The People’s Republic of China is moving into Latin America in force.
Excluding Mexico, China is the region’s largest trade partner. In 1981, Cuba was the only Latin American country trading more with China than the U.S.
China’s two-way trade with the region was $12 billion in 2000, the year before it joined the World Trade Organization. In 2021, two-way trade jumped a stunning 41% to $450 billion. The Atlantic Council projects China’s trade with Latin America will exceed $700 billion in 2035.
Thus, as big a presence as China now has in the region, expect it to become even larger. “America should brace for a significant expansion of Chinese influence in Latin America this year,” Robert Evan Ellis, Latin America research professor of the U.S. Army War College, tells Newsweek.
For one thing, as Peru’s Julio Armando Guzman explains in Foreign Affairs, “the region is headed for an economic crisis that China is primed to exploit.”
Yes, China is ready. Beijing just dropped its COVID travel restrictions, so the country’s state-owned enterprises will be fanning out across the region looking for new deals. With the evident downturn in the Chinese economy—the economy could be contracting—these large businesses have all the more reason to search for deals elsewhere.
Moreover, China has laid all the necessary groundwork for exercising influence. Its average annual direct investment in Latin America in the 2020-2021 period was four times what it was in the five previous years.
In any event, Latin America is open to Chinese investment in light of the “Pink Wave,” the election of “progressive” governments throughout the region.
The tide began in Mexico in 2018 with the election of “AMLO,” Andres Manuel Lopez Obrador. The wave continued with the return to power in Brazil, the region’s most important state, of Luiz Inacio Lula da Silva. In between, seven other countries moved leftward, including long-time U.S. ally Colombia.
And the “Pink Wave” is probably not over. This year and next, 11 more Latin American countries will hold presidential elections.
“China does not overtly try to manipulate elections in Latin America like the Soviet Union did, but when populists come to power these days, Beijing takes advantage of the situation with commodity purchases and contracts structured to its benefit,” Ellis told this publication. “Chinese money thus enables bad governance. Think of the Chinese as pay-day lenders.”
Those Chinese lenders then descend on a country after an election. Beijing, for geopolitical reasons, has turned on a big green light for the region. The Belt and Road Initiative of Chinese ruler Xi Jinping is faltering in most parts of the world, but it is doing well in Latin America and the next-door Caribbean, where 21 countries have assented to Beijing’s sweeping infrastructure program.
Many of the Chinese projects are expensive, faulty, and ill-conceived, like the now-abandoned Yachay City in Ecuador and the troubled Coca Codo Sinclair hydroelectric project, built near an active volcano in that country. There are more than 17,000 cracks in the dam’s eight turbines. That’s what Ecuador gets for being “at the forefront of Beijing’s push into the region.”
China has been promoting other expensive and fanciful dreams. There is, for instance, the Nicaragua Canal. The project was nominally a Chinese private-sector initiative, but it had support at the highest levels in Beijing. The canal project was abandoned, but there is now talk of a possible revival.
Another example is the 3,300-mile Atlantic-Pacific railroad linking Brazil and Peru. The project had the personal backing of Xi Jinping, who announced it in 2014. Brazil dropped the plans for the “Railway to the Pacific” over the Andes because it raised “absurd” engineering challenges and was not commercially viable. With the return to power of Lula in Brazil and Peru now pink, however, Xi may be able to revive his pet project.
All of these projects, well-conceived or not, further entrench Chinese influence in the region. The most important ones are the ports.
Let’s go to Peru. About 47 miles north of the capital of Lima, Beijing is pouring $1.3 billion into the Chancay port. There are plans to commit another $1.7 billion in related facilities. COSCO Shipping Ports, a unit of the Chinese shipping line, is the main investor in the Peruvian “megaport,” with a 60% stake.
When completed next year, this could be China’s most important port project in Latin America. Chancay will become a regional hub that could, as some say, “redefine shipping lines in the entire southern Pacific.”
China has some 40 port projects in the region, including one on America’s doorstep, Hutchison Whampoa’s pier in Baja California.
In times of war, these facilities could come in handy to, say, the People’s Liberation Army. “I was just in Panama about a month ago and flying along the Panama Canal and looking at all the state-owned enterprises from [China],” said General Laura Richardson, head of the U.S. Southern Command, in July at the Aspen Security Forum. “They look like civilian companies or state-owned enterprises that could be used for dual use and could be quickly changed over to a military capability.”
“In wartime, or in the months before war, China may be able to use its economically based influence in Latin American capitals to induce the region to limit U.S. access to its ports and airspace, as well as to put U.S. deployment and sustainment flows and the U.S. homeland at risk,” Ellis notes. “With China’s commercial presence, there are also numerous ways the Chinese could shut down the Panama Canal.”
Now, China is also eyeing the ability to close off the Strait of Magellan, at the tip of South America. Beijing is trying to get approval to, in effect, establish a navy base in Tierra del Fuego in Argentina.
How does China get the right to operate military bases in Latin America? Simple: Beijing is flashing cash, and Washington is not. It is but one manifestation of American neglect and the discarding of the Monroe Doctrine.
Many call Latin America “America’s backyard.” Actually, it now looks like China’s.
Gordon G. Chang is the author of The Coming Collapse of China. Follow him on Twitter: @GordonGChang.
The views expressed in this article are the writer’s own.