Indian Council of World Affairs

China has become an important player in Latin America. It enjoys comprehensive relations with most Latin American countries encompassing multidimensional fields. It published two White Papers in 2008 and 2016 to delineate its approaches towards Latin America. China’s approaches towards Latin America encompasses various fields with its main focus being the pursue of economic interests such as obtaining raw materials and accessing Latin American markets. It has a keen interest in obtaining strategic minerals such as Lithium and niobium and enhancing the BRI (Belt and Road Initiative) which it introduced in 2017, and 22 Latin American countries are currently part of it. It has engaged in financing projects, offering economic loans and expanding trade links to foster relations. 

In recent times China established diplomatic relations with Honduras, has made an outreach towards Colombia, and signed a Free Trade Agreement (FTA) with Ecuador. It reached an agreement with Argentina, Brazil and Bolivia to use the Yuan for settlement of payments for trade transactions. It also reiterated support for Argentina’s claims over Islas Malvinas. 

Apart from pursuing its economic interests, China seeks to gain strategic and political depth. China’s objective could also be to counter the US in its vicinity as a counter for its activities in Taiwan Straits and the Indo-Pacific region. It is interested in diplomatically isolating Taiwan from Latin America. It has adopted approaches such as the sale of armaments to the use of soft power to further its interests in this regard.  

This paper will examine the approaches of China toward Latin America. 

Diplomatic Engagement 

China’s diplomatic approaches seek to enhance economic ties, isolate Taiwan, and develop strategic depth against the US. Apart from bilateral engagements, China engages multilateral institutions such as the CELAC[i], OAS[ii] CARICOM[iii], IADB[iv], and AIIB[v]. 

During the 1970s and 1980s ideology took precedence in forming relations notably with Left-leaning governments. Since 2001, after China acceded to the World Trading Organisation (WTO), diplomatic exchanges turned frequent, with Chinese President Xi Jinping visiting the region eleven times since 2012[vi]. Subsequently, China’s focus turned from ideological underpinnings towards economic and strategic grounds. 

As it pursues strict adherence to the ‘One China’ policy[vii] with its partners, it has since 2007 been able to persuade several countries to switch diplomatic relations from Taiwan to PRC. China’s economic strength and influence are key factors for such changes. With Nicaragua and Honduras being the latest partners of China, Taiwan is left with only Paraguay, Belize, Guatemala, Haiti, St. Vincent and the Grenadines, St. Kitts and Nevis and St. Lucia. Not only does this affect Taiwan, but also challenges the pre-eminence of the US in the region. 

Economic Approaches 

Beijing’s primary focus is on securing access to raw materials and markets for its exports. China’s exports to Latin America consists of mechanical and electrical goods, machinery and transportation equipment, motor vehicles, integrated circuits, data processors and plastic products. Latin American countries export soy, agricultural goods, petroleum products and minerals. In 2000, bilateral trade between China and Latin America was at US$ 12 billion which increased to US$ 482 billion[viii] in 2022. In 2022, Latin America exported goods worth US$184 billion, in the same year China exported mostly finished products worth US$ 265 billion resulting in a trade deficit of 1.4 percent to the GDP[ix] for Latin America. In the first seven-months of 2023, China’s trade with Latin America has grown by 5.5 percent[x]. It is estimated that 18 percent of Latin America’s global trade[xi] is with China which highlights the deep economic relations. Trading patterns highlight inter-dependency, which has rendered Latin America as a supplier of raw materials and importer of finished goods. Financial slowdown in China, leading to lower demand for commodities may also impact Latin America adversely. 

China’s investments in Latin America are in three distinct categories which are Overseas Foreign Direct Investments (OFDI), loans by policy banks[xii] and loans by commercial banks[xiii]. China’s OFDI to the region is offered by both state and private entities[xiv] and 46 percent is concentrated in the extractive sector, while 30 percent of such investments are in manufacturing and 27 percent in the energy sector. Till 2022, Chinese OFDI has resulted in 192 projects across the region and most of these investments are concentrated in Brazil, Argentina, Mexico and Peru. In terms of OFDI, China has made strong headways and invested around US$ 12 billion[xv] in 2022.   

Chinese Policy Banks, mainly the China Development Bank and the China Ex-Im bank have offered loans[xvi] amounting to US $136 billion[xvii]  as of 2022. Venezuela is the largest recipient (US$60 billion) followed by Brazil (US$ 31 billion) and Ecuador (US$ 18.2 billion). Till 2022, US$ 90. 9 billion has been disbursed as loans in the energy sector, while US$ 26.5 billion has been directed towards the infrastructure and mining sector in the region. 

