Obama Heads to South America to Head Off China

Business Week reports that President Obama’s upcoming trip to South America is really all about China:

The $300 billion in annual trade with Latin America supports 900,000-plus U.S. jobs, with more than a quarter of those resulting from trade with Brazil. Brasília, the capital, is Obama’s first stop in a five-day, four-city excursion that also includes Rio de Janeiro; Santiago, Chile; and San Salvador, El Salvador. Brazil has gone “from a country that needed an IMF loan just a matter of years ago to now having $300 billion in reserves,” says Froman. The focus on Brazil is part of a broader effort by the Administration to engage more with the so-called BRIC countries, the emerging economies of Brazil, Russia, India, and China. (Obama has already visited Russia, China, and India.)

It’s also an opportunity to cement relationships as China’s economic power increases. In 2009, China bumped the U.S. as Brazil’s top trading partner. Obama isn’t expected to announce any major business deals or agreements on the trip, as he did during last year’s India visit. Nor does the White House expect to resolve long-standing trade disputes with Brazil. The world’s largest producer of sugar and sugar-cane-based ethanol, Brazil has long pressed the U.S. to lower tariffs on sugar imports and a 54 cents-per-gallon surcharge on ethanol imports.

Instead, say Administration officials, the trip is about building a framework for the future. For example, Brazil’s recent discovery of offshore oil gives it claim to reserves twice the size of the U.S.’s, Froman says. The Administration has its eye on that oil—and so does China. China Petroleum & Chemical last month said it may bid on exploration rights and has already taken a 40 percent stake in the Brazilian unit of Repsol YPF, a Spanish energy company. Some Brazilians welcome the stepped-up U.S. interest. “It’s better for us,” says Fernando Henrique Cardoso, Brazil’s President from 1995 to 2003, “for the Americans not to retreat too much, to keep the balance.”

And from Reuters:

China will loom large over U.S. President Barack Obama’s visit to Latin America this week as he sends a message that Washington remains relevant to a region that owes much of its robust economic health in recent years to Chinese demand.

In both Brazil and Chile, the two South American countries that Obama will visit, China has recently overtaken the United States as the number-one trade partner.

Even in those countries where the United States is still the dominant partner, China is catching up fast.


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