The dragon and the tiger in the Grand Prix of the Global South

Since Deng Xiaoping opened China's doors to the world in 1978 after Maoist autarky, its economy has depended on its foreign trade. Drewry Maritime Research estimates that in 2022 Chinese shipping companies owned or managed 36 of the world's 100 largest ports. Another 25 are in its territory, which is home to eight of the 10 largest by the tonnage they handle. Cosco Shipping Ports, CMPort and Hutchison Ports, the big three, operate in 61% of the main hubs maritime and manage or are shareholders in 95 ports in 53 countries: Haifa (Israel), Piraeus (Greece), Hambantota (Sri Lanka), Dar es Saalam (Tanzania), Gwadar (Pakistan), Chancay (Peru), Colón (Panama )…

The diversity of its trading partners reflects its experience of the risks that come with over-reliance on a single market, no matter how large. The vulnerability of their supply chains to pandemics, geopolitical tensions – especially in straits such as Bab el-Mandeb, Hormuz and Malacca – and natural disasters, which can dismantle them from one moment to the next. Having many markets in different phases of their economic cycles is more logical.

In 2015, Beijing launched the program Made in China 2025 to achieve self-sufficiency in semiconductors, artificial intelligence and renewable energy. Even before Trump raised tariffs on its exports to 25%, the dragon was already looking for new hunting grounds. The American Enterprise Institute estimates that between 2004 and 2014 the G7, Australia and New Zealand absorbed almost half of Chinese foreign investment, excluding Belt and Road projects.

In 2022 they received only 15%; the rest went to Indonesia, Brazil, Saudi Arabia and other emerging countries. In 2023, exports to the US fell by 8.5% and those to the EU fell by 5.3%. In 2018, 22% of US imports came from China. In 2023 only 13%. The ASEAN countries are now, together, China's largest trading partner, with which it maintains the largest commercial relationship on the planet and which is connected with its own cross-border interbank payment system: CIPS, the Chinese version of SWIFT.

Divorce ad portas

In 2022, the Chinese technology sector received $1.2 billion in venture capital from the US. In 2018 there were 14,000 million. It's a global trend. In 2023, 3,000 restrictive trade measures were imposed, three times more than in 2019. deglobalizationHowever, it is a myth.

Since 2011, the ratio of world trade to GDP has ranged between 55%-60%. In the cold war it was 24%. Bilateral trade between blocks has fallen, not between its members. Between 1980 and 2020, the value of merchandise trade increased 12 times, to $25 trillion (in current prices). Since 2000, container transport has tripled, as has the number of air passengers in the Global South, the battlefield where the dragon and the tiger fight the duel – political, economic, cultural… – of the century.

A Noah's Ark

Some 120 countries make up what is now called the Global South, the former Third World of the non-alienated and first underdeveloped and then developing countries. Despite objections from academic circles, the term has become popular.

Geographically, most of India and China are north of the equator, but both use the term and claim to belong to the Global South, like more than half of the world's population who share a colonial past, often also slaveholding. Between 1500 and 1890, Brazil, for example, received more than four million Africans who fazendeiros They bought at the Valongo dock in Rio de Janeiro.

Although their countries do not share economic interests or political systems, almost all are neutral in the war in Ukraine, as they were in Iraq in 2003. Another common feature is their industrialization plans. In the last decade, Saudi Arabia has invested $1.3 trillion in infrastructure ranging from petrochemical plants to soccer stadiums, 10% of GDP in 2023 alone.

Cambodia wants to double its manufacturing exports. Kenya is building five industrial parks in areas duty free. In 2020, Indonesia banned exports of unprocessed bauxite and nickel (7% and 22% of the world total) to force mining companies to do so in Java, Sumatra or Borneo.

Between 2020 and 2023, Jakarta spent 400 billion on infrastructure, including 27 industrial parks. The problem is that technology has made many theoretical models on industrial policies obsolete because, among other things, fewer and fewer workers and operators are needed in factories. In relation to GDP, on a global scale, the manufacturing sector went from 19% in 1997 to 16% in 2022.

Global Gurus

India –constitutionally wishwaguru, something like a “guru-country”, believes that its comparative advantage is its development model. According to its Prime Minister, Narendra Modi, the Hindustani country has entered an era of splendor: the Amrit Kaal, the era of nectar in Sanskrit. In Why Bharat matters (2023), Foreign Minister Subrahmanyam Jaishankar maintains that India bases its foreign policy on the teachings of the Ramayana and the Mahabharatasacred texts of Hinduism.

Between 2014 and 2022 its economy grew at an average of 5.6% annually, compared to 3.8% for 14 other large developing economies. In the interviews he gives, Modi remembers, listing them in detail, that since 2014, when he came to power, the airports have doubled and 706 new medical schools have been inaugurated and since 2018, 10,000 kilometers of roads have been built every year.

