US vs. China’s Tug-of-War for Strategic Influence in Latin America
Latin America’s geopolitical landscape is witnessing a strategic competition between the US and China, each vying for influence through economic, technological, political, and military engagements.
While Mexico and Central American countries maintain close ties with the United States, South American nations, including Brazil and Argentina, have different global aspirations and regional dynamics. This distinction is even more pronounced among the Andean countries—Bolivia, Colombia, Ecuador, and Peru. Apart from geographical and cultural commonalities, these countries share significant political and economic bonds through the Andean Community, a regional alliance of strategic importance.
Trade and Investments
Latin America’s trade dynamics have undergone a significant shift in recent years, particularly between the Andean countries and global powers like the United States and China. Historically, the US was one of the primary trading partners in the region. However, China’s role has expanded remarkably over the past decade, driven by its insatiable demand for primary-extractive resources such as minerals and oil.
Colombia and Ecuador have experienced varying degrees of trade balance. While Ecuador’s exports to China are on the rise, rivaling its trade with the US, Colombia’s trade with China has stagnated. However, despite this stagnation, Colombia’s trade with the US remains robust, a testament to its economic stability.
Venezuela’s case is unique due to its heavy reliance on oil exports. Ongoing conflicts and US sanctions have forced Venezuela to pivot towards China, seeking new markets for its oil. Despite declining export figures since 2018, Venezuela has sustained energy cooperation with China through loans and investments tied to oil exports.
The Trump administration viewed China as a strategic competitor, which led to a withdrawal from the Trans-Pacific Partnership (TPP). This move was seen as a boon for China, which has aggressively pursued trade agreements worldwide. China’s trade expansion in Latin America, particularly in the Andean region, underscores its growing influence and strategic importance in securing natural resources.
Chinese investments in Latin America have also grown, particularly in sectors previously overlooked. While American investments remain significant, Chinese firms have ventured into mining, energy, and infrastructure projects, especially in Peru and Ecuador. For instance, Chinese state-owned enterprises like the China National Offshore Oil Company (CNOOC) have long operated in the hydrocarbon sector in Venezuela, Peru, and Ecuador.
The acquisition of companies in the extractive and energy sectors has given China a substantial foothold in the region. China’s entry into the electricity sector is noteworthy, as it acquired assets from US companies like Sempra Energy, which oversees electrical distribution in Chile and Peru. These strategic investments indicate China’s superior financial capabilities and long-term vision for the region.
Financing Dynamics
China’s financial influence in Latin America has seen ebbs and flows, mainly through institutions like the China Development Bank (CDB) and the Export-Import Bank of China (Eximbank). Although Chinese loans to the region spiked from $8 billion in 2011 to $13 billion in 2015, they have significantly dwindled in recent years. By 2020, for the first time in 15 years, Latin America had yet to receive any public financing from China. This reduction is particularly pronounced in the Andean region, where bilateral financial support has been minimal since 2016, with Ecuador being a notable exception.
Chinese loans have been pivotal for countries facing unfavorable economic conditions, such as Venezuela, Brazil, and Ecuador. These loans, often in exchange for natural resources, are typically exempt from the political conditions imposed by Western financial institutions like the IMF and the World Bank. This financial flexibility has allowed China to establish strong ties with countries with strained relations with the United States.
Despite the decline in public financing, Chinese private banks continue to extend loans, particularly in Chile, Ecuador, Peru, and Colombia. Additionally, the Asian Infrastructure Investment Bank (AIIB), under Chinese leadership, has become a significant player, with Ecuador, Chile, and Peru among its members. This indicates a sustained, albeit evolving, financial presence in the region.
Technological Competition
China’s rapid technological advancements have positioned it as the primary competitor to the United States. With a substantial budget for research and development, China leads in registered patents and scientific publications. Initiatives like the “Digital Silk Road,” part of the broader Belt and Road Initiative, aim to disseminate Chinese technology globally. This is aligned with the “Made in China 2025” plan, which seeks to close the technological gap with traditional powers.
