FOREIGN POLICY: WHAT NEXT?

Regional integration high up the agenda for next president

Next Sunday’s presidential elections will trigger the curiosity of a significant number of foreign observers. They include journalists (both correspondents and special envoys), diplomats posted in Buenos Aires and businesspeople, mainly from the financial world but also from other sectors of the economy.

Their interest is not merely academic. Foreign policy decisions impose themselves as a significant segment of the next government’s agenda, and they include a wide range of issues with many different short-, medium- and long-term implications. Negotiations with the holdouts/“vultures” have long ago ceased to be merely financial affairs. They now have serious political implications. Regional integration —and more specifically the Mercosur — is another item waiting for a policy which materializes into action. And there is a long list of other items, including relations with Russia and China and their impact on Argentina’s links with its more traditional partners. They all raise questions about the “next steps.”

Many of those questions can be linked to the need to assess the influence of the Peronist tradition in Argentine foreign policy. It is indistinct if Juan Domingo Perón’s heirs are in government or in opposition. In the latter case, they will have enough nuisance power so as to make the government’s life difficult. And, in any case, two of the three leading candidates, Daniel Scioli and Sergio Massa, have very strong links to Peronism. As for the third one, Mauricio Macri, his party has a not insignificant Peronist component. Moreover, two of the most relevant PRO foreign policy spokespeople — Diego Guelar and Fulvio Pompeo — come from the Peronist camp.

But defining Peronist foreign policies are far from easy. Since the return of democracy, some Argentine Peronists, like Carlos Menem, have aligned the country with the United States, without any doubts or regrets. Menem went as far as contributing to US military actions in the Middle East, sending a war ship to Iraq. Cristina Fernández de Kirchner went the other way. She made a point of entering, with quite significant fanfare, a strategic alliance with Russia’s Vladimir Putin who — despite the fact that the Cold War ended long ago — is definitely not on Washington’s list of favourite leaders.

Looking back into the origins of Peronism, the father of the creature was a true — and very able — pragmatist. His “Third Position” narrative — “We are far from both imperialisms” (sic) — was normally combined with moves which placed Argentina alternately near one or the other, according to the needs of the moment. During his first two presidencies he rejected US pressure to join in fighting the Korean war, whilst, at the same time, accepting Washington’s continental defence policies, by adhering to the Act of Chapultepec in 1945 and the Inter-American Treaty of Reciprocal Assistance (Rio Treaty) in 1947.

Perón’s third — and very short — presidency was also a display of pragmatism in action. The foreign policy programme published on 12 October 1973, the day he was sworn in, talks of “adapting to the international situation, favouring political realism rather than ideology.”

However, neither Menem nor CFK seemed to share Perón’s pragmatism.

A certain consensus

There seems to be a certain consensus on some foreign policy issues, amongst the three main candidates. They have all made noises about negotiating with the holdout/“vultures.” Likewise, all three have spoken about rebuilding relations with traditional partners — in other words, the European Union (EU) and the US.

In Scioli’s case the noises are less audible and combined with signs adhering to the more Kirchnerite policies. These signs have included a short visit to Cuba, as well as images showing himself in the company of interlocutors like Bolivia’s Evo Morales, Uruguay’s “Pepe” Mujica and Brazil’s Dilma Rouseff .

It remains to be seen — if and when Scioli becomes president — if such gestures were targeted at a general audience or were merely a signal to the diehard Cristina supporters who still, albeit more silently, accuse him of being a right-winger in disguise. Which brings up the question of CFK and her close followers’ reactions to the different foreign policy changes which will inevitably start to emerge under a new president.

One can reasonably expect that, if the new policies are implemented by Macri or Massa, they will meet with opposition from CFK.

But what will happen in the case of a Scioli presidency moving away from existing foreign policy? How far will CFK go in her opposition? And how many of the more traditional Justicialist Party (PJ) leaders will align with her?

