Assad Raza is an Active Component U.S. Army Civil Affairs Officer with deployment experience throughout the Middle East. He holds an M.A. in Diplomacy with a concentration in International Conflict Management from Norwich University, and is a graduate of The Western Hemisphere Institute for Security Cooperation Command and General Staff Officer Course at Fort Benning, Georgia. He can be found on Twitter @assadraza12. Divergent Options’ content does not contain information of an official nature nor does the content represent the official position of any government, any organization, or any group.
Title: Assessing China’s Economic Influence in Latin America
Date Originally Written: April 12, 2020.
Date Originally Published: May 25, 2020.
Summary: Similar to the Soviet Union during Cold War, China is seeking victory without war. In this Latin America case however, China is leveraging its economic instrument of power to achieve influence instead of supplying fellow communists with materiel like the Soviet Union did. China’s efforts in this arena are a threat to U.S. interests in Latin America.
Author and / or Article Point of View: The author believes China’s investments and financial deals throughout Latin America can threaten U.S. interests in the long-term.
Text: In 2008, China published a White Paper expressing their long-term goals in Latin America. This White Paper highlighted several areas of cooperation to include trade, investment, and financing throughout the region[1]. Over a decade later, China almost built a canal in Nicaragua, negotiated several free trade agreements with countries like Brazil and El Salvador, and funded several infrastructure projects throughout Latin America. Unfortunately, China has successfully used its economic instrument of power to coerce countries and legally advance their global interests against competitors like the United States.
Over the past decade, China has become the largest trading partner to countries like Brazil and El Salvador. However, these trading dependencies have caused countries like Brazil to fall into recessions because of their reliance on China’s economy, as seen in 2015[2]. China’s approach has increased Latin American countries dependencies with them, which can be a risk to their economies and the region. A good example is China’s loans-for-oil deal with Venezuela, which contributed to Venezuela’s economic collapse due to falling oil prices and their inability to repay Chinese loans[3]. However, China’s trade is not limited to only natural resources; it also includes building infrastructure throughout the region as another means to trap countries into default, holding them hostage to more Chinese coercion.
China has taken on several infrastructure projects to consolidate its influence throughout Latin America. In December 2019, the President of El Salvador met with Chinese President Xi Jinping to finalize a deal on several infrastructure projects for the country[4]. These projects include a large sports stadium and a water treatment plant[5]. This deal came after El Salvador broke diplomatic ties with Taiwan and publicly announcing their support to the One-China Policy[6]. The agreement with El Salvador demonstrates China’s ability to undermine international support for Taiwan through investment opportunities in developing countries. These risky investments in Latin America are similar to China’s Belt and Road Initiative, in countries throughout Asia.
Throughout Asia and Africa, China has leveraged long-term leases of ports in vulnerable countries that have failed to pay off loans. For example, China was able to negotiate a 99-year lease over the port of Hambantota with Sri Lanka due to debt[7]. This long-term lease to pay off loans is not isolated to Asia but could be used to leverage territories in Central and South America with countries in debt to China. China’s investments are strategic, knowing that developing countries in Latin America that default on payments may feel pressured to lease out territories like their ports.
China has already attempted this approach in Central American countries like El Salvador. In 2018, China tried to purchase Isla Perico, an Island off the coast of El Salvador, and to relocate its population to the mainland[8]. China also requested a 100-year lease for areas near a port and tax exemptions for Chinese companies[9]. More importantly, these offers came at a time when the U.S. had suspended aid to El Salvador because of mass migration issues leaving a gap for China to exploit. Although the U.S. has temporarily stalled these negotiations, it demonstrates China’s ability to target vulnerable states to advance their agenda legally.
Chinese investment in Latin America also includes the technology sector. This technology consists of similar systems used in China to conduct surveillance on their people. In 2016, Chinese telecom company ZTE Corp assisted with Venezuela’s “fatherland card” that tracked citizens and linked it to government subsidized food and health programs[10]. The risk with this technology is that other governments may want to acquire it from China and use this to reward loyalists and oppress those perceived as not loyal, increasing instability, as seen in Venezuela. This pattern is worrying and without mitigation could be a harbinger of more Orwellian-type surveillance state behavior spreading throughout Latin America.
China’s interests throughout Latin America continue to increase, as seen with their recent attempt to lease port lying areas in El Salvador. Much like in Sri Lanka, China aggressively pursues developing countries to legally entrap them and coerce them into long-term commitments for compensation. Although their priority in Latin America is to gain an economic foothold, their actions also shape Latin American perceptions and buys political influence in the region. China’s economic advancement in Latin America has the potential to become a national security threat to the U.S. and its interests throughout the region.
Endnotes:
[1] Peters, E. (2015). China’s Evolving Role in Latin America: Can It Be a Win-Win? (pp. 5-11, Rep.). Atlantic Council. Retrieved April 12, 2020, from www.jstor.org/stable/resrep03629.5
[2] Patey, L. (2016, November 21). Trouble Down South: Xi Jinping’s Latin American Tour. Foreign Affairs. Retrieved April 12, 2020, from https://www.foreignaffairs.com/articles/south-america/2016-11-21/trouble-down-south
[3] Guevara, C. (2020, January 13). China’s support for the Maduro regime: Enduring or fleeting? Atlantic Council. Retrieved April 12, 2020, from https://www.atlanticcouncil.org/blogs/new-atlanticist/chinas-support-for-the-maduro-regime-enduring-or-fleeting
[4] Renteria, N. (2019, December 3). China signs on for ‘gigantic’ investment in El Salvador infrastructure. Reuters. Retrieved April 12, 2020, from https://www.reuters.com/article/us-el-salvador-china/china-signs-on-for-gigantic-investment-in-el-salvador-infrastructure-idUSKBN1Y7266
[5] Ibid.
[6] Ibid.
[7] Schultz, K. (2017, December 12). Sri Lanka, Struggling with Debt, Hands a Major Port to China. New York Times. Retrieved April 12, 2020, from https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-china-port.html
[8] Londono, E. (2019, September 21). To Influence El Salvador, China Dangled Money. The U.S. Made Threats. New York Times. Retrieved April 12, 2020, from https://www.nytimes.com/2019/09/21/world/americas/china-el-salvador-trump-backlash.html
[9] Ibid.
[10] Berwick, A. (2018, November 14). How ZTE helps Venezuela create China-style social control. Reuters. Retrieved from https://www.reuters.com/investigates/special-report/venezuela-zte