Loans from commercial banks especially for infrastructure projects have been directed towards various countries with Argentina being the recipient of 36 loans, followed by Brazil with 9 loans and then by Chile and Peru with 4 of them. These loans are granted by commercial banks of China out of which the most important are Industrial and Commercial Bank of China, the Bank of China, China Construction Bank, Bank of Communications and the Agricultural Bank of China.  Most Commercial loans[xviii] range from US$ 1.25 million to US$ 100 million[xix] depending on the projects. Similar to the loans issued by policy banks, these commercial loans are concentrated in the energy, infrastructure and mining sectors[xx]. 

China’s Belt and Road Initiative (BRI) has been implemented in the region since 2017, with 22 countries participating, and Panama being the first country to endorse it. The BRI focusses on deepening cooperation in areas such as infrastructure, energy, telecommunications, renewables and digital technology with the active support of Chinese private and state-owned companies. So far around US$ 4.2 billion has been invested in various projects such as a new port in Peru, hydroelectric dams in Ecuador and Bolivia and Argentina, a bridge over the Panama Canal, Bogota Metro Line, a nuclear plant in Argentina and an underwater fibre optic cable between China and Chile.  China intends to invest US$ 250 billion[xxi] in the next decade in similar projects. 

Despite such deep economic relations, certain aspects merit focus. Projects such as the Ituango Hydroelectric dam in Colombia, hydrocarbon exploration in Ecuador and Bolivia, Las Bambas mining operations in Peru have led to protests from local and indigenous communities due to their environmental impact[xxii]. As a response, countries such as Brazil, Peru, Ecuador brought in some reforms such as Prior Consultation and Ecological Assessment. China on its part has released guidelines[xxiii] for consultations and dialogues with stakeholders, encouraging adoption of environment friendly practices. However, there are gaps regarding implementation, and full endorsement of the Chinese projects by the locals remains an issue. 

Also, investments and loans are mostly concentrated in primary sectors; hence it leaves little incentive for economic diversification. In terms of job creation too, the Chinese projects have limited impact which are largely focussed on low-skilled workers. Moreover, certain countries such as Ecuador[xxiv], Suriname and Guyana[xxv] owe a major portion of their external debt[xxvi] to China, which leaves them financially vulnerable. 

Strategic Engagement 

China’s strategic objectives entails gaining depth in the region, traditionally considered as being US’s sphere of influence. Broadly, this aspect has three dimensions such as military engagement, technical cooperation, and cooperation in space and telecommunication. To pursue these objectives, China has focussed on the interaction between military officials, the sale of arms, and joint military exercises. China regularly hosts members of the Armed Forces of various Latin American countries and offers training. It conducted military exercises with Peru in 2010, with Argentina in 2013 with the navies of Chile, Brazil, and Argentina and in 2017 with Venezuela[xxvii]. In terms of arms sales, it has actively engaged countries such as Venezuela, Cuba, Ecuador, Argentina, and Mexico to name a few. It has intelligence sharing arrangement with Cuba and Venezuela. China has sold armaments such as WMZ-551 armoured vehicles, K-8 aircraft, JYL-1 radars, and small arms worth US$ 629 million[xxviii]. Beijing has also offered policing and surveillance equipment to certain Caribbean countries such as Jamaica. 

Technical cooperation has increased bilaterally which involves research and development, sharing technology and expertise. Focus has been laid on developing clean energy, digital cooperation, artificial intelligence, and investment in strategic minerals such as lithium[xxix]. China seeks to gain foothold in these expanding sectors. 

Space and telecommunications cooperation with Latin America is another aspect that merits attention. China has engaged Brazil, Venezuela, Argentina, and Bolivia aiming to enhance cooperation in this field. The China-Brazil Research Satellite (CBERS), Venezuelan Remote Sensing Satellite (Vensat-1), Espacio Lejano station in Argentina, and the Tupac Katari Satellite of Bolivia are some examples of collaboration[xxx]. 

Chinese telecommunication firms such as Huawei, ZTE, and Shanghai Alcatel Bell have established bases for operations and have aided in the creation of infrastructure such as fibre options and control facilities[xxxi]. 

There are however limitations to China’s strategic engagement in Latin America. The absence of Chinese military bases is noteworthy, although it has constructed deep-water ports, and is seeking to establish a Joint Military Training facility in Cuba. For Latin American countries, access to diverse partners and a variety of weaponry strikes resonance with their military requirements. However, they do not wish to partake in strategic competition between the US and China. China's inability to achieve deep strategic cooperation such as security pacts shows limits to its influence in Latin America. 