@andresfederman

CREDITS: BUENOS AIRES HERALD

THE TRUMP CARD

Argentina’s relationship with the US moves into spotlight

Once again, Argentina and the United States are embroiled in deep controversy, one which still seems to be escalating. The issue is serious enough so as to have prompted President Cristina Fernández de Kirchner to bring it up at the recent United Nations General Assembly. She did, however, avoid naming names. But it was obvious that the president was referring to the missing former spymaster, Antonio Stiuso, who is rumoured to have taken refuge in the US.

CFK’s supporters had the chance — once again — to celebrate the president’s anti-imperialist courage. Her detractors though were quick to point out that it is not “the done thing,”discussing these kinds of issues in a forum like the UN.

Thrilling as spy adventures may be, the importance of each specific case should not be overstated. There are the obvious exceptions. The famous Cambridge spy ring led by Kim Philby is a case in point. The tragic case of the Rosenbergs who were executed in the United States during the Cold War is another. But otherwise, governments normally prefer to deal with espionage issues relatively quietly. Spies are, after all, a fact of life. As is dealing with adversaries, ideally through quiet negotiations rather than noisy scandals.

CFK’s public criticism of US President Barack Obama is not new and in the past, has taken in a variety of issues. Earlier this year, on April 11, at the Summit of the Americas which took place in Panama City, she ridiculed Obama’s decision to declare Venezuela a national security threat to the US. And a few days later, at the opening of a Honda manufacturing facility, she picked up on a comment from the US president — regarding the fact that he preferred looking toward the future rather than back at the past, at history — to remind him about the nuclear bombs dropped by the US over Hiroshima and Nagasaki toward the end of World War II.

Government supporters feel comfortable with these unilateral skirmishes — the US very rarely gets involved in replying — and celebrate the anti-imperialistic stance and rhetoric of their leader. Opponents feel equally comfortable criticizing the government and complaining about the shift of alliances away from the US and the European Union to Russia and China.

Interestingly enough, a recent opinion survey about the confidence that the people from different countries have in the president of the US seems to reflect this. It was carried out the by US-based Pew Research Center and it covered 40 countries. The key question was: “Tell me how much confidence you have in each leader to do the right thing regarding world affairs.” The responses included “a lot of confidence,” “some confidence,” “not too much confidence,” and “no confidence at all.” But the report conflates the four options to two. “Confidence” combines the answers of those who chose “a lot of confidence” and “some confidence,” while “no confidence” tallies up the totals of “not too much confidence” and “no confidence at all.”

Only 40 percent of Argentines were “confident.” Six countries returned lower levels of trust: Lebanon (36 percent) , Venezuela (26 percent), the Palestinian Territories (15 percent), Pakistan (14 percent), Jordan (14 percent) and Russia (11 percent). By contrast, 94 percent of people in the Philippines trusted the US president, as did 88 percent of South Koreans and 83 percent of French citizens.

One thing that CFK’s critics need to accept is that either she is very good at detecting the Argentine mood, or — alternatively — she is a very persuasive leader.

In 2008, at the end of former US president George W. Bush’s time in the White House, a similar Pew survey showed that only seven percent of Argentines trusted him.

But, when Obama won the November elections, CFK’s congratulatory letter said, amongst other welcoming phrases: “The period that starts today in your country, above all else, is a great milestone in one of the most impassioned odysseys in history, the struggle against discrimination and for equality of opportunities.”

At the end of 2009, Obama’s presidency was welcomed — 60 percent of Argentines said they had confidence in the US leader.

But things change.

Four years later, in September, 2013, after a G20 meeting, CFK shot from the hip, accusing Obama of practising “fictional multilateralism.” Obama had failed the Argentine president by refusing to support her position on the holdouts/“vulture funds.”

In addition he refused to place the question of military action against Syria in the hands of the UN. Trust in the US president reflected this — only 44 percent of Argentines then said they trusted him.

In a few weeks time, Argentina will have a new president. And exactly one year later, in November, 2016, the US will hold its own presidential election. However, though the confrontations between CFK and Obama have made things difficult, there is no guarantee that the change of presidents will make things better.

Many pundits are convinced that the time for the Republicans has arrived. And that the US is entering a new conservative mood. True, this might not be a problem. In fact, some of the candidates with good chances in the Argentine election could be on the same ideological wavelength as many Republicans.

