Where Xi leads, Abe follows? China, Japan compete in Latin America

Japanese Prime Minister Shinzo Abe's trip to Latin America immediately follows the visit of Chinese President Xi Jinping. Both are chasing investment and energy deals, although with different strategies.

No sooner had Chinese President Xi Jinping left Latin America than Japanese Premier Shinzo Abe arrived there, as Asia’s two largest economies and greatest political rivals vie for influence in a region traditionally under the sway of the United States.

Japanese officials insist that the timing of Prime Minister Abe’s trip (he arrived in Mexico on Friday and will also visit Colombia, Chile, and Brazil), starting two days after President Xi ended a tour of Cuba, Venezuela, Brazil, and Argentina, is coincidental, dictated by the Japanese parliamentary calendar.

But the coincidence highlights the worldwide competition between the two economic giants, whose relations have soured dramatically over a territorial dispute in the East China Sea.

Tokyo and Beijing are both chasing the same things. Latin America offers “huge potential as an export market…and secure provision of energy and raw materials,” says Tomohiko Taniguchi, an adviser to the Japanese cabinet. “Mr. Abe’s trip is long overdue.”

Both too are seeking investment opportunities for their engineering companies in countries such as Brazil and Mexico, where lucrative projects for new roads, ports, and railways are on the drawing board.

Japan also has a more political item on its wish list: election next year to one of the rotating seats on the United Nations Security Council. China is deeply opposed to that. On Monday Abe met leaders from the Caribbean Community at a summit in Trinidad and Tobago; the regional group’s 14 members will cast 14 votes in the election.

Head to head competition 

The two leaders’ choice of destinations also reflects global political tensions: Xi celebrated Beijing’s friendship with US bugbears Cuba and Venezuela, while Abe is sticking to Washington’s allies.

“China seems to actively court countries that are at loggerheads with the US, while Japan is reaching out to close partners of the US,” says Martin Schulz, an economic analyst at the Fujitsu Research Institute in Tokyo. “Politics and economics are mixed up very closely.”

Both China and Japan are courting Brazil, Latin America’s economic powerhouse, where a burgeoning middle class holds out the prospect of a growing consumer market and government infrastructure plans promise valuable construction contracts.

They are going head to head in competing bids to develop Brazil’s railroad network, but there may be room for both of them on that and other projects, says Mr. Schulz. China has the advantage when it comes to providing the hardware and manpower to build gigantic infrastructure, while Japan is better placed to supply the computerized, high technology systems that run oilfields or railroad networks.

China has more money to hand out, though. In Brasilia, Xi announced Beijing would fund projects in Latin America with $25 billion worth of loans; in Buenos Aires he pledged a five billion dollar loan to pay for two Chinese-built hydroelectric dams in Patagonia. In Havana he rolled over Cuba’s debt and offered more soft loans and trade credit.

That generosity is likely to pay dividends, Chinese observers believe. “Latin American countries know how to handle themselves,” says Wu Guoping, a Latin America analyst at the China Academy of Social Sciences in Beijing. “They understand very well the need to improve their economies, and since China is Brazil’s top trade partner and a very important trade partner for Mexico…I think their interests will lie with China.”

In Tokyo, the Japanese government sees things differently. Beyond counting on the quality of Japanese products and what Mr. Taniguchi calls the “huge untapped reservoir of goodwill” in countries such as Brazil and Peru, home to nearly two million people of Japanese descent, Japan has another advantage, he says: its democracy.

“We have a natural constituency where political values are strong,” says Taniguchi. “The Japanese government has been slow to tap into that.”