China and Commodities: The Americas Do Not Want to Be the Next Africa

Posted on January 13, 2011

These are the latest headlines compliments of Wikileaks:

Not much is known about Xi Jinping, the expected next president of China, but according to a newly public WikiLeaks cable, Xi has been complaining to America’s neighbors about “well fed foreigners” pointing fingers at China. [foreignpolicy]

China, our esteemed creditor visited Mexico taking the US to task and  hoping that our neglect of Central and South America will endear them to the area as they make overtures to separate those countries from their commodities.  But the  targeted countries are more than aware of China in Africa and do not want the same outcome:

“We don’t want to be China’s next Africa,” a Mexican official told a U.S. embassy economics officer, according to the cable, referring to the oft-cited criticism that China has pursued a strategy of seizing the continent’s huge natural resources while dumping cheap industrial and manufactured products into foreign markets. “We need to own our country’s development.”

Two other recently released WikiLeaks cables also detailed China’s charm offensive in Latin America and skepticism on that continent of Chinese motives and practices.

“China’s strategy in Latin America is clear: it wants to ‘control the supply of commodities,’ said the Brazilian consul general in Shanghai,” according to one cable sent to Washington from the U.S. Shanghai consulate in April 2009.

“Colombia is wary of Chinese motives and what it sees as lax Chinese environmental and labor standards. However, Colombia needs new economic partners, particularly given the lack of progress on a U.S.-Colombia Free Trade agreement (FTA),” said another cable, conveying the views of Colombian diplomats as reported by the U.S. embassy in Beijing.

The cables paint a picture of an aggressive Chinese effort to insert state-owned companies into America’s backyard while Latin American countries have few options but to go along in the face of American neglect.

Actually, China has been successful at purchasing commodities in the US. …[O]ne of its most powerful state-owned companies, is spending $2.2 billion for shale acreage in the U.S. owned by Chesapeake Energy (CHK) and $3.1 for 50% of a unit of Argentina’s Bridas Energy. [Barrons] If it can’t buy the business, it buys the underlying commodity.

There is so much important information on China’s economic endgame in the Barrons article cited above that I will simply refer you to it.  You may be surprised to learn that the Chinese will keep us afloat as a market until their own country becomes a market and then….  Be sure to read this article!