But in terms of candidacies, we are not talking about “many Republicans.” One of the candidates is ahead of all the rest in eight out of nine opinion polls within the GOP.

His name is Donald Trump and he is famous because it is said that his personal wealth will allow him to finance his campaign without the need for donors. Unfortunately, his other claim to fame is his determination to expel hundreds of thousands of Mexican immigrants back home.

The foreign affairs advisers of the next Argentine president would be well advised to start thinking hard and fast about how to manage Donald Trump sitting in the White House.

One year goes by very quickly.

@andresfederman

CREDITS: BUENOS AIRES HERALD

SOFT POWER AT WORK

Pope Francis illustrates how to approach UN resolutions

On September 9, the United Nations General Assembly (UNGA) voted in favour of an Argentine initiative establishing basic principles to be followed in cases of debt restructuring. The principles — nine in total — are designed to protect debtor countries in default from illegitimate pressures or reprisals from creditors.

Of the 183 votes cast at UNGA, 135 nations voted in favour, 42 abstained and six said nay.

The government was ecstatic. President Cristina Fernández de Kirchner was quoted by this newspaper saying: “After the vultures preyed on Argentina and tried to prey on the world, an absolute majority of countries ended up supporting these basic principles.”

CFK is not alone in her views.

Last Friday, Pope Francis also referred to the IMF and similar agencies. He told the UNGA that the “international financial agencies should care for the sustainable development of countries and should ensure that they are not subjected to oppressive lending systems which, far from promoting progress, subject people to mechanisms that generate greater poverty, exclusion and dependence.”

The bad news is that, despite the majority vote, the UNGA resolutions are not binding. And the six countries that voted against the “principles” include the US, the UK, Germany and Japan. In other words, the world’s key financial markets, which are unlikely to give in to the moral pressure of a non-binding list of principles. As the pope told the UNGA, referring to multilateral organizations: “We must avoid every temptation to fall into a declarationist nominalism which would assuage our consciences. We need to ensure that our institutions are truly effective.”

The UNGA vote does not guarantee the “true effectiveness” demanded by His Holiness, but it might be a step in the right direction.

True, neither the pope, let alone Argentina, have the political, military or financial power to enforce the UNGA-approved principles. But they can exercise their “soft power,” which is the ability of a country — or, in this case, the Vatican — to persuade others to do what it wants without force or coercion, be it (again, in this case) financial or political. In fact, soft power, a given for important states, is a must for those nations lacking such attributes.

Pope Francis’ visit to the US was a perfect example of soft power at work. A case in point was his defence of immigration, delivered to a gathering of some 40,000 Latinos, which took place in Philadelphia. It was a strong message from the spiritual leader of 1.2 billion Roman Catholics, that is, 17 percent of the world’s population. Seventy million of them live — and vote — in the US. These figures should encourage Donald Trump and his followers to think twice about building walls at the borders and expelling millions of people.

Soft power is about credibility, legitimacy and picking the right fights. In the US, His Holiness got full marks on these three items.

Argentina has a sound case to put forward, based on its own experience, one that underscores its legitimacy and credibility. Its very advocacy for a solution to an issue that affects — or that may affect — many other countries is definitely a legitimate battle in which to engage.

While it’s true the government presented the UNGA victory to the Argentine people in a manner that was overly enthusiastic, and although it exaggerated the real effects of the vote — perhaps linked to enthusiasm or the needs of an election campaign — such a position is more than compensated for with the good work involved in actually securing the UNGA vote. It surely took long hours of research and legwork, as well as similarly long hours of quiet negotiating and lobbying.

The government invested a good deal of resources to get to this point. Continuity is the necessary condition to validate such an investment. If the nine principles are going to be something more than a mere statement, both the Economy and the Foreign ministries must keep working and negotiating. On the one hand, there is the need to strengthen the commitment of the nations that voted in favour of the principles. Additionally, it is necessary to use the UNGA vote as leverage to start negotiating with the four countries that voted against the principles. Some lobbying by means of lectures and public discussions, as well as press action, could prove to be quite useful.