China’s Soft Power in Latin America 

Apart from diplomatic exchanges, China has pushed its soft power to further its interests in the region to portray itself as a responsible partner. Aspects of Chinese soft power are its people-to-people diplomacy, media outreach, and culture. China has highlighted its growth, showcasing it as an alternative to Western models, and encapsulating convergences with Latin America. Chinese diaspora has a significant presence in Peru, Costa Rica, Brazil, and Chile. 

There are more than 44 Confucius Institutes and 18 affiliated organisations[xxxii] across Latin America, the Chinese language is taught in various institutes and Beijing has funded various educational and cultural projects. Scholarships are awarded to students and academicians and in 2022, around six thousand scholarships were awarded in accordance with the China-CELAC plan. China has also invested in medical diplomacy, tourism, and cultural interactions in the region. In terms of public outreach, China has emphasised developing relations with various segments of Latin American society and political organisations. With the aid of the certain organisations,[xxxiii] it conducts meetings to promote Chinese interests[xxxiv]. Chinese media houses such as China Daily, Xinhua, and CGTN are active and broadcast programmes in vernacular languages.  

Conclusion 

China’s approach hinges primarily on its economic engagement with Latin America, which has enabled it to approach other theatres of engagement such as its strategic positioning in the region. For Latin American countries, their interests lie in obtaining access to investments, technology, and forming strong trade relations with China considering its huge market. These countries view it as a partner, confirming their goals of diversifying their foreign and economic relations. While Argentina, Mexico, and Brazil see China as a gateway to boost their exports, Cuba, Nicaragua, and Venezuela have deeper strategic relations with China, due to issues with the US.  

The United States has followed China’s engagement in the region with keen interest. US seeks to deepen engagement with Latin American countries and has introduced acts such as the Western Hemisphere Nearshoring Act, Build Back Better World (B3W), and the Americas Partnership for Economic Prosperity (APEP) to encourage economic cooperation. Due to increased divergence in views between China and the US, strategic competition will be witnessed in Latin America and China may intensify its engagement with Latin America just as the US seeks to expand its influence in China’s proximate neighbourhood and the larger Indo-Pacific region.

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*Dr. Arnab Chakrabarty is a Research Fellow at the Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes

[i] Community of Latin American and Caribbean States

[ii] Organisation of American States

[iii] Caribbean Community

[iv] Inter-American Development Bank

[v] Asia Infrastructure Investment Bank

[vi] Benjamin Creutzfeldt. (2023). Los Niños que clamaban Guerrero Lobo: La Estrategia diplomática de China en América Latina.  Colombia Internacional. Accessed 12th July 2023. http://www.scielo.org.co/scielo.php?script=sci_arttext&pid=S0121-56122023000100061.

[vii] Evan Ellis. (2022). Forums and Influence: Chinese Competitive Strategy and Multilateral Organizations in Latin America and the Caribbean. Dialogo Americas. Accessed 12^th July 2023. https://dialogo-americas.com/articles/forums-and-influence-chinese-competitive-strategy-and-multilateral-organizations-in-latin-america-and-the-caribbean/.

[viii] Diana Roy. (15^th June 2023). China’s growing influence in Latin America. Council on Foreign Relations. Accessed 13^th July 2023. https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri.

[ix] Zara.C. Albright. (2023). Latin America and the Caribbean’s relationship with China rebounds with pivot toward green energy, electric vehicle supply chains, Global Development Policy Center, Accessed 1^st August 2023. https://www.bu.edu/gdp/2023/04/23/latin-america-and-the-caribbeans-relationship-with-china-rebounds-with-pivot-toward-green-energy-electric-vehicle-supply-chains/.

[x] Xinhua. (8^th August 2023).  Update: China’s foreign trade sustains growth despite weakening external demand. Xinhua.  Accessed 14^th August 2023. https://english.news.cn/20230808/8640a2e42dc5454c95d7625dfba1e19b/c.html#:~:text=Its%20trade%20with%20Latin%20America,percent%20of%20the%20country's%20total.

[xi] The Economist. (18^th 2023). What does China’s reopening mean for Latin America? Accessed 13^th July 2023. https://www.economist.com/the-americas/2023/01/18/what-does-chinas-reopening-mean-for-latin-america.

[xii] These loans are given by state owned banks.

[xiii] These loans are given by commercial banks.

[xiv] While state institutions actively participate in investments certain Chinese private firms such as Power China, Tianqui Lithium Corporation, Ganfeng Lithium, China Yangtze Power, China Railway Construction Corporation, China Telecom and Huawei are active in investing in Latin America across various sectors.

