Chinese Interest in Latin America and the Caribbean

China Interest and Investment in Latin America and the Caribbean

By CW4 Charles Davis.

Never before in modern human history has a state so powerful, so fundamentally put at risk the global institutional order, security, freedoms and prosperity of the rest, employing an approach that was so superficially benign, and disarming its targets from within by playing to their short-term material interests. – Evan Ellis 1/27/2021

In June 2022, the United States hosted its 9^th Summit of the Americas. However, a summary Congressional Research Report indicates only 23 of the 35 member heads of state participated. [1] The decision to boycott, by so many leaders, hinged on President Biden’s decision to exclude Cuba, Nicaragua, and Venezuela. And while the leaders of Cuba, Nicaragua and Venezuela are undesirable partners for the United States, the response from other Latin American Countries reinforces a regional perception that only US interests are a priority for the United States.

Final commitments from the Americas Summit are firmly nested in the Biden Administration’s climate initiatives as it seeks to establish a resilient Caribbean region regarding natural disasters, catastrophic weather events, and migration. However, on a geo-political stage, China may have been the big winner at an event it didn’t even attend. With every American misstep, China’s influence in Latin America and the Caribbean (LAC) continues to expand.

China’s Belt and Road Initiative

Based on the Green Finance & Development Center reports, of the 33 countries in LAC, 20 state leaders have committed to China’s Belt and Road Initiative (BRI) in the region. [2] Key among those participants are Argentina, Cuba, Venezuela, Panama, and Chile. While not a member, Brazil remains heavily tied to significant loan obligations as well. [3] These economic ties did not occur overnight, but the People’s Republic of China (PRC) has made significant inroads over the past 20 years while the United States remained focused on the Middle East. Chinese trade in LAC has continued to rise. In 2002 trade peaked at 18 billion USD, reaching 449 billion USD in 2021. [4]

From 2005 to 2020 the PRC has used state owned China Development Bank and the Import and Export Bank of China to secure an estimated 99 loans at a staggering 137 billion USD, with Venezuela, Brazil, Ecuador and Argentina carrying 90% of that debt. [5] These same institutions are the leading lenders in the region while China holds voting interest in local financial institutions like the Inter-American Development Bank and the Caribbean Development Bank. [6] This financial strength has secured China’s place as South America’s top trading partner and primary lender in energy and infrastructure.

The Council on Foreign Relations (CFR) asserts; China has invested $73 billion USD in LAC’s raw materials sector since 2008, establishing refineries and processing plants for coal, copper, natural gas, oil, and uranium. [7] The CFR also indicates China’s focus is now the Lithium Triangle countries of Argentina, Bolivia, and Chile, which the PRC believes accounts for more than half of the world’s lithium, a metal necessary to produce batteries. [8]

China in United States’s Backyard

During a June 2021 conference on US-China Strategic Competition, U.S. Southern Command (USSOUTHCOM) Commander, Adm. Craig Faller, commented on the importance of the LAC: “I look at this region, our neighborhood here as a region of real promise. The proximity, location matters, the distance to the United States is key. The people, those values associated with the people and the cultural connections [are strategically important]”. [9] He further spoke of concerns regarding Chinese presence and influence across the continent, commenting on the port of Ushuaia (the furthest port in the southern hemisphere) and the Panama Canal. Both are tied to key commercial navigation routes and of significant interest to China. With Panama a key BRI partner and Argentina a significant investment partner of China, his concerns are well founded.

Maps: Left Google Maps, right, Wikipedia (OpenStreetMap)

The pan-Asian professional services firm, Dezan Shira and Associates, produces the Silk Road Briefing, an online publication which focuses on China’s BRI globally. Their May 2022 assessment of Chinese interests in Ushuaia asserts: “Chinese involvement in the Beagle Channel would also mean that it would be capable of exerting some control of US commercial shipping both north and south of the South American continent.” [10] The Panama Canal is operated with assistance from Chinese logistics firms on both ends of the canal, at Margarita Island and the Colón Free Trade Zone. [11] Panama is also a member of the Belt and Road Initiative. Given China’s claim to be a near Artic partner, its relationship with the Russian Federation on northern projects and its interests and investment in Argentina and Panama, it seems likely China will be at least the gate keeper if not the key holder to global commercial shipping access.

In March of 2022, USSOUTHCOM CDR General Laura Richardson addressed specific concerns regarding Chinese presence and influence in Panama over activities associated with the Panama Canal. GEN Richardson expressed concern the US has not been as invested in projects important to Panama and this has allowed the PRC inroads with this key partner. She also mentioned joint Argentina and PRC space projects, which now allow the PRC to track US satellites. Richardson explained Beijing’s ongoing investments in Central and South American infrastructure, particularly ports, follow the patterns linked to debt trap financing in Africa. Right now, the “Chinese have 29 port projects” across the Southern Command (SOUTHCOM), including a major one in El Salvador that has economic implications for other Central American nations. [12]

Community of Latin American States

The Community of Latin American States (CELAC) provides additional insight into Chinese political influence in LAC. Founded in 2011 as a regional bloc of 32 member states, CELAC serves as an alternative to the Organization of American States (OAS), which is supported politically and economically by the United States. Mexico’s President, Manual Lopez Obrador, serves as the organization’s current President and is pursuing an agenda which would model the European Union, thus negating a need for the American led OAS. This vision is supported through affiliations with China, Russia, Turkey and several Arab States. [13]

The China-CELAC Joint Action Plan for Cooperation in Key Areas addresses political and security cooperations as well as financial support. The plan includes initiatives on trade and links the previously discussed financial organizations to future partnerships through China-LAC Infrastructure Cooperation Forum. Other components of the plan emphasize agriculture, industry, and science and technology partnerships. [14]