The main bone of contention with the four negative votes is that these countries argue that the international financial institutions, and not the UN, are adequate agents with which to negotiate the issue of sovereign debt. It is indispensable to convince them that times are changing.

Given the imbalance of financial power in their favour, persuasion and negotiation seem to be a more realistic option than a shouting match. Pope Francis’ actions and speeches in his recent visit to the US seem to present the model that should be followed.

But before even considering any of this, it is important to note that on December 10 there will be a change of government in Argentina. It would be important for CFK’ successor — especially if it is not Daniel Scioli — to commit to continuity on this issue. If not, all that was done so far will have been wasted.

@andresfederman

CREDITS: BUENOS AIRES HERALD

BRICS OR BRICSA?

CFK’s desire to join the group, in vain or in vanity?

At an event which took place on September 10, President Cristina Fernández de Kirchner voiced — once again — her hopes that Argentina can join Brazil, Russia, India, China and South Africa as part of the BRICS. This rather loose association of emerging countries triggers — among many Kirchnerites — a vision of a strong alliance that will challenge the existing international economic order.

A further proof of the importance that CFK assigns to joining the BRICS, is that she made a public display of handing the job of advocating for Argentina’s admittance into the group to former Brazilian president Luiz Inácio Lula da Silva, who was visiting the country and present at last week’s event. In her speech, CFK told Lula that she hoped that BRICS acronym would turn into BRICSA, marking Argentina’s membership of the club.

However, although it might be seen as an exercise in nitpicking, it is worth noting some objections to CFK’s initiative.

BRICSA NO WAY

Last year, Russia invited the Argentine president to attend the BRICS’ summit that took place in Brazil. This triggered the expectation that Argentina would be invited to join the group. But it turned out that it was a mere invitation to visit the club and not a membership offer. At the time, Putin’s initiative seemed to have created some discomfort amongst Russia’s partners (Brazil?) because — in the end — the guest list was hastily expanded to include other UNASUR guests. In addition, CFK did not have the satisfaction of seeing the issue of holdout/vulture funds, which was the main focus of her speech, reflected in the meeting’s closing statement. Many saw this as a bit of a dismissive gesture in terms of summit etiquette.

Last year's speculations (illusions?) about a possible invitation to Argentina to join the club were politely but clearly rejected by several BRICS representatives, including Putin himself. The message of this year’s summit was quite similar.

The Russian Deputy Foreign Minister Sergei Ryabkov, told the press that “BRICS is not an organization, it is a collection of countries that are united by national interests. We think that the current format is an optimal one … After South Africa became participating state, the leaders decided to declare a moratorium for accepting new members.” True, he did include in his statement the line “we do not exclude anything. What will happen should be driven by national interest.” However, this last phrase seems to be an expression of diplomatic politeness more than a statement about the near future.

In fact, the original BRICS were born as BRIC, because they did not include South Africa. The four founding members, Brazil, Russia, India and China have a number of things in common. Possibly the most relevant ones are these countries’ large populations and the fact that — together — they account for a significant proportion of the world’s GDP. But, say many commentators, there was something missing. Only four of the five continents were represented. Africa was absent. And this encouraged the inclusion of South Africa in 2010.

South Africa — like Argentina — is not in the big league in terms of GDP or population. Its membership derived from the political need of having all five continents represented.

CFK’s illusions

Unfortunately for Argentina, the Latin American place is already covered by Brazil. Accepting Argentina into the club would force the BRICS to include four more members, one from each non-Latin American continent. Whilst four big partners plus a South African “smaller brother” make the group relatively easy to manage, ten members of different size in terms of both GDP and population would complicate — and perhaps paralyze — the group. This is perhaps the main reason that thwarts CFK’s illusions.

But this is not the only reason that makes the president’s push rather useless and untimely. There is also a local politics angle.

The president is almost at the end of her mandate. And joining the BRICS or, for that matter, any other international group or organization seems to be a decision that should be left for the next president to make. True, Daniel Scioli has a very good chance to be elected as Cristina’s successor and he is the FPV candidate, which she blessed. But, even if Scioli is totally in agreement with her views, she is undermining his future presidential authority by making commitments in his name.

