Latin America is becoming China’s backyard – BRINK – Conversations and Insights on Global Business

Growing economic needs, Chinese ambition and hard cash give China an increasingly strong presence in Latin America. Underlying reasons for China’s success include China’s domestic demand for Latin American agriculture, mining and commodities, and the failure of the United States to take concerted interest. to the region, as well as political unrest in Washington. The old idea, enshrined in the monroe doctrinethat Latin America is “America’s backyard”, over which it could dominate, has been relegated to the dustbin of history.

The Monroe Doctrine has been superseded

It’s hard not to be impressed by the scale of China’s growing economic footprint in the region. Last year, China’s trade with Latin America reached $450 billion compared to $180 billion in 2010. According to the World Economic Forum, “on the current trajectory, LAC-China trade is expected to exceed 700 billion dollars by 2035more than double that of 2020.”

As a result, China is now the biggest trading partner for many South American countries, including Peru, Chile and Argentina. This is a particularly impressive feat, considering that at the turn of the century in 2000, Chinese trade with the region was just 2%.

Chinese trade with the region is boosted by trade in natural resources and raw materials that the Asian giant needs for its growing economic footprint and its agricultural products – like the soybeans needed to sustain its massive population.

It’s not just trade

Diplomatic, cultural, military, financial and investment ties are everywhere. Twenty of the 33 nations in Latin America and the Caribbean have joined China’s Belt and Road Initiative. Some of the signing ceremonies have been accompanied by pomp and circumstance, such as Argentinian President Alberto Fernández’s visit to China earlier this year when he attended the Winter Olympics in Beijing and held a grand signing ceremony with President Xi Jinping.

The BRI partnership opens the door not only to greater trade but also to investment, as among other things the agreement facilitates the “Chinese banks and companies …to finance and build roads, power plants, ports, railways, 5G networks and fiber optic cables around the world. Chinese investment in the region has also increased rapidly, especially in strategic sectors such as mining and power generation. In 2020, China’s foreign direct investment in the region amounted to $17 billion, with most concentrated in a few countries like Brazil, Argentina and Mexico.

China has also become one of the main lenders to major oil-producing countries in the region, such as Venezuela and Ecuador. Chinese investments have focused on extractive industries, but according to the IMF, they are “increasingly directed towards manufacturing and service industries such as transport, electricity, financial services and information technology. and communication (ICT)”.

COVID diplomacy

Beyond trade and investment, China has engaged in aggressive diplomacy in the region at a time when US leaders were looking elsewhere. During the COVID pandemic, China has been rushing to provide many countries in the region with Vaccines made in China against the coronavirus as well as PPE equipment. President Xi has also been a frequent visitor to the region, making 11 trips to Latin America since 2012, compared to one trip for former President Donald Trump and none for President Biden.

Beyond trade and investment, China has engaged in aggressive diplomacy in the region at a time when US leaders were looking elsewhere.

While China has stepped in to bring needed investment and trade to the region, its presence comes at a price. The Chinese regime does not prioritize democracy or civil rights, and investments often come at the expense of poor environmental, labor and human rights standards. A report by the Collective on Chinese Finance and Investment, Human Rights and the Environment found that “many projects supported by China are also among the most flagrant violators of human rights and environmental law. They neglect the needs of local and indigenous communities and contribute to deforestation and pollution.

While China has the economic muscle and the strategic desire to maintain a long-term presence, it also has challenges in the region. One of the main ones is the awareness created by the pandemic that new supply chains must be diversified and geographic proximity suppliers is not as negligible as one might think.

US nearshoring is a counterweight to Chinese dominance

There is a new bipartisan will in the US Congress and the White House to expand US investment in the region to potentially develop manufacturing supply chains closer to the continental United States. And the Latin governments seize it: Just listen to Caribbean governments explain to American manufacturers the benefits of setting up their next factory just four days by boat from Miami. Such a move would help boost US investment in the region and create new economic interdependence.

US regulators are increasingly focused on slowing China’s tech expansion, with new laws now restricting both exports and imports. This puts further pressure on Latin governments to be cautious about the technologies they buy from China.

The United States could do more to strengthen and utilize the benefits of its close cultural ties to the region, developed over decades of closeness and the large number of Latin American immigrants to the United States. Miami is a win-win situation, a phrase popular with Chinese government officials.

The United States must look beyond immigration

There is a growing choir of voices in the United States warning of the need for a more robust response to China’s presence in the region, but a thoughtful US program for the region is sorely lacking. Ask any Latin American government official and you’ll be infuriated by the languid responses of US government counterparts to threats and opportunities in the region.

The U.S. focus on Latin America must go beyond a concern with immigration to consider creating new forms of trade and investment that take the current relationship to a new level. . Chief among them is how to position the US trade relationship in areas such as renewable energy, strategic minerals, such as lithium, and information technology. Focusing on these growing and innovative sectors will open new doors.