Chinese tech giants like Huawei, Xiaomi, and ZTE have established a significant presence in Latin America, investing in data centers, telecommunication networks, and innovative city projects. Huawei, in particular, has faced scrutiny and espionage allegations from the US, which led to its inclusion in the US “entity list,” restricting American firms from dealing with it. Despite this, Huawei’s longstanding presence in Latin America, including initial 5G infrastructure projects in Bolivia, Chile, Colombia, Ecuador, and Peru, underscores its deep-rooted influence.
The US has countered China’s technological advances with initiatives like the “Clean Network,” which excludes Chinese technology from critical infrastructure. Ecuador has joined this initiative, influenced by the terms of a $3.5 billion loan from the US International Development Finance Corporation, which stipulated avoiding Chinese technology.
On the other hand, Chile has maintained a neutral stance, allowing Huawei to expand its data centers and fiber optic networks. Colombia has also resisted US pressure to exclude Chinese firms from 5G projects. These varied responses reflect the complex dynamics of technological competition in the region.
Political Competition
China’s political engagement with Latin America has grown, marked by high-level visits and establishing intergovernmental mechanisms for dialogue and cooperation. All Andean countries, except Colombia, have hosted President Xi Jinping on official visits, highlighting China’s proactive diplomacy. In contrast, the US has struggled to maintain robust political ties with left-leaning governments in the region.
China’s diplomatic strategy emphasizes building alliances irrespective of political ideologies. It has established various cooperative associations with Andean countries, ranging from Cooperative Associations with Colombia to Integral Strategic Associations with Chile, Ecuador, Peru, and Venezuela. The China-CELAC Forum, established in 2014, exemplifies China’s multilateral approach to fostering regional ties, providing a platform for dialogue and cooperation without US involvement.
Historically influential in Latin America, the US has faced challenges in recent years. The Trump administration’s disengagement and the failure to visit key countries like Peru and Colombia have weakened its influence. While the Biden administration has sought to reinvigorate ties, the longstanding political and ideological differences with certain Andean countries persist.
Military Competition
Historically, Latin America has been under significant American military influence. However, China’s military presence has grown, particularly in Venezuela. Under Maduro, China has become Venezuela’s primary arms supplier, surpassing Russia. This military cooperation extends to Ecuador, Peru, and Bolivia, albeit on a smaller scale, with China providing modern equipment at competitive prices.
Colombia remains an exception, maintaining a robust military alliance with the United States, its primary arms supplier. US military aid to Colombia has decreased in recent years, but the country’s defense spending remains among the highest in the region.
China’s military cooperation includes training, donations, and technology transfers. Agreements for natural disaster management and other non-combat roles have complimented this. The reduction in US military aid and the budget cuts to the Southern Command, responsible for US military programs in Latin America, have raised concerns about China losing strategic advantages.
As Latin America navigates the geopolitical competition between the US and China, the region faces complex decisions. Both powers offer distinct benefits and challenges. China’s economic investments and technology provide growth opportunities, but its influence raises concerns about dependency and strategic autonomy. With its historical ties and military support, the US remains a critical partner, but its recent disengagement has created a vacuum that China is eager to fill.
In this strategic tug-of-war, Latin American countries must balance their relations with both powers to maximize benefits while safeguarding their sovereignty. The competition between the US and China in Latin America is not just about economic or military dominance; it’s a broader contest for influence in a region with significant geopolitical importance.
Latin America’s geopolitical landscape is transforming significantly as the US and China vie for influence. This competition spans economic, technological, political, and military domains, each offering unique regional opportunities and challenges. As Latin American countries navigate this complex environment, their decisions will shape the future of regional and global geopolitics.
Also read: Key Latin America Issues for the Next U.S. President to Address
The strategic competition between the US and China in Latin America underscores the region’s importance in the global order. As both powers continue to vie for influence, Latin American countries must navigate a delicate balance, leveraging opportunities while maintaining their autonomy. The outcome of this geopolitical contest will have far-reaching implications for Latin America and the broader international landscape.
