It’s China’s Turn to Resurrect Cuba
After decades of pumping money into the Cuban prison island, Russia’s efforts ceased due to its own failed economy in 1991. The Russian bear was left hanging with $35 billion in uncollectable debt. Now China’s President Xi Jinping wants to try his hand at fixing the irreparable. He now intends to not only prop up Cuba’s moribund economy, but to coalesce a bloc of socialist nations in Latin America.
In the last of a four-stop tour including Venezuela, Argentina and Brazil, Jinping visited his communist allies in Cuba and signed no less than twenty-nine credit, debt and other agreements. China is now Cuba’s largest trading partner at $1.4 billion per year.
As the largest economy in the Brazil, Russia, India and China group of emerging markets, (BRICs), China hopes to flex its economic muscle by shoring up many of the floundering South American economies that Jinping visited. The Chinese president joins Russia’s Vladmir Putin, in looking to unite many of the socialized nations in Latin America and capitalize upon their rich oil and mineral resources. They also hope to turn these nations against American, European and Japanese markets.
By all optimistic accounts the emerging markets should be flying rather than sinking BRICs. A quick look at the emerging market’s performance in 2013, shows that Brazil’s stocks were down -15.9 percent, Chinese -7.1 percent, Russian -4.3 percent and India -3.5 percent. This trend even applies to the smaller more agile and reliable emerging markets such as Turkey that was down -18.3 percent. It is hard to imagine how one failing country can help another in any stable way.
According to the S&P 500, contrast these downward numbers with those of the leading three global economies during the same period. Japan’s stocks grew at +57 percent, the U.S. at +29 percent and Germany ending with a very respectable increase of +26 percent. China and the other BRICs will not be surpassing these markets any time soon since they have to grapple with rampant inflation and market bubbles of their own.
However, flush with Western cash, Jinping took advantage of his trip to mount a threat to the West by announcing the establishment of the New Development Bank to be headquartered in Shanghai to cater to emerging markets. This is primarily because it has not been easy for high risk emerging markets to secure financing from the World Bank or the IMF. This new bank is proposed to finance infrastructure and development projects for emerging markets of socialist persuasion including Cuba, which might be better defined as a submerged market.
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