The Aadhaar system, a biometric identification system with 1,260,000,000 registered Indian residents who can use it to open bank accounts and receive transfers. As Happymon Jacob writes in Foreign Affairs, while Beijing wants to replace the current world order, India only wants to reform it. Since the end of the cold war, 1.5 billion people have been lifted out of poverty. According to Jaishankar, the continuity of the virtuous circle of growth requires a multilateral institutional framework in a more equitable and multipolar order. India, he specifies, is non-Western, not anti-Western.

During the G20 summit in New Delhi in November, Modi convened a parallel summit – Voice of the Global South, to which China was not invited – in which 125 African, Asian and Latin American countries and seven Eastern European countries participated in which Modi outlined his plans to make India a developed economy by 2047, the centenary of its independence.

To achieve this, its economy would have to grow 8% until then. The Indian economy is already the fifth in the world (3.5 trillion) and the fastest growing in the 'Top Ten': 7.6% in 2023 and a projected 6% on average annually until 2030. At that rate, the State Bank of India estimates that by 2029 it will be the third largest economy in the world. On January 22, the National Stock Exchange of India, with a capitalization of 4 trillion dollars, surpassed the Hong Kong stock market. Tata, which is worth 269 billion on the stock market, has 900 million customers in 10 business lines and one million employees, only after Amazon and Wallmart.

7% of iPhones are already Made in India and in 2025 they could be 25%. In August, the Chandrayaan-3 probe landed at the lunar south pole. The Serum Institute, the world's largest vaccine manufacturer, has just received WHO approval for one against malaria. Micron is going to build a $2.75 billion plant in Gujarat to manufacture chips, a project in which the government will provide 70% of the investment, about $100,000 for each job.

Theaters of operations

Latin America and the Caribbean is a key theater of operations. In 2009, China surpassed the US as Brazil's largest trading partner. The dragon already sends 27% of its exports to the region: iron, grains, meat… Cofco International is directing 40% of its investments to Brazil, where it is building a second terminal in the port of Santos in São Paulo that will increase its export capacity. from three to 14 million tons in 2026.

Until now, Chinese investment has been concentrated in extractive sectors. Mexico nationalized its lithium mines after one of its miners tried to buy one of the largest in Sonora. China knows that it has to offer added value if it wants to compete with the US, India and the EU. According to Inter-American Dialogue, between 2003 and 2022 it invested 187.5 billion in the region. Brazil took the lion's share (42%), followed by Peru, Mexico, Argentina and Chile. Among the most recent are those of BYD in Brazil and Chile, where it is going to invest 290 million in a lithium cathode plant in Iquique. The Sino-Mexican Solarever has announced that it will invest 1,000 million in a plant in Nuevo León to manufacture electric vehicles and export them to the US.

Voids that are filled

Capital travels in both directions. According to the UNAM China-Mexico Studies Center, Bimbo, Camposol, Codelco, Embraer, Herfalife and Interceramic, among other multilatinas, are growing in Asian markets. The Mexican Bimbo is today the second seller of its class in China.

In 2000, Mexico's trade with China was 1% of the total; in 2020, 11%. China is already the largest trading partner of Cuba, Panama, Venezuela, Peru, Chile, Uruguay and Brazil. 9.3% of China's imports come from the region, compared to 4.1% from Africa and 17.6% from the US and Canada. The EU, on the other hand, today imports 15% less from the region than in 1999. Its market today accounts for only 16% – and the US 15% – of Brazilian foreign trade. China, India and South Korea now account for 30%.

Asian lessons

Asian economies have valuable lessons for other middle-income countries. To overcome exchange obstacles, ASEAN bases its integration on monetary compensation systems. Symbiosis is inevitable between food-producing countries and others with low per capita rates of arable land. Argentine exports to India, Vietnam, Malaysia, Indonesia and South Korea exceed those to China.

Lula, as a former metal worker in the industrial belt of São Paulo, knows first-hand the effects of deindustrialization. Agriculture today moves 25% of the GDP, 20% of employment and 40% of exports. Manufacturing today accounts for only 10% of GDP, compared to 30% in the 1980s. At the Volkswagen plant in São Bernardo do Campo (Sao Paulo), Lula recently announced that the German multinational will invest 3.2 billion dollars to manufacture 100% hybrid and electric vehicles. Made in Brazil. GM has promised another 1.4 billion and BYD 600 million in the Camaçari (Bahia) plant that Ford closed in 2021.

Tiger jump

In August 2021, Tata Consultancy (TCS) opened its first cybersecurity center in the region in Querétaro (Mexico), with almost 500 computer engineers. In 2019, companies in the region lost $90 billion due to their vulnerability to cyber attacks. hackers and hackers.

Some 20 Indian cybersecurity companies, which employ more than 40,000 people in the region, have signed advisory and cooperation agreements with more than 130 Mexican public and private universities. Tata has Latin American clients in local governments, banks, universities and private clinics. The 'boom' of e-commerce companies like Mercado Libre or fintechs like NuBank, show the potential of synergies. India has a hundred unicorns digital (start-ups valued at more than 1,000 million dollars).