The gradualeconomic recovery in South America has been severely affected by a crisis ofconfidence in Argentina and political uncertainty in Brazil in the run-up toits elections. The last Economic Outlook disseminated by Crédito y Cauciónpredicts that 2018 will be another disappointing year for most of the region,with a slowdown in economic growth and an increase in inflation. The poorperformance of the region, which will remain in 2019, combined with themoderation of US financial support provides space for China to expand itsinfluence in the area.
China'sinvestments in South America have tripled in recent years, from 50,000 milliondollars in 2012 to more than 150,000 in 2016 and 2017. Although this amount isstill below Chinese investments in other emerging regions, the leading creditinsurer in Spain prevents that could increase in the coming years.
China has extended its New Silk Road to South America initiative in the last year. Antigua and Barbuda, Bolivia, Costa Rica, Guyana, Panama and Trinidad and Tobago have joined the treaty, which includes heavy Chinese investment. For Panama, this was possible after ending its recognition of Taiwan and adopting the one-China principle. In 2018, the Dominican Republic and El Salvador also broke diplomatic relations with the island.
China's financing capacity, much larger than that of Taiwan, the high investment need sand the limited availability of financing for many Latin American countries supported this change. For El Salvador, but also for other countries in Central America, reducing the financial dependence of the United States, which has cancelled the temporary protection status of its immigrant nationals, could have played an important role. In this environment, it is foreseeable that China will address in 2019 relations with other countries in the region that still have ties with Taiwan, such as Belize, Haiti, Honduras, Guatemala and Nicaragua.