If joining the BRICS is such an FPV priority, then it would have been a better idea to allow Scioli to voice the request to Lula, especially because he happened to be present at the event. In fact it might have provided Scioli with a good opportunity to publicize what he plans to do when he becomes president. Moreover, this might have offered him a competitive advantage given the fact that clear definitions are conspicuously absent from the messages of the three main presidential

candidates.

CREDITS: BUENOS AIRES HERALD

PUZZLES FOR THE NEWCOMER

Relationships will be far from simple and straightforward for the new administration

Frequently, foreign policy is not a key agenda issue at election time, and the forthcoming presidential elections are no exception. However, foreign policy advisers to the three key candidates have offered some clues in several talks and press interviews. There seems to be a confluence of opinion with regard to rapprochement with the United States (US) and the European Union (EU). However, there also seems to be agreement among the advisers about protecting current relations with China as well as Russia.

And while it’s true that there are differences in the level of priority that each candidate assigns to these objectives, in all cases they are at the top of their agendas. And they all ascribe great importance to the relationship with Brazil in particular.

This is very good news, especially given the politicians’ harsh controversies about the national agenda, partly due to the needs of political campaigning but mainly reflecting the profound rift in Argentina’s society. Continuity, predictability and rational players are always a welcome asset in foreign policy.

The bad news for those that will sit inside the Casa Rosada and the Palacio San Martín after 10 December, is that existing and, perhaps, future close relations with the above named countries will be far from simple or straightforward.

Close to home, Brazil, our next door neighbour, is stomaching an explosive mix. The country’s very poor economic performance of late, which is widening its deficit gap, combined with the saga of the corruption scandals — in which a number of government officials and lawmakers are involved — has resulted in a dramatic drop in the president’s public-approval rating. She is also weathering strong political pressures from different — and often opposing — sectors ranging from the São Paulo industrialist lobby, to citizens indignant with corruption, in addition to the social pressures derived from increasing unemployment.

It is in this context that Argentina has to reach agreements on bilateral trade, as well as the way in which Buenos Aires and Brasilia will go about negotiating on the EU and Mercosur fronts. Whilst everybody agrees that both foreign ministries have very adept officials, the fact is that both governments might be forced, in the near future, to prioritize their own internal interlocutors at the time of negotiating with each other. This sort of scenario can be very frustrating for all parties involved.

The China question

Overseas, China, has recently been in the news because of the weakness of its financial markets. But this is only part of the problem, and perhaps the least significant part. The way in which China commemorated the recent Victory Day holiday (against the Japanese), with a very impressive military parade, is sending out the clear signal that — despite the headlines in the global press — its aspirations of being a major power remain intact. Moreover, some observers have voiced suspicions about the possibility that the excessive fall of the Chinese currency was self-inflicted and perhaps a deliberate move aimed at showing off its ability to be a financial nuisance.

As I’ve stated previously in this column, China’s real objective is to increase pressure on the IMF in order for the Yuan to be admitted as part of that organization’s basket of currencies. The SDR, which stands for Special Drawing Rights, now includes the US dollar, the Euro, the Swiss Franc, the Japanese Yen and the Pound Sterling. The IMF says that it will only accept China into that club when the Yuan is traded on the free market, without any government intervention. This looks unlikely to happen very soon.

In addition, China continues to confront the US through quite unsubtle gestures. The guest list for the Victory Day military parade was a roll-call of heads of state that are unfriendly toward the US. Predictably, Russia’s Vladimir Putin and Venezuela’s Nicolás Maduro were quite prominent guests. They are also part of this country’s current circle of friends. Less prominent was Argentina’s Amado Boudou. Please note that it is up to the reader to decipher whatever message may be gleaned from this last reference.

Another Chinese gesture is the recent opening of a Yuan clearing bank in South Africa, thus giving Beijing a somewhat privileged position. This happens at the same time when Nelson Mandela’s original party, the African National Congress (ANC), has increased the volume of its anti-US rhetoric. Next month, the ANC is expected to issue a foreign policy statement blaming Washington for about everything which was and is going wrong in the world, from the Tiananmen massacre in Beijing 26 years ago to the current conflict involving Russia in Kiev.

