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China's Big Money Diplomacy
On Latin American Tour, Chinese Premier Makes Major Investments in Brazil

Chinese Premier Li Keqiang is in Brazil today as part of his tour of Latin America, signing billions of dollars worth of trade and development deals. The latest reports indicate that it won’t be the astronomical $50 plus billion some had predicted, but the deals represent a lot of money for an economy that has been teetering on the brink as investment falls and a political crisis creates uncertainty and instability. Reuters reports:

While China has failed to deliver on many past investment promises, Brazilian government officials said they are hoping for agreements worth 53 billion reais ($17.6 billion) with the Chinese.

However, China’s ambassador to Brazil, Li Jinzhang, told Brazilian newspaper Valor Economico the deals to be inked during the premier’s visit would total about 26 billion reais.

An injection of capital from China could not come at a better time for Brazil, which is sliding into recession following the end of a commodity boom that was fueled by voracious Chinese demand for its main exports, iron ore and soybeans.

Chinese companies with technology and experience are ready to build factories in Brazil to produce materials and equipment needed for large-scale infrastructure projects, premier Li said in a column published on Monday by Valor Economico.

“China wants to get involved in Brazil’s large plans to build freight railroads, electricity and telecommunications networks,” wrote the Chinese premier, who arrived on Monday night before beginning his official round of meetings on Tuesday.

As we wrote last month, China’s enormous, rapid-fire foreign investments have been grabbing headlines around the world lately. First Xi visited Pakistan to sign more than $46 billion in deals with Islamabad, concurrent with investments in a host of East African nations, as part of the One Belt, One Road project. Then on April 30, Chinese and Venezuelan state media announced that China was investing $73 billion in Venezuelan housing (it’s no secret what Beijing might want from the crumbling country with the world’s largest oil reserves). And now we have the lucrative deals with Brazil, which are sorely needed given the precarious situation the Brazilian economy finds itself in. Don’t be surprised to see more big numbers in the news as Li continues his trip with visits to Columbia, Peru, and Chile.

Using its massive economic might to influence the developing world is a key part of China’s quest to become a global superpower, and though such investments come with considerable risks (see the ill-starred Nicaragua canal project), Beijing is buying influence at least as much as it is investing in projects expected to pay off. Though some might be alarmed that Beijing is offering handouts practically in our back yard, we say it has certain advantages. Let China reap the rewards, and the headaches, of playing Mr. Monopoly to the world—it ties an aspiring revisionist power more closely to an international monetary system that the U.S. ultimately controls.

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  • Kevin

    Is China buying influence on the cheap or just investing into a bear market in commodities?

    I’m not so sanguine about China’s investments (assuming they work out). Rather than reinforcing the world trading system they could be setting up a mercantilistic trading system with local client elites running these countries that pulls them out of the global economy. Of course, if they don’t work out they are just squandering a huge pile of cash.

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