Latin America and China trade

Kevin Gallagher
guardian.co.uk
Monday 7 March 2011 16:38 GMT

Colombian President Juan Manuel Santos sent shockwaves through Washington when he told the Financial Times that his nation is holding negotiations with China to build a multibillion dollar "dry canal" that would compete with the Panama Canal. After all, Santos said, China is "the new motor of the world economy".

This deal is charged with politics. Colombia is trying to get the US to pass a long-stalled trade deal. And let us not forget that the original canal was to be the result of an agreement between the US and Colombia. When the Colombians didn't like the deal the US had on offer and threatened to squelch it, Washington supported Panamanian separatist movements and got itself a new country to build a canal with.

But that's all water under the isthmus. Or so we thought.

Whether or not this deal goes through, it highlights the stark contrast between China's foreign economic ventures and those of the United States.

For 30 years, Washington has been shopping a trade-not-aid based economic diplomacy across Latin America and beyond. According to what is generally known as the "Washington consensus", the US has provided Latin America loans conditional on privatisation, deregulation and other forms of structural adjustment. More recently, what has been on offer are trade deals such as the US-Colombia Free Trade Agreement: access to the US market in exchange for similar conditions.

The 30-year record of the Washington consensus was abysmal for Latin America, which grew less than 1% per year in per capita terms during the period, in contrast with 2.6% during the period 1960-81. East Asia, on the other hand, which is known for its state-managed globalisation (most recently epitomised by China), has grown 6.7% per annum in per capita terms since 1981, actually up from 3.5% in that same period.

Mexico's Government attacks unions

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The U.S. and the Mexican economy are closely linked – and this integration has been advanced by the NAFTA/ North American Free Trade Agreement of 1994.   ( See, The Global Class War: How America’s Bipartisan Elite Lost our Future- and What it Will take to Get it Back. 2006.  Jeff Faux.)

The  2008- 2009 banking  crisis in the U.S. has produced a severe  economic crisis in Mexico.  The Mexican economy has contracted by % 6.8  this year,  and unemployment there is not likely to recover soon.

In the midst of this crisis, the government of Mexico has accelerated  the  same  neo liberal economic policies which caused the crisis by attacking a major union and shutting down a public owned electric company in preparation for privatization.