China’s Growing Influence in Latin America

Introduction
China’s role in Latin America has grown rapidly since 2000, promising economic opportunity even while raising concerns over Beijing’s influence. China’s state firms are major investors in the region’s energy, infrastructure, and space industries, and the country has surpassed the United States as South America’s largest trading partner. Beijing has also expanded its diplomatic, cultural, and military presence. Most recently, it has leveraged its support in the fight against COVID-19, supplying the region with medical equipment, loans, and hundreds of millions of vaccine doses.

But the United States and its allies fear that Beijing is using these relationships to pursue its geopolitical goals, including the further isolation of Taiwan, and to bolster authoritarian regimes. U.S. President Joe Biden, who sees China as a “strategic competitor” in the region, is seeking ways to counter its growing sway.

What is China’s history with Latin America?
China’s ties to the region date to the sixteenth century, when the Manila galleon trade route facilitated the exchange of porcelain, silk, and spices between China and Mexico. By the 1840s, hundreds of thousands of Chinese immigrants were being sent to work as “coolies,” or indentured servants, in Cuba and Peru, often on sugar plantations or in silver mines. Over the next century, China’s ties to the region were largely migration-related as Beijing remained preoccupied with its own domestic upheaval.

Most Latin American countries recognized Mao Zedong’s communist government following U.S. President Richard Nixon’s trip to Beijing in 1972, but it was not until after China’s entry into the World Trade Organization in 2001 that they began to form robust cultural, economic, and political ties. Today, Peru has the region’s largest Chinese diaspora community, amounting to about 5 percent of the population, or one million people. Other countries with large diaspora communities include Brazil, Cuba, Paraguay, and Venezuela.

How have economic relations developed?

In 2000, the Chinese market accounted for less than 2 percent of Latin America’s exports, but China’s rapid growth and resulting demand drove the region’s subsequent commodities boom. Over the next eight years, trade grew at an average annual rate of 31 percent, reaching a value of $180 billion in 2010. By 2021, trade totaled $450 billion, and economists predict that it could exceed $700 billion by 2035. China is currently South America’s top trading partner and the second-largest for Latin America as a whole, after the United States.

Latin American exports to China are mainly soybeans, copper, petroleum, oil, and other raw materials that the country needs to drive its industrial development. In return, the region mostly imports higher-value-added manufactured products, a trade some experts say has undercut local industries with cheaper Chinese goods. Beijing has free trade agreements in place with Chile, Costa Rica, and Peru, and twenty Latin American countries have so far signed on to China’s Belt and Road Initiative (BRI). (Talks on a free trade agreement with Ecuador began in February 2022.)

Chinese overseas foreign direct investment (OFDI) and loans also play a major role. In 2020, Chinese OFDI in Latin America amounted to roughly $17 billion, mostly in South America. Meanwhile, the state-owned China Development Bank and the Export-Import Bank of China are among the region’s leading lenders; between 2005 and 2020, they together loaned some $137 billion to Latin American governments, often in exchange for oil and used to fund energy and infrastructure projects. Venezuela is the biggest borrower; it’s taken on loans worth $62 billion since 2007. China is also a voting member of the Inter-American Development Bank and the Caribbean Development Bank.

However, these ties have raised some concerns, particularly among regional governments. While Chinese loans often have fewer conditions attached, dependence on them can push economically unstable countries such as Venezuela into what critics call “debt traps” that could result in default. Critics also say that Chinese companies bring lower environmental and labor standards, and they warn that China’s growing control over critical infrastructure such as energy grids poses national security risks. There are also fears of economic dependency in countries such as Chile, which sent nearly 39 percent of its total exports to China in 2020.

What are China’s political interests in the region?

At the forefront is China’s desire to expand its sphere of influence through what it calls “South-South Cooperation,” a development framework focused on aid, investment, and trade. China’s focus on soft power—including strengthening cultural and educational ties—has helped Beijing build political goodwill with local governments and present itself as a viable alternative partner to the United States and European states.

Since former Chinese President Jiang Zemin’s landmark thirteen-day tour of Latin America in 2001, there have been dozens of high-level political exchanges. President Xi Jinping has visited the region eleven times since he took office in 2013. In addition to several bilateral agreements with countries in the region, China has signed comprehensive strategic partnerships—the highest classification it awards to its diplomatic allies—with Argentina, Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela.

China’s push to isolate Taiwan is another major factor. With Beijing refusing diplomatic relations with countries that recognize Taiwan’s sovereignty, Latin America’s support for the island has dwindled in recent years; only eight countries in the region still recognize it. The Dominican Republic and Nicaragua most recently flipped their positions after being offered financial incentives by China, including loans and infrastructure investments. Experts say the remaining holdouts, such as Haiti, are facing increased pressure.

Meanwhile, some observers say growing China-Latin America ties are bolstering authoritarian governments, including those in Cuba, Nicaragua, and Venezuela. China’s role in such countries is that of “an incubator of populism,” says Evan Ellis, a research professor of Latin American Studies at the U.S. Army War College Strategic Studies Institute. “It’s not that China’s trying to produce antidemocratic regimes, but that antidemocratic regimes find a willing partner in the Chinese.”

What security ties do they have?

Chinese government strategy on Latin America, as defined in its 2015 Defense Strategy White Paper and others, has underscored the importance of security and defense cooperation. China’s efforts to forge stronger military ties with its Latin American counterparts include arms sales, military exchanges, and training programs. 

Venezuela became the region’s top purchaser of Chinese military hardware after the U.S. government prohibited all commercial arms sales to the country beginning in 2006. Between 2009 and 2019, Beijing reportedly sold more than $615 million worth of weapons to Venezuela. Bolivia and Ecuador have also purchased millions of dollars worth of Chinese military aircraft, ground vehicles, air defense radars, and assault rifles. Cuba has sought to strengthen military ties with China, hosting the Chinese People’s Liberation Army for several port visits.

China’s growing presence is also visible in its participation in  peacekeeping operations in Haiti, as well as its military training exercises and provision of supplies to local law enforcement across the region. For example, China has provided Bolivian police departments with anti-riot gear and military vehicles, and donated transportation equipment and motorcycles to police forces in Guyana and Trinidad and Tobago.

What has been China’s role during the COVID-19 pandemic?

Many analysts say China’s “COVID-19 Diplomacy” in Latin America is an effort to improve its image and curry favor with regional governments. This has included distributing medical equipment such as ventilators, diagnostic test kits, and masks; offering billions of dollars in loans for countries to purchase Chinese vaccines; and investing in local vaccine production facilities.

China has delivered more than three hundred million vaccine doses to Latin America, over three times that provided to the region by the global COVAX initiative. Additionally, at least a dozen countries in the region have signed vaccine contracts with Beijing, some of which include technology transfers and research cooperation with Chinese vaccine developer Sinovac. Chile is among the top recipients, with 75 percent of its COVID-19 vaccination coverage coming from Chinese vaccines; Argentina, Brazil, Colombia, Mexico, and Peru have also purchased hundreds of millions of doses.