Recently, with global turmoil, some countries in South America, known to be "America's backyard", have experienced dramatic changes. These changes are not only reflected in the economic slowdown or decline, but also in the social turmoil and the changes in the political structure of these South American countries. For instance, Venezuela's political and economic crisis has intensified and deteriorated. In Brazil, the right-wing Jair Bolsonaro, dubbed as Trump of the Tropics, was elected as the President. All these shows that South American countries are accelerating their changes under the tide of counter-globalization, and their politics, economy and society are re-integrating and re-adjusting.
The latest change in Venezuela, which is deeply mired in the political and economic crisis, is that the United States, Brazil and other countries refused to recognize the legitimacy of the Nicolás Maduro government under the pretext that the election was not free and unfair. On January 23, the president of the National Assembly Juan Guaido was sworn in as the Venezuela's interim president, which was promptly recognized by countries such as the United States. Maduro then announced the severance of diplomatic relations with the United States. As the Venezuelan Supreme Court reaffirmed that the practice of the entire conference was unconstitutional, the Venezuelan Defense Minister stated that the military did not recognize Guaido as the country's president. How will the next situation in Venezuela develop? It depends on whether Maduro can rely on the military or other security forces to consolidate his regime. However, it should be pointed out that the political crisis in Venezuela has been significantly affected by international intervention. After the United States, Brazil, Colombia, Chile, Peru, Ecuador, Argentina, Paraguay, Canada and the Organization of American States (OAS) all claimed to recognize Guaido to serve as the "interim president" of Venezuela. Mexico, Bolivia and Cuba, which belong to the left-wing camp, expressed their support for the Maduro regime. It can be said that Venezuela has become the focus of the two major political forces in South America.
Looking at the geopolitics of South America, from the end of 2015, with the return of the political map of Latin America, Venezuela's political allies in Latin America have decreased significantly, and the governments of Brazil, Argentina, Peru and other countries have turned and become side that pressured the Maduro government. With the decline in oil prices and the economic hardship in Venezuela caused by the U.S. sanctions, although Maduro has strong political power in Venezuela, the government's poor ability in handling the economic problems has caused Venezuela to fall into social and political crisis. In the midst of this crisis, there are no signs of recovery in the near future; under the external influences, this kind of crisis can easily cause the "South American Spring" political turmoil, which would make the economy of Venezuela even worse.
The deterioration of the political and economic crisis in Venezuela has significant impact on China's interests. China and Venezuela had signed an "oil-for-loan" agreement in 2007. China has obtained a cheap and stable supply of oil, while Venezuela has received funding for economic development. According to incomplete statistics, China has provided more than US$ 60 billion in loans to Venezuela for more than 10 years. Considering China's investment and assistance in Venezuela are as long as 15 years, China has a huge commercial presence in the country. Therefore, it is for certain that China would provide help to the Maduro government to some extent so that it will be able to pay off its debts to China in the future to avoid losses. The Chinese Foreign Ministry said that China supports the Venezuelan government's efforts to safeguard national sovereignty and stability, opposes external interference in Venezuela, and shows support for Maduro. Some analysts believe that for the trade of products related to residents' lives, the support for Venezuela should be increased to stabilize the lives of local residents and to avoid the intensification of social unrest, in order to avoid the overthrow of the Maduro government. Currently, the United States is trying to isolate Venezuela in Latin America and even globally, and it spares no effort to do so. China should resolutely oppose the blockade of Venezuela, especially the oil blockade.
As Venezuela falls into chaos, Brazil's right-wing president Jair Bolsonaro has emerged. In addition to his radical remarks and his national political inclination, he has repeatedly stated that he would turn the whole market towards the United States. The election of Bolsonaro can also be seen as a right-leaning model of politics in South America. Previously, Brazil fell into recession from 2016 to 2017, and the economy has been sluggish for a long time. However, the Brazilian economy began to recover slowly in 2018, and the economic growth rate is expected to increase in 2019. The World Bank's recently released Global Economic Prospects predicts Brazil's economic growth rate to be 2.2% in 2019. What needs to be paid attention on is that if the Brazilian economy is unable to resume growth for a long time, then the new Brazilian government is likely to adopt a hostile policy towards China, just like how Trump does to cater to domestic political needs.
These political trends in South American countries will pose severe challenges for China, which has invested a lot of resources in the South American economy in order to strengthen its trade diversification. In particular, Borsonaro attacked China's investments in Brazil in his campaigns. Whether the Brazilian government's economic and trade cooperation policy toward China will change will require further observation. However, from the recent speech of Bolsonaro at the Davos Forum and the attitude of the new Brazilian government, the new Brazilian government has shown a pragmatic and positive attitude towards economic and trade cooperation with China. Bolsonaro said that Brazil will open its economy and will attract a large amount of foreign investments and will work to promote economic stability.
Since China also has huge interests in Brazil and has an important impact on the Brazilian economy, it is expected that the new Brazilian government, which has the primary task of restoring the economy, will not adopt a hostile attitude toward China in the short term. China is Brazil's largest trade surplus country. In 2017, China-Brazil trade totaled US$ 74.7 billion, of which Brazil's exports to China has reached US$ 47.4 billion, and Brazil's imports from China reached US$ 27.3 billion. 80% of Brazilian soybeans are exported to China, and China has purchased agricultural products and iron ore from Brazil. Since 2003, China has invested a total of US$124 billion in Brazil. In 2016, China Three Gorges Corporation paid US$1.48 billion to acquire the rights to operate the two largest dams in Brazil. In 2017, China State Grid acquired a controlling stake in São Paulo's Brazilian power company CPFL Energia SA and its subsidiary for US$4.9 billion. China's HNA Group also bought a controlling stake in Brazil's second-largest major airport. However, Bolsonaro's dissatisfaction is only China's investments in Brazil's oil, mining and energy sectors, and it is expected that he will restrict China's investments in these sectors to fulfill his promises during his election campaigns. Therefore, the trade and investment of Chinese enterprises and financial institutions in Brazil should also focus on the long-term development of the local economy and the environment and avoid stimulating contradictions for short-term interests.
Final analysis conclusion:
Some recent changes in South American countries have actually reflected the intensification of economic contradictions; this is also in accord with the trend of counter-globalization. In particular, the latest changes in Venezuela and Brazil have had major impact on China's foreign trade and investment. Such impact may be long-term, thereby requires China to have long-term investment and trade strategies to play a role in improving the local economic downturn.
