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Risky Business
China Expands Footprint in Cuba

As Beijing’s bets in Venezuela go south, China appears to be stepping up its investments and business dealings in Cuba, notes Reuters:

From buses and trucks to a $500 million golf resort, China is deepening its business footprint in Cuba, helping the fellow Communist-run state survive a crisis in oil-benefactor Venezuela and insulate against a possible rollback of U.S. detente.

Cuban imports from China reached a record $1.9 billion in 2015, nearly 60 percent above the annual average of the previous decade, and were at $1.8 billion in 2016 as the flow of oil and cash slowed from Venezuela due to economic and political turmoil in the South American country. […]

A deterioration in U.S.-China relations under Trump could also lead Beijing to dig in deeper in Cuba, some analysts say.

“If and when the Trump administration increases pressure on China … China may decide to double down on its expanding footprint in the United States’ neighborhood,” said Ted Piccone, a Latin America analyst at the Brookings Institution think tank.

Reuters makes it sound like the Chinese are playing a brilliant game of chess in the United States’ back yard, but the reality is less glamorous than that. Chinese investment in Cuba is not a new development, for one thing: China has been Cuba’s top creditor and second largest trading partner for years. And to the extent that China’s footprint in Cuba is growing, this is in part a reflection of Beijing’s failures in Venezuela. After extending $50 billion in cushy loans to Caracas over a decade, Beijing has seen those bets go bad as sinking oil prices, socialist mismanagement, and political turmoil have left Venezuela unable to make good on its obligations. As Venezuela struggles to stay afloat and falls further behind on oil deliveries, Beijing is naturally prioritizing other Latin American countries for investment, while seeking to gain an edge in Cuba by capitalizing on Havana’s own fall-off in trade with Caracas.

China’s uptick in investment in Cuba is an opportunistic move, in other words, and while the trend bears watching, Beijing’s track record should give pause about its ability to place winning bets. As we have noted before, China’s cushy, politically motivated deals in Latin America and Africa have backfired repeatedly, often causing more headaches for the Chinese leadership than they are worth. And by offering soft credit to a poorly developed socialist country as a political ploy, China could be repeating the same mistakes that got it in trouble in Venezuela.

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  • Pete

    China and Cuba — two losers joining together.

    But fear not. Soon China will not have the money or resources to squander in places like Cuba.

  • ——————————

    Another attempt at a growl by the paper tiger…but it is just another purr, as usual….

  • Fat_Man

    If we blockaded Cuba as part of an effort to relieve it of 60 years of Communist oppression, the Chinese couldn’t do much about it.

  • LarryD

    “Soft credit”, which I take to mean credit on easier terms than the risk-analysis justifies, will always have a high failure rate. Risk-analysis has a purpose, after all, and a lender ignores it at their peril.

  • Jacksonian_Libertarian

    China doesn’t have many choices, if it plans to challenge America, it has to take advantage of every potential foreign influence. It’s still screwed logistically. A strategic blockade would permanently destroy the 40% of China’s economy dependent on foreign trade. There’s nothing China makes that can’t be made elsewhere (America: secure energy resources for decades) with much less risk of a complete loss of the investment. In the time since the fall of the Iron Curtain, China hasn’t spawned a single world class brand name like: Sony, Toyota, Kia, Samsung, Apple, Intel, Google, Microsoft, etc…

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