Latin American and Caribbean nations with diplomatic ties with Taiwan. (Taiwan Ministry of Foreign Affaris, 2023)

Image: Latin American and Caribbean nations with diplomatic ties with Taiwan. (Taiwan Ministry of Foreign Affairs, 2023)

Through the PRC’s sustained presence in these organizations and LAC’s growing reliance on Chinese financial institutions, the PRC has shifted the region’s relationship away from Taiwan. President Xi Jinping has visited the region eleven times since he took office in 2013, and now only eight countries in the region still recognize Taiwan’s sovereignty. The Dominican Republic and Nicaragua are the most recent countries to break ties with Taiwan. [15] It is not surprising that Nicaragua would demonstrate a willingness to partner with China as its relations with the United States have continued to deteriorate. In November 2021 President Biden addressed Nicaragua’s election, stating “What Nicaraguan President Daniel Ortega and his wife, Vice President Rosario Murillo, orchestrated today was a pantomime election that was neither free nor fair, and most certainly not democratic.” [16]

Chinese Technology

While the United States is experiencing the cost of deteriorating partnerships and projects across the LAC, LAC states are also forced to exam the cost of partnering with the PRC. Chinese technology is being used to bolster surveillance throughout the hemisphere. While this capability aids in fighting crime and monitoring natural disasters, it also provides data and intelligence collection to the PRC. Evan Ellis, writer for The Center for Strategic and International Studies (CSIS), suggests integrators such as Huawei continue to leverage technologies, especially facial recognition and biometrics programs nested in big data repositories. These technologies originate in the PRC where individual privacy considerations are minimal. China then offers this capability to LAC, “where insecurity [and] the fight against corruption make Chinese solutions attractive”. [17] The United Kingdom, Australia, and the United States have already experienced the costs of allowing companies like Huawei access to national digital infrastructure.

Chinese Military Engagement

As in every other region of the PRC’s Belt and Road Initiative, economic and political relationships are followed by engagements with the military. Evans also asserts, “For the [People’s Liberation Army] PLA, engagement in Latin America supports multiple national and institutional objectives as a subset of its global engagement. One of the PRC’s economic and strategic goals is building strong all-around relationships with countries in the region, which includes forging bonds with Latin American militaries.” [18] Just as with the US military industries, the PLA weapons sales allow for many continuing relationships through training, service contracts and equipment upgrades, and professional military education opportunities.

Defense is a key component of the CELAC Action Plan, incorporating a defense forum and fighting transnational organized crime, nuclear proliferation, and violent extremism. The plan also offers exchange opportunities for professional military education to LAC and includes opportunities for PLA members to attend jungle warfare instruction. Given how much of the PRC’s sub-Saharan playbook is being used towards goals in the LAC, the US should take lessons from China’s covert efforts to establish bases. In the United Arab Emirates, classified satellite imagery led U.S. officials to conclude that the Chinese were building some sort of military installation at the port. [19] Concerning Equatorial Guinea, the US Department of State indicated, “As part of our diplomacy to address maritime-security issues, we have made clear to Equatorial Guinea that certain potential steps involving [Chinese] activity there would raise national-security concerns.” [20]

Mr. Ellis also alluded to potential US security concerns regarding the PRC’s military goals being nested in infrastructure projects. “Some have speculated [PLA base construction] could occur as a product of construction work or port concessions going to Chinese companies in Panama, or through the port of La Union in El Salvador. Such caution in close proximity to the United States is consistent with PRC reluctance to acknowledge even the military character of its only current foreign military port facility, which is located in Djibouti, in Africa.” [21] The PRC continues to lead with Economics but will certainly shore up those efforts with its Diplomatic and Military elements of national power.

Consequences of Limited U.S. Interest in LAC

Of all the LAC countries, Peru has the region’s largest Chinese diaspora community, amounting to about 5 percent of the population, or one million people. The PRC’s presence in the LAC will only grow, and the United States will likely have to weigh the consequences of its limited interest in the LAC over the past 20 years. Professor Richard Kilroy recently presented potential scenarios for OAS and CELAC at the Homeland Defense Academic Symposium. There is value in his argument:

“For the OAS to maintain its relevancy in a changing global security environment, it needs to adapt to address the concerns of its member states. President Manual Lopez Obrador’s call for CELAC to replace the OAS should not be dismissed. Rather it should serve as a wake-up call to the United States and the OAS bureaucracy to reimagine its future in the Western Hemisphere. Key drivers for this scenario would include: a new organization structure in the OAS, to include modeling the UN’s Security Council with six permanent members (Argentina, Brazil, Canada, Chile, Mexico, and the United States) and eight rotating members (two each) from the sub-regions (Caribbean, Central America, Southern Cone, Andean Ridge); movement of the headquarters out of Washington, D.C. to a more central location in the region, such as Panama, utilizing the former military facilities of the U.S. Southern Command which moved to Miami, Florida in 1999; creation of an office of military affairs to coordinate peacekeeping or peace enforcement operations by member states, to include disaster response, pandemics, and responding to transnational criminal threats; and an empowered Secretary General with the ability to act both regionally and globally in expanding the OAS’s ability to interact with other international governmental organizations in confronting trans-regional threats, to include climate change and environmental security.” [22]
Professor Richard Kilroy

Regardless of the chosen path forward, the US must re-evaluate the level of national interest placed on what SOUTHCOM leaders have framed as our back yard. Foreign policy in the region must include not only what is nested in the US National Security Strategy but also that which serves those relevant and specific issues of the member states of the LAC region.