Wednesday, June 19, 2024

OP-ED | 12-02-2022 09:51

Of silk roads and sow’s ears

The main lesson from the president’s Sino-Russian swing should be the need to separate international economic relations from domestic politics and even geopolitics in a multilateral world.

Now that President Alberto Fernández has safely landed from his important Sino-Russian swing (with all due respect to Barbados), it is time to draw a balance which distinguishes between the primary and secondary aspects of his trip. Since the secondary aspects have taken pride of place in many analyses, let us start with them.

From the outset the timing of the trip was questioned – during a delicate moment in the twilight zone between reaching an understanding and an agreement with the International Monetary Fund with an avoidable luncheon date in the Kremlin at an even more delicate time in the Ukrainian crisis and attendance at a Winter Olympics inauguration subjected to widespread boycott due to China’s human rights violations against its Muslim minorities (Congress Speaker Sergio Massa reportedly said that he could not imagine a worse time in a comment naturally not uttered in public but which he ensured was leaked). Given that the controversial Games were inaugurated on February 4 while the 50th anniversary of diplomatic relations with the People’s Republic providing the nominal reason for the trip falls on February 19, the latter date could easily have been chosen for the bilateral visit without any risk of causing offence in the outside world.

Yet rather more noise came from the gratuitous presidential remark in Moscow about reducing dependence on the United States and the IMF – an attempt at ingratiating his host with no visible effect on Vladimir Putin’s impassive countenance. The buzz over this was overblown at both ends – this cannot possibly have gone down well in Washington, despite presidential spokesperson Gabriela Cerruti basing her questionable attack on a reporter on the lack of any official State Department declaration, but this unease has also been vastly overrated by government critics since it is equally obvious that the White House has far more pressing problems both at home and abroad than the chronic verbal exuberance of Alberto Fernández.

No doubt Fernández was aiming at humouring his own coalition as much as the challenging task of drawing a smile from Putin but the main lesson here should be the need to separate international economic relations from domestic politics and even geopolitics in a multilateral world. To give one simple example, Chile joined the Silk Road over three years ago under a centre-right government without seeing any need for ideological posturing or confronting other trade partners. The quest for ideological affinity can be a dangerous distraction – during his trip President Fernández became very excited about joining BRICS (Brazil, Russia, India, China and South Africa) when he should be paying more attention to the unique opportunity of last month’s offer by the OECD (Organisation for Economic Co-operation and Development) to open accession discussions, a road being intently pursued by Brazil.

Mention of the Silk Road (the more popular name for China’s Belt and Road Initiative or BRI) takes us from the secondary to the primary aspects of this trip. President Fernández has announced the results of his Chinese jaunt as hugely beneficial with billions and billions of dollars coming Argentina’s way – US$23.7 billion from BRI loans and investments alone plus the proposal to broaden the currency swap with Beijing (already around half of Central Bank reserves) and even a request for China’s special drawing rights (which is being “studied”).

Joining the Silk Road is not in itself as controversial as some government critics make it sound – almost two-thirds of the world’s nations have already signed up, including 19 in the Latin American region (although none of the three most populous), even if shunned by all G7 countries except Italy. More justified are the doubts whether the promised funding will actually materialise (especially after the US$20 billion announced by Hu Jintao in 2004 remained in thin air) but perhaps the BRI initiative proceeding according to plan could be the greater worry. This is because much of the Chinese credit is destined for a nuclear power plant which (quite apart from the ghosts of Chernobyl and Fukushima) could end up costing rather than earning Argentina money. The investment costs of every kilowatt of nuclear energy are five or six times higher than other sources and the plant will require importing a technology alien to current Argentine usage.

Not the only question but China (the world’s top economy in purchasing-power parities for some years now although still behind in dollar terms) is a complex partner as simultaneously Argentina’s main export market and its biggest trade deficit. A relationship calling for in-depth analysis rather than Chinese whispers.

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