China’s volume of trade with Latin American countries increased over twenty-six-fold in the years 2000-2019. Over the last two decades, China has accelerated its forays into the region—undertaking infrastructure projects, extending loans and providing medical aid to help combat the COVID-19 pandemic.
The goals for China’s penetration into the region are to secure raw materials for its economy, export finished goods to Latin American economies, compete for diplomatic recognition with Taiwan and challenge the United States’ hegemony in the Western Hemisphere. While previous US Presidential administrations saw China as a force for good in the region, the growing influence of China in Latin America has drawn US scrutiny in recent years and will continue to attract the attention under President-Elect Joe Biden.
Investment and infrastructure
In the last decade, an estimated 1.8 million jobs have been created by Chinese trade and investment in Latin America and a further 2,000 Chinese companies have settled in the region. Latin American countries have largely welcomed Chinese investments as an avenue for economic growth and an opportunity to bring millions of its citizens out of poverty.
The region provides China with both an export market for excess retail and manufactured goods and a source for raw materials such as oil, metal, and foodstuffs for its growing economy. China is now the primary trading partner of Argentina, Peru, Uruguay, Brazil, and Chile. Chinese-Latin America trade reached $315 billion in 2019, approaching Chinese President Xi Jinping’s goal of $500 billion by 2025.
To facilitate this trade network, China is undertaking infrastructure projects in Latin America, building roads, ports, and bridges throughout the region. For instance, in 2019, the China Communications Construction Company announced a billion-dollar investment in the port of San Luis in Brazil, the largest foreign direct investment into Brazil that year. Similarly, a Chinese state-owned shipping company made a $2.3 billion investment in a Peruvian port in 2019, hoping to facilitate trade between the two states and create jobs, according to Li Guanghui, vice-president of the Chinese Academy of International Trade and Economic Cooperation.
As trade flows increase, China has further expanded its presence in the region by extending loans to Latin American states. In 2015, loans from Chinese banks exceeded those offered by the World Bank, making the China Development Bank and China Export-Import Bank the largest lenders in Latin America. The majority of the loans have funded energy and infrastructure projects. From 2005 to 2019, China lent $137.1 billion to Latin American countries, of which Venezuela was by far the largest recipient of Chinese money, accepting $62.2 billion in loans.
Loans from Chinese banks are appealing to Latin American states as they come with fewer conditions than those offered by other large financial institutions such as the World Bank and the International Monetary Fund (IMF). But some are concerned that by granting credit to countries that are unable to pay it back, these banks will trap Latin American states in debt and seize control of key assets upon their default.
A mixed reception
While China has been a positive force in some aspects of its relations with Latin America, other facets of its involvement in the region have been less well-received. For instance, China has begun to play a larger role in the telecommunications sector. Huawei’s plan to roll out 5G throughout the region specifically has raised concerns over privacy and cybersecurity. Similarly, surveillance cameras installed by Chinese telecoms company ZTE have drawn scrutiny from the US State Department, which fears China will use the cameras to “promote corruption, support arbitrary surveillance, and silence dissent,” according to a spokeswoman for the Department’s Western Hemisphere Affairs Bureau.
Some Chinese projects in Latin America have also raised concerns amongst environmentalists. For example, the Rosita dam project in Bolivia, which was suspended over concerns raised by indigenous communities fearing displacement following the dam’s construction.
Nonetheless, public opinion favours China’s presence. A poll taken by the Pew Research Center found that Brazilians, Mexicans, and Argentinians take a positive view of the role that China plays in their respective economies.
China has helped Latin American states respond to the COVID-19 pandemic by granting medical aid to governments throughout the region and extending loans to help countries finance vaccines once released. Under the strain of the pandemic, regional GDP is expected to contract by 5.2% in 2020, and the world can expect to see China play a role in the Latin American economic recovery from the pandemic.
As Latin American and Chinese ties strength, the roles played by Taiwan and the US in the region are diminishing. El Salvador, the Dominican Republic, and Panama have cut diplomatic ties with Taiwan in recent years in order to grow closer to China.
Under the Bush and Obama administrations, took a positive view of China’s forays into Latin America, hoping that China would contribute to regional economic development while complying with international law. While the US began to pay closer attention to China’s growing presence in Latin America under Trump’s tenure, the President has, according to Ted Piccone of the Brooking Institution, “failed to leverage these trends by setting the proper tone or substance for policies that would help swing relations back toward Washington.”
Once President Trump’s term of office has expired in January 2021, President-elect Biden has promised he will reengage in Latin American affairs. During his tenure as vice president, Biden made more trips to Guatemala than Trump has made to Latin America in its entirety during his presidency. The President-elect’s history in Latin America, which includes spearheading anti-drug trafficking legislation as a senator, may have earned respect among Latin Americans that will help him achieve his goals in the region.
In the “Biden Plan for Central America,” he outlines an initiative to strengthen the US’ relationship with its southern neighbours by spending $4 billion in foreign aid and addressing concerns including poverty, economic development, and rule of law. Regarding the issue of competing for influence in Latin America, Biden stated “China can’t match our extraordinary ties and common history with the people of Latin America and the Caribbean.”