How China Capitalized on U.S. Indifference in Latin America
By James T. Areddy, Ryan Dubé, Roque Ruiz | Published on November 2024
Chinese leader Xi Jinping arrives this week in a region where China has replaced the U.S. as the dominant trading partner for most big economies, with the exceptions of Mexico and Colombia. Beijing has signed up most of Latin America and the Caribbean to an infrastructure program that excludes the U.S. In Peru, Xi will inaugurate a megaport to speed trade with Asia.
China is a voracious buyer of lithium from Argentina; Venezuelan crude oil; and Brazilian iron ore and soybeans. The $286.1 billion in Chinese projects in the region, including metro lines in Bogotá and Mexico City and hydroelectric dams in Ecuador, is approaching the value of China's work in Africa, but with a revamped lending model and less backlash.
Xi is visiting South America to take part in leadership summits, including an Asia-Pacific Economic Cooperation (APEC) forum this week in Lima, Peru, and a Group of 20 summit next week in Rio de Janeiro. Both are likely to illustrate China's economic marginalization of the U.S. in the region. While President Biden is also expected, his stature will be much diminished in the wake of Donald Trump's election victory — and Xi as China's leader has visited the region more than both of them.
Few see Latin America as the U.S.'s backyard anymore. The region's nations are generally sincere in their desire for warm relations with the U.S., but they are often seen as a secondary priority in Washington. Beijing's diplomats and executives, meanwhile, actively engage with local and national governments almost regardless of their political leanings.
Challenges for the U.S. and China's Rising Influence
"It's super frustrating because this region has everything you'd think American companies would want," said Ryan Berg, director of the Americas program at Washington's Center for Strategic and International Studies.
On top of deepening economic linkages, Xi promotes a governance model that breaks with the U.S.-led postwar order that he suggests is an outdated relic of colonialism. Xi's sustained attention to the region "is symbolic, and countries of the Global South need that recognition," said Alvaro Mendez, director of a unit at the London School of Economics and Political Science that studies China's influence.
Trump, who in his first term mostly focused on the region as a source of unwanted immigration, could now force some of its countries into difficult choices if he pushes them to limit their China links. "Many Latin Americans are apprehensive about what's in store for them over the next four years on this critical issue," said Michael Shifter, a scholar of Latin America at the Inter-American Dialogue policy group in Washington.
Chinese Investments and the Belt and Road Initiative
Chinese trade and investment has boomed across the approximately 40 nations of Latin America and the Caribbean, home to more than 660 million people stretching from Mexico to Chile and Argentina, plus island nations such as Jamaica and Cuba.
China's construction of infrastructure including ports to move commodities mirrors how, all over Asia and Africa, China under Xi has cemented its presence by building bridges, power plants, and stadiums. China also has less of a debt-collector reputation in Latin America than it has in other developing parts of the world, in part because Beijing has slowed new project commitments and adjusted how it has financed some work.
Beijing's largess isn't always beneficial, and its exports of capital and consumer goods plus chemicals and machinery, in particular to Mexico, give China a trade surplus with the region overall.
Environmental and Economic Concerns
China is crowding in with manufactured exports such as Huawei Technologies' telecommunication hardware and electric vehicles from BYD, which has taken over an abandoned Ford plant in Brazil. An influx of Chinese steel recently forced the closure of a large Chilean mill. Already some countries are raising tariffs on Chinese goods, and others see threats from big Chinese entrants to traditional sectors, such as fishing.
China's image has also been tarnished by shoddy construction, such as on a hydroelectric project in Ecuador, and by limited regard for the environment and indigenous people, such as around copper mines in Peru.
Strategic Moves in the Region
One of China's goals is isolating the democratically governed island of Taiwan. Seven of the 11 nations worldwide that maintain diplomatic relations with Taipei are in the region, including Guatemala, Paraguay, and Haiti. Five that switched recognition to Beijing under Xi's watch, including Honduras and Panama, were showered with Chinese deals.
China has locked in mineral and foodstuff purchase agreements, plus deals to operate ports in places such as Peru and trade in yuan, to fortify supply lines against risks that Chinese militarism one day sparks calls among Western powers to impose an embargo. In such a scenario, Beijing could be expected to offer inducements toward such G-20 nations as Brazil to defuse the kind of decoupling pressure Russia faced after it invaded Ukraine, according to a new report from the Rhodium Group and the Atlantic Council.
The U.S.'s Response and Future Prospects
It has been 110 years since the U.S. completed the Panama Canal and over a half-century since Washington sought to check the spread of communism during the Cold War by meddling in Latin America's democracies. Today, U.S. policymaking toward the region is heavily slanted toward illegal immigration and narcotics, instead of how its more recent general political stability and growing middle class could work to America's advantage.
Washington's smaller-scale and less deal-oriented engagement has provided space for China to win regional recognition for boldness. When two of the region's pro-trade nations, Uruguay and Ecuador, got nowhere seeking free-trade agreements with the U.S. near the start of the Biden administration, they turned to Beijing. Last year, Uruguay and China said they were in talks for an agreement, while Ecuador completed a deal, Beijing's fifth in the region compared with the U.S.'s 11.
Conclusion
China hasn't displaced the U.S. so much as it has taken advantage of uncontested opportunities, said Jorge Guajardo, a former Mexican ambassador to China. As he puts it, "The U.S. sees Latin America as 'ours to ignore.'" The region is now witnessing China's growing role as a geopolitical player, further signaling the shifting global influence dynamics.
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