Argentina’s foreign policy after 10 December will be to pursue a double objective of rapprochement with the West and maintaining and strengthening ties with the East, all set against this very complicated background. While relations with Brazil do not imply geopolitical choices between two sides, current and planned ties with the different players definitely does.

Optimists will call this scenario a challenge for the new administration. Pessimists (or realists?) will call it bad news. Make your choice.

CREDITS: BUENOS AIRES HERALD

RISKY PARTNERS

Argentina faces a problematic last quarter as it must keep an eye on two giant troublemakers

Argentina has always been a country in which power is widely concentrated in the hands of the president. And some would argue that Néstor and especially Cristina Fernández de Kirchner have taken such concentration to the extreme.

Another interesting point about the current president is that — less than three months away from ending her presidential term — she is far from losing her influence. She has not become the weak, lame-duck president that those in the opposition had predicted and hoped for. Fernández de Kirchner still continues to hold the political initiative and it is quite evident that her ministers and deputies seem quite reluctant to take the initiative independently.

As for civil servants, they reflect this too, and depend too much on the orders of their political masters. Those enamoured with this system will tell you that it is the only way to make sure that the decisions taken respect the wishes of the voters, or — more dramatically — “the people.” But they are wrong.

The job of those who are voted into office and their politically appointed ministers is to set the guidelines and objectives for public policies, in line with their views which, in theory, are legitimized by elections. Then, their civil servants’ job is to implement them.

It is not a civil servant’s job to make foreign policy, but it is very much their responsibility to get things done, monitor relationships and make sure that existing policies are in good shape, and to sound the alarm when something goes wrong. But right now, either the alarms are not sounding accurately or nobody seems to be listening to them.

Lacking in vigilance?

Currently, criticism about a lack of vigilance in foreign policy will be immediately rebuked by pointing out to the government’s anti holdouts/“vultures” campaign at the United Nations or the battle against New York City judge Thomas Griesa. It should be noted that the battle at the UN — if won — would be a feather in Argentina’s international hat, but too late for this country. Griesa has already happened, and the situation is now more of a legal quagmire set for the next government to take over than a big target for the MFA’s efforts.

Meanwhile, although this writer hopes to be proven wrong, there are other clear and present dangers on the foreign policy front for Argentina, with the compliments of our main international partners.

One of them is Brazil. Its recent devaluations are likely to have a negative impact on Argentina, while there is also a strong pro-devaluation industrial lobby in Brazil which does not seem too friendly toward Argentina and would clearly prefer to deal with the European Union (EU) directly, leaving Argentina to fend for itself. The lobbying toward Dilma Rouseff is very serious, on account of her current political weakness and very low approval ratings. The combination of negative opinion polls and a precarious economy is likely to undermine any possible pro-Mercosur political determination in Dilma’s mind. That is, if there is any left. Especially because sectors in Uruguay and Paraguay seem to agree with Sao Paolo’s objectives, which are far from committed to Argentina’s views.

Chinese aspirations

And then there is China’s devaluations and its effects on Argentina. The immediate consequence will be that Chinese imports will gain competitiviness, so the prices of Argentine commodities will drop. However, perhaps these are not the most serious problems. CFK has — in a quite ostensive way — aligned Argentina with China as a “strategic partner,” which led to long-term contracts and commitments, not only in terms of trade or financial aid. But many international observers are now suggesting that the relevance of the recent devaluations is more political than financial.

It so happens that China occupies the second-highest position in terms of world trade, but its currency, the yuan, occupies a meagre ninth position in terms of internationally traded currencies, something that does not make the Chinese Government happy. Beijing seems determined to change that, in order to receive the prestige of being an internationally traded currency, on a par with the US dollar, the euro, the Swiss franc the Japanese yen or pound sterling. These are the five currencies included in the “basket” which makes up the IMF’s foreign exchange reserve assets, the Special Drawing Rights. China wants to join the prestigious club. The International Monetary Fund (IMF) though has closed the door on account of the fact that the yuan is not traded in free markets. As a result, say some, China might have attempted with is three devaluations in a row to show its capacity for damage to the world.

