“China Has Good Reason to Help Stabilize Latin American Economies”
Although these alliances will primarily be closer to home, most of Latin America is a naturally ally not only because of its increasing trade and commercial relations with China, but because of its common interest in an international political order that favors respect for national sovereignty and independence over unilateral intervention and military force.
In the last week or so much of the international business press has been focused on the problems of financial stability in developing countries, some of whom have recently become more vulnerable to capital outflows.
The main cause is that investors are trying to get the jump on possible moves by the U.S. Federal Reserve to allow U.S. interest rates to rise, which will draw capital from developing countries and cause their borrowing costs to rise.
Argentina has gotten some of this attention, as it allowed the peso to fall by 15 percent in one day and increased some access for Argentines to dollars on the official market.
Venezuela is not so much affected by these market developments, but is always negatively portrayed in the international media, and more so in the last year since its exchange rate system problems have caused its inflation to rise to an annual rate of 56 percent over the past year.
The two countries face different sets of problems, but they will both likely have to stabilize their exchange rates in order to resolve them.
This is where international help can make a big difference, and there is one country that has both the ability to help and a compelling interest in doing so: China.
China has already helped Venezuela with tens of billions of dollars of loans – much of which has already been repaid – as well as investment.
It has also provided significant lending and investment in Ecuador, Cuba, Brazil, and other countries. But there is more that they could do at this moment.
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