Argentina Latest Nation To Look At Joining The Belt & Road Initiative
Op/Ed by Chris Devonshire-Ellis
Move has implications upon China’s relations with Mercusor
Argentina will join China’s multibillion-dollar Belt & Road Initiative (BRI), the Argentine newspaper Perfil has reported, citing the Argentine foreign office.
In Latin America, Chile, Peru and Uruguay, along with 16 other countries, have already joined the scheme, while regional powerhouses Argentina, Colombia, Mexico and Brazil have not.
“We will join Belt and Road in the future, we’re interested,” the Argentine foreign office was quoted as saying.
As for the other main South American economies, Brazil is a member of the BRICS group, which stated last month that each of the BRICS states had agreed to enhance trade ties with each other. Brazil is also the leading partner with Mercusor, which includes Argentina in addition to Paraguay and Uruguay. Mercosur operations involve free intra-zone trade and a common trade policy between member countries. It is the world’s fourth largest trading bloc after EU, NAFTA, and ASEAN, with an annual GDP of about US$5 trillion.
The bloc is home to more than 250 million people and accounts for almost three-fourths of total economic activity in South America. It also includes Venezuela, but the country has been suspended from Mercosur since early 2016 for not complying with agreed tariff changes.
Associate members include the rest of South America, namely Bolivia, Chile, Ecuador, Guyana, Peru, and Suriname, along with Mexico and New Zealand as observer nations. Of these, China has double tax agreements with Brazil, Ecuador, Peru, and Venezuela, while an FTA with Colombia is still at the feasibility study stage. Mercosur Associate members do share some of the free trade benefits, although in several cases these are still awaiting legislative approval.
On enhancing Mercosur, however, Uruguay’s Finance Minister Danilo Astori said that “each Mercosur country should have a multiplicity of memberships. Mercosur must have joint international policies, an agreement on moderate protection from third parties and above all must have agreements with other trade blocs.”
China has been active in the pursuit of diplomatic ties. Is has formed the China-CELAC Forum, which brings China and the Community of Latin America and Caribbean States (LAC) together under a formal banner. The South American members of this include Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Paraguay, and Venezuela.
The China-CELAC Forum serves as a platform for dialogue and agenda-setting between international and regional leaders. It has become a Chinese priority as China pushes for deeper influence within the region and is considered by some to reduce the significant influence of the US on the politics and economics of Latin America.
China’s influence on the region has been accelerating fast. The value of trade between Latin America and China increased 22-fold between 2000 and 2013. China is LAC’s second largest source of imports, and the third largest market for LAC exports. China has recognized this in the second Chinese Policy Paper on LAC (2016), a cooperation trade network and investment review that leans towards the identification of energy and resources with new targets including the now Belt and Road construction, agriculture, manufacturing, and scientific and technological innovation. This fits in with countries such as Bolivia, Chile, and Peru, as their economic profiles are built on national mineral wealth leading their domestic and foreign policies.
That said, discussions are taking place between China and the Mercosur nations over upgrading trade relationships to free trade status. However, China does not seem to be in much of a hurry, preferring to want to arrange this on a “step by step” basis according to comments made by China’s Foreign Minister Wang Yi when meeting with the Uruguayan Foreign Minister Nin Ninova at the beginning of last year. Here, China’s “step by step” approach is probably an allusion to “one at a time” rather than a full China-Mercosur FTA. However, the Mercosur bloc is significant, being the world’s fourth largest with a population of 260 million and accounting for 75 percent of South America’s GDP. China’s trade with Mercosur totaled about US$107 billion in 2018.
China has already stated its intentions to double bilateral trade with South America to US$500 billion by 2025 and to increase total investment into the region to US$250 billion. The addition of Argentina to the Belt & Road Initiative is a further step forward towards that goal.
- Developing Global Free Trade: Linking China’s BRI with Mercosur, South America
- China’s Belt & Road Initiative And South America
Silk Road Briefing is written by Dezan Shira & Associates. The firm provides strategic analysis, legal, tax and operational advisory services across Eurasia and has done since 1992. We maintain 28 offices throughout the region and assist foreign governments and MNC’s develop regional strategies in addition to foreign investment advice for investors throughout Asia. Please contact us at firstname.lastname@example.org or visit us at www.dezshira.com