[xv] Diana Roy. (15^th June 2023). China’s growing influence in Latin America. Council on Foreign Relations. Accessed 13^th July 2023. https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri

[xvi] In 2022, China lent US$ 813 million to the region.

[xvii] The Dialogue. (2023).  China-Latin America Finance Databases. Accessed 13th July 2023. https://www.thedialogue.org/map_list/.

[xviii] In 2022 some of the major commercial loans were, US$ 500 million agreement with the Banco do Brasil, US$ 115 million agreement with Barbados and US$ 192 million agreement with Barbados.

[xix] Margaret Myers & Rebecca Ray. (2023). At a Crossroads: Chinese Development Finance to Latin America and the Caribbean, 2022. The Dialogue, Accessed 1^st August 2023. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.bu.edu/gdp/files/2023/03/IAD-GDPC-CLLAC-Report-2023.pdf

[xx] 36 loans have been issued for the energy sector, followed by 17 in the infrastructure sector and 7 in the mining sector.

[xxi] Margaret Myers. (28^th October 2022).  A Belt & Rough Road? China- Latin America Relations. Wilson Center, Accessed 15^th July 2023. https://www.wilsoncenter.org/blog-post/belt-rough-road-china-latin-america-relations.

[xxii] As of 2023, fourteen Chinese projects in the region ranging from resource extraction to infrastructure building have been found to not comply with environmental and safety standards.

[xxiii] Fermin Koop. (17^th March 2023). Latam NGOs raise concerns on Chinese investments to UN body. Dialogo Chino. Accessed 8^th August 2023. https://dialogochino.net/en/infrastructure/364274-latin-american-ngo-concerns-chinese-investments-un/.

[xxiv] In 2022, Ecuador and China agreed to restructure its loan repayment.

[xxv] Countries that have highest bilateral debt with China are, Guyana at 76 percent, Grenada 26 percent, Honduras 42 percent and St. Vincent and the Grenadines at 58 percent.

[xxvi] Margaret Myers & Rebecca Ray. (2023). At a Crossroads: Chinese Development Finance to Latin America and the Caribbean, 2022. The Dialogue, Accessed 1^st August 2023. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.bu.edu/gdp/files/2023/03/IAD-GDPC-CLLAC-Report-2023.pdf.

[xxvii] Evan Ellis. (19^th November 2020). Chinese Security Engagement in Latin America. CSIS, Accessed 1^ST August 2023. https://www.csis.org/analysis/chinese-security-engagement-latin-america.

[xxviii] Diana Roy. (15^th June 2023).  China’s Growing Influence in Latin America.  Council on Foreign Relations. Accessed 11^th August 2023. https://www.cfr.org/backgrounder/china-influence-latin-america-argentina-brazil-venezuela-security-energy-bri.

[xxix] Although China contributes 13 precent of global lithium production, it seeks to secure supply from Latin America. The lithium triangle that comprises Boliva, Chile and Argentina hosts 52 percent of global lithium reserves and Chinese investments are predominant. In January 2023, Bolivia and China agreed to a US$ 1 billion Lithium prospecting deal.

[xxx] Rachel Mural. (31^st May 2018). China finds Partners and power in Latin American Space Development.  Global Americans.  Accessed 16^th July 2023. https://theglobalamericans.org/2018/05/china-finds-partners-and-power-in-latin-american-space-development/.

[xxxi] Juan Delgado. (7^th March 2023). China, 5G, and the Security Threat in Latin America. Dialogo Americas. Accessed 16^th July 2023. https://dialogo-americas.com/articles/china-5g-and-the-security-threat-in-latin-america/.

[xxxii] Evan Ellis. (18^th August 2018). China’s use of Soft Power in Support of its Strategic Engagement in Latin America. Dialogo Americas. Accessed 19^th July 2023. https://dialogo-americas.com/articles/chinas-use-of-soft-power-in-support-of-its-strategic-engagement-in-latin-america/.

[xxxiii] Chinese organisations such as the China-Latin America and Caribbean Friendship Association (CHILACFA), Chinese Peoples’ Association for Friendship with Foreign Countries (CPAFFC) and other individual forums are instrumental in promoting Beijing’s interests in the region.

[xxxiv] Lucía Wei He. (12^th 2019).  How China is Closing the Soft Power Gap in Latin America. Americas Quarterly. 19^th July 2023. https://www.americasquarterly.org/article/how-china-is-closing-the-soft-power-gap-in-latin-america/.