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China’s presence in Latin America is not just economic. The country has significantly increased its diplomatic staff while the United States often leaves senior positions in its embassies vacant. Additionally, state officials, journalists, and academics from the region are invited to China free of charge. This expansion worries figures like Republican Senator Marco Rubio, who argues that the United States “cannot afford to allow the Chinese Communist Party to expand its influence and absorb Latin America and the Caribbean into its political-economic bloc.”
Officials in the region counter that by acting as a client, investor, and financier of needed infrastructure, China has filled a void left by the West. For instance, the United States maintains free trade agreements with 11 Latin American countries but shows no interest in expanding that number. Uruguay’s center-right government is in talks with China for a trade deal following being ignored by the United States, while members of the European Union (EU) are blocking the ratification of a trade pact with Mercosur.
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The United States and Europe remain the largest foreign investors in Latin America, but as China’s role as a trading and investment partner grows, especially in South America, governments on the subcontinent are apprehensive regarding being forced to choose between the two global superpowers. “Our policy is to try to maintain a balance,” says one foreign minister.
However, some are advocating for a foreign policy doctrine of “active nonalignment,” a term coined by Jorge Heine, a former Chilean ambassador, evoking the Non-Aligned Movement, established during the Cold War. Heine argues that the protectionism adopted by Donald Trump (and continued by Joe Biden) and the rise of the BRICS group, which includes Brazil and China, signify an irreversible change in the world order. Active nonalignment “allows countries to be close to one power on certain issues and to another on different issues.”
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While this approach may seem logical for Latin America, in practice, its leaders appear to be overlooking the potential political consequences of economic decisions. The region “is not thinking regarding Chinese dominance in terms of government policy in the short and long term,” warns Margaret Myers of the Inter-American Dialogue think tank. This applies to Peru, which, in addition to the port of Chancay, has approved Chinese state-owned companies acquiring a monopoly on electricity distribution in Lima.
The regulator imposed lenient conditions on the transaction, but no government body considered the geopolitical implications. The threat is not that China can cut off the power supply, but that it has acquired a tool to exert subtler pressure. Myers points out that China is attempting to shape the international environment in Latin America to its advantage. This, of course, is something the United States has long sought to do, but in this instance, there is much greater awareness and independent thinking on how to respond.
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“Nobody is thinking in an organized way regarding Chinese investment,” says the minister interviewed. There is no strategic examination of foreign investments, as there is in Europe or the United States. A Chinese state-owned company has a very different relationship with its government than, for example, a European private firm. There is a shortage of experts in the region on China, which funds several of the limited foreign policy research centers that exist.
Both the EU and the US are discussing increased investment in Latin America. At a summit last year, the EU pledged $48 billion by 2027, focusing on green energy, digitalization, and essential minerals. Biden also hosted representatives from 10 Latin American and Caribbean countries for the first summit of the Alliance for Economic Prosperity in the Americas, largely funded by IDB funds. Diplomats in the region say both initiatives are essentially repackaged versions of existing programs.
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More muscle would come from a bill sent to the US Congress in March with bipartisan support, which includes trade benefits, infrastructure financing, and subsidies for investment in “near-shoring”. If approved, it would create more competition for China. For Latin America to leverage the presence of more suitors and minimize the risk of dependency, it needs to be vigilant.
Translated by Antonio Yonz Martinez.
Latin America’s Blind Spot: The Growing Influence of China
The Economic and Political Landscape
China’s presence in Latin America is increasingly felt, not just economically but also diplomatically. While the United States often leaves senior positions in its embassies vacant, China has expanded its diplomatic staff significantly. Additionally, officials, journalists, and academics from the region are frequently invited to China at no cost. This expansion has raised concerns, particularly from figures like Republican Senator Marco Rubio, who warns that the United States “cannot afford to allow the Chinese Communist Party to expand its influence and absorb Latin America and the Caribbean into its political-economic bloc.”
Latin American officials argue that China has filled a void left by the West by acting as a client, investor, and financier of essential infrastructure projects. The United States, despite maintaining free trade agreements with 11 Latin American countries, shows little interest in expanding such agreements. In contrast, Uruguay’s center-right government is actively negotiating a deal with China, following a lack of progress with the United States. The European Union (EU) is also facing challenges in ratifying a trade pact with Mercosur, further highlighting the growing importance of China.
Navigating a Complex Geopolitical Landscape
The United States and Europe remain the largest foreign investors in Latin America. However, as China’s role as a trading and investment partner grows, particularly in South America, governments in the region face the challenge of balancing their relationships with both global superpowers.
Many Latin American countries are seeking a foreign policy doctrine of “active nonalignment,” a term coined by Jorge Heine, a former Chilean ambassador. This concept echoes the Non-Aligned Movement established during the Cold War. Heine argues that the protectionism adopted by Donald Trump (continued by Joe Biden) and the rise of the BRICS group, which includes Brazil and China, mark an irreversible shift in the world order. According to Heine, active nonalignment “allows countries to be close to one power on certain issues and to another on different issues.”
A Lack of Strategic Thinking and The Growing Influence of China
While active nonalignment may offer a sensible strategy for Latin America, many leaders appear oblivious to the potential political consequences of their economic decisions. Margaret Myers of the Inter-American Dialogue think tank warns that the region “is not thinking regarding Chinese dominance in terms of government policy in the short and long term.” This is evident in Peru’s decision to allow Chinese state-owned companies to acquire a monopoly on electricity distribution in Lima.
While the regulator imposed mild conditions on the transaction, the government failed to consider the geopolitical implications. The threat isn’t that China will turn off the power supply but its potential for more subtle forms of pressure. Myers emphasizes that China is actively shaping the international environment in Latin America to benefit its interests. This mirrors the long-standing U.S. approach, but in this case, there is a notable lack of awareness and independent thinking within Latin America regarding how to respond.
A Need for Strategic Analysis and Expertise
A lack of strategic foresight regarding Chinese investment is a recurring theme. “Nobody is thinking in an organized way regarding Chinese investment,” says one minister. There is no systematic assessment of foreign investments as seen in Europe or the United States. The relationship between a Chinese state-owned company and its government drastically differs from that of a European private firm. This highlights a shortage of expertise on China within the region, a critical factor given China’s significant financial support for a limited number of foreign policy research centers.
The West Responds with Limited Impact
Both the EU and the US are striving to increase investment in Latin America. Last year, the EU pledged $48 billion by 2027, focusing on green energy, digitalization, and essential minerals. Biden also hosted a summit with representatives from 10 Latin American and Caribbean countries, launching the Alliance for Economic Prosperity in the Americas, primarily funded by the Inter-American Development Bank (IDB). However, diplomats in the region perceive both initiatives as repackaged versions of existing programs.
A New Bill: A Potential Game Changer?
Greater impact might come from a bill with bipartisan support sent to the U.S. Congress in March. This bill offers trade benefits, infrastructure financing, and subsidies for investment in "near-shoring." If approved, it might increase competition for China.
Latin America’s Dilemma: The Need for Strategic Thinking
For Latin America to leverage increased suitors and minimize the risk of dependence, strategic thinking is critical. The region must recognize the potential political consequences of its economic decisions and develop a more comprehensive understanding of China’s role in the region. This includes cultivating a deeper understanding of China and its investment strategies as well as building the necessary expertise to analyze and navigate these complex geopolitical dynamics.
