenos Aires on Tuesday on a stopover between Brazil and Chile. Accompanied by state officials and business representatives, he will spend a mere two days in Argentina, one of which will be devoted to a private visit. His stay in Brazil lasted six days.

Nevertheless, Argentina’s eagerness for Chinese investment and trade have led to wildly inflated predictions in the press over recent weeks.

The Argentine press has gone so far as to project investments of up to 20 billion dollars, a figure that the government of President Néstor Kirchner allowed to circulate at first, but then took pains to tone down, so as to avoid almost certain disappointment.

Last week, the director of the Chinese government information office, Yang Yang, warned against expecting "unreasonable" announcements from the Chinese delegation that will visit Argentina, even though there will be good news, he added.

There are very good reasons to assume that trade between the countries will expand beyond agricultural products (which comprise the bulk of Argentine exports to China), said Yang, who also alluded to agreements on space aviation, transportation, oil exploration, telecommunications and satellite launching.

However, Yang somewhat boldly suggested that instead of making unrealistic estimates of future investment, Argentina would do better to develop a trade promotion strategy, like Brazil’s, to showcase the best of the products it has to offer the world, and identify sectors that could lead to mutually complementary bilateral deals with China.

The Chinese official touched a sensitive nerve with his comments. Argentine analysts agree that the country lacks a clear strategy for insertion in the world market, one that establishes a national identity and an "action plan" of priorities for future international trade.

"There is no fixed foreign policy strategy, which is what we need in order to determine what our priorities should be," said Gloria Báez, an economist with the Argentine Council for International Relations and coordinator of a group research project, "China: A Challenge and Opportunity for the Agribusiness Sector."

"It isn’t really clear what Mercosur wants from China, either," Báez commented to IPS. "We know that there is interest in the sub-region, but there are no defined policies," she added, referring to the trade bloc made up of Argentina, Brazil, Uruguay and Paraguay.

Eduardo Sigal, the undersecretary for integration matters at the Argentine foreign ministry, told IPS that Mercosur’s strategy with regard to China is "under construction". "We are visualising the ways in which our economies can complement each other, and studying how to expand more deeply in the areas of investment and technology," he said.

Sigal noted that numerous high-level meetings between Mercosur (the Southern Common Market) and China had been held since 1997, the most recent in July of this year. However, the trade bloc is still "discussing the criteria for a feasibility study on the impact of an agreement, which could involve either free trade or fixed trade preferences; this has yet to be determined," he said.

He added that, in view of the economic collapse suffered by Argentina in late 2001, it is only "logical" that the country still has no clearly defined strategy for insertion into the international market.

After the crisis, Argentina defaulted on its debts to private creditors, which would now total just over 100 billion dollars, including the interest that has accumulated, while poverty soared to more than half of the country’s 37 million inhabitants.

And although the national economy has experienced a notable recovery since 2003, the country is still far from having recouped what was lost in terms of economic dynamism and social well-being.

As a result, analysts, businesspeople and journalists have asked why a country of 1.3 billion inhabitants, whose economy is growing by eight percent annually, would be interested in strengthening relations with a highly indebted nation that has barely begun to recover from a devastating crisis, and that has never even sought closer ties with China.

The sources consulted by IPS concur that even though China claims to be self-sufficient, it needs to guarantee the supply of food for an enormous population that continues to grow, and Argentina and Brazil are the world’s largest producers of soybeans, along with the United States.

China’s energy needs are also huge, and this fact coincides with Argentina’s recent decision to create a mixed public/private company – with the state holding the majority of shares – dedicated to offshore oil exploration, an area in which the Chinese have experience and could be willing to invest.

"There is obvious interest in the region," said Báez. In fact, Hu announced on Friday in Brasilia that China plans to invest 100 billion dollars in Latin America over the next 10 years, and recalled a statement made by late Chinese leader Deng Xiaoping (1904-1997), "The 21st century will be the century of Latin America and the Pacific."

In any event, Báez believes it is best to remain patient, prudent and realistic. "As of now, our greatest potential is in the agribusiness sector, and we can go on from there to make further progress in fruits, especially citrus, and meat," she noted.

Anything else is still strictly in the realm of speculation. "There is no basis for predicting anything concrete with regard to investments in other areas," she said, adding that expectations should be kept in check, along with the mounting fear of a potential "invasion" of the domestic market by Chinese merchandise.

As in the case in Mexico, and to a lesser degree in Argentina and Brazil, the massive influx of toys, electronics, textiles and footwear from China clearly illustrates that closer ties with Beijing come at a price, one that is paid by national industrial development.

This matter has become a particular concern for Brazilian manufacturers since Brasilia decided last week to recognise China as a market economy, which means it will now be subject to the anti-dumping rules and penalties (used when another country is deemed to be exporting products at artificially low prices) established by the World Trade Organisation (WTO).

Beijing imposed this recognition as a condition for the signing of numerous agreements.

China joined the WTO in 2001 as a "non-market" economy, a category used when prices are set by the state, as opposed to market forces. This status allows other member countries to adopt special measures to protect their markets from Chinese products.

In fact, the majority of anti-dumping measures in Argentina are specifically aimed at imports from China, as the Argentine newspaper Clarín reported on Monday.

These dangers make it incumbent upon Latin American governments to urgently develop a road map detailing the priorities, opportunities and threats involved in closer ties with China, so as to increase trade without sacrificing domestic development, said Báez.

It is time to give up fairy tale fantasies and to start working on medium- and long-term plans that will allow for the development of a mature and lasting relationship, instead of waiting for the touch of a magic wand, say analysts.