Japan and China Compete for Latin American Clout

Chinese President Xi Jinping’s fruitful visit to South America, which included a proposed US$20 billion fund to finance infrastructure projects in Latin America and the Caribbean and a cornucopia of other benefits, has thoroughly overshadowed a similar trip to Latin America by Japanese Prime Minister Shinzo Abe.

Abe hailed his own five country visit as “the opening of a new chapter” in his country’s relations with the region. But further progress will be hampered by competing foreign policy priorities in Tokyo and China’s growing influence in the Western Hemisphere. The Abe mission – the first by a Japanese head of state in a decade – comes on the heels of the mid-July trip by Xi, the sixth journey since 2004 to the region by a Chinese head of state.

Beijing’s commitments to Latin America dwarf those announced by Abe. In addition to the infrastructure bank, Xi also announced plans to increase China’s stock of investment in Latin America to US$250 billion over the next decade. His country’s trade with the region was valued at more than US$255 billion in 2012, with China accounting for the greatest share of commerce in Chile, Peru and Brazil.

Nonetheless, while in Latin America, Abe looked to forge new economic ties and strengthen Tokyo’s geopolitical position. Accompanied by dozens of Japanese business leaders on his circuit of the region, the prime minister pledged to accelerate trade negotiations and signed off on approximately US$700 million of financing for Brazil. Greater access to the region’s growing markets and plentiful natural resources would boost exports, create new opportunities for Japanese firms, and bolster the country’s energy security in the wake of the Fukushima disaster.

Abe has also stepped up efforts to garner international support as antagonism increases between Tokyo and Beijing. Defending controversial reforms of Japan’s pacifist constitution, he deplored attempts to “unilaterally change the status quo” in East Asia and emphasized the need to “respect rule of law of the seas” while meeting with presidents of several Caribbean Community countries in Trinidad and Tobago.

A key voting bloc in the United Nations, the Caribbean bloc could aid Tokyo’s bid for a permanent seat on the UN Security Council – as Central American countries pledged to do following a summit with Prime Minister Koizumi in 2005.

Currying favor with the Latin American governments will likely prove more difficult for Abe than his predecessors. Dogged by nearly two decades of economic stagnation, Japan’s is no longer the preeminent economy in East Asia. Tokyo’s political relations with Latin America have been warm but distant for years. Meanwhile, rapid inroads by rival China have left Japan outgunned both diplomatically and economically.

China’s increasing engagement in Latin America is unlikely to displace Japanese commercial or diplomatic interests in the region. Japan’s ties with the region are older, more mature and better diversified than its larger neighbor’s. The stock of Japanese investment in Latin America remains several times larger than China’s, and the number of Japanese companies operating in the region is on the rise. The roughly 1.8 million people of Japanese descent living in Latin America could also induce support for Japan in countries like Brazil and Peru.

But Tokyo remains reluctant to devote resources to improving ties in Latin America. Abe’s new economic commitments to Latin America pale in comparison to its support for Africa and Southeast Asia, where the Japanese prime minister pledged new aid and investment packages worth US$43 billion and US$20 billion, respectively. Of the 47 countries the leader has visited since assuming office in 2012, only five are in Latin America. Unless Abe devises new ways to prove he is serious about expanding ties with the region, Japan will find itself playing second fiddle to an increasingly important China.

Abe should emphasize quality rather than quantity as it looks to bolster its relationships in the Western Hemisphere. Tokyo cannot realistically match the scale of Chinese trade, financing or new investment in the region. But Japan has demonstrated leadership in electronics, pharmaceuticals, infrastructure and manufacturing – key areas of interest for Latin America’s largest economies. Several of the accords finalized on Abe’s tour provide the basis for new collaboration in these sectors. In the coming years, new efforts should focus on further harnessing these and other areas of competitive advantage to propel mutual development.