A currency war? We should hope not. It does not seem prudent to be the strategic partner of a nation at war — even if only financially — with the IMF and the big capitalist countries.

@andresfederman

CREDITS: BUENOS AIRES HERALD

CHINESE STRINGS

Whatever happens at the polls, some ties won’t break

In the last 12 years, first Néstor Kirchner and then Cristina Fernández de Kirchner have introduced drastic changes in Argentina’s foreign policy alignments.

It is quite noticeable how China and Russia have replaced the US and Europe as Argentina’s non-regional partners of choice — and the way in which this country has strengthened its ties with countries like Ecuador and Venezuela. All this is reflected in the formal political statements, in the narrative and — quite clearly — in Argentina’s trade, investment and financial relations.

There is a general agreement on the fact that China is not longer a communist state. But there is also a consensus that it would be equally wrong to say it is a capitalist state comparable to the US or the EU countries. It is also quite clear that, even if the cold war is something of the past, China — as well as, but not always together with Russia — competes in geopolitical terms with the US and its European partners. And that such state of affairs is very noticeable in Latin America.

China’s LatAm role

One of the most significant elements in this scenario is the new role currently played by Beijing in the region’s finances. In addition to its financial involvement in Brazil, China is nowadays the largest source of funding for Venezuela, Ecuador, and Argentina. And Chinese developmental banks’ investments in Latin America are larger than those of the World Bank and the Inter-American Development Bank.

Last week, Venezuela’s government triumphantly announced that it had obtained a new loan from the Chinese government. It was possibly the only piece of good news for Caracas, at a time when the country is facing a new crisis of violent demonstrations and lootings. However, the news on the loan was not too surprising — especially because the Chinese lender expects to be paid back in oil and not in cash.

Commodities exchange

A good percentage of the Chinese financing in Latin America is linked directly or indirectly to other deals that have to do with commodities — oil from Venezuela, agricultural exports from Argentina — or, as it happens like in Ecuador, with projects in which there is a significant involvement of Chinese companies.

Consequently, countries like Venezuela, Ecuador or Argentina are likely to have an easier life at the time of negotiating finances. Which, when combined with trade or investment, offer more room for flexibility. The more elements there are on the negotiating table, the easier it is to exchange concessions. Much more so if politics are part of the equation.

Financial negotiations with China often have an even more important advantage for these three Latin American countries, which share unorthodox economic policies that are often anathema for bankers. The latter’s priority is profit, and, therefore, they need to satisfy their boards, shareholders, auditors and regulatory authorities. By contrast, state negotiators are held accountable by political masters and their objectives. And these will often prioritize the political over the financial gains involved in a loan or a joint venture.

Future foreign policy

This has worked well for both China and Argentina during the Kirchners’ presidencies. So the question is what will happen after December 10.

Opinion polls suggest that the only two real competitors are the FPV’s Daniel Scioli or — through the intricacies of a two-round election — PRO’s Mauricio Macri.

In the last few months, Scioli has kept busy making clear his alignment with CFK’s policies. He was so successful that the purists within FPV who rejected him as a right-of-centre infiltrator shifted their narrative to a warm support. The fact that his vice-presidential candidate is Carlos Zannini —who is considered to be one of the government’s key strategists — has likely helped.

Scioli’s competitor Mauricio Macri has also been busy explaining that he agrees with, and will not drastically change, some of the basic tenets of this government’s policies. He mentioned social benefits and nationalizations. But he did not include foreign policy in that list.

In any case, drastic changes in Argentina’s international alignments would not be easy. True, it is relatively easy to change the rhetoric, or the statements in international organizations which a nation-state endorses. It is less easy to move away from financial commitments or trade patterns.

Argentina would need to find new lenders and new clients for its exports. None of this happens at short notice. So, whatever happens in the presidential election, Argentina’s ties with China are likely to remain strong for the foreseeable future.

@andresfederman

CREDITS: BUENOS AIRES HERALD