China’s Engagement in Latin America: Views from the Region
A look at the challenges of understanding and responding to China’s increasingly complex relationships in Latin America.
China’s economic and political engagement in Latin America grew significantly in the first part of the 21st century. And yet, Latin American reporting on China has not grown apace. Too few Latin American journalists cover Chinese activities in the region and even fewer foreign correspondents from Latin America report on developments in China. This knowledge gap means journalists struggle to provide proper context for major trade and investment deals and are unprepared to investigate when scandals erupt. Latin American media outlets often lack the capacity or resources to cover foreign affairs in general, much less the geo-political repercussions of China-Latin American relations.
The reality is that in the Americas — as elsewhere — all politics is ultimately local. The following presents the perspectives of one academic and four journalists on the challenges of understanding and responding to China’s increasingly complex relationships in the region.
Chile: Ignacio Tornero, Catholic University of Chile
China-Latin America relations are living a very interesting moment; with China having established diplomatic relations with most of the region, having become a strategic trade partner for many countries and, more recently, having increased the amount of foreign direct investment flows in several destinations.
The establishment of formal diplomatic relations has been of critical importance for building the appropriate grounds to move toward the development of other ties.
This created the conditions for China and Latin American to start trading with each other and then, in some cases, in the establishment of free trade agreements like the ones with Chile (2005), Peru (2009) and Costa Rica (2010). Based on World Economic Forum’s figures, trade between China and Latin America grew 26-fold between 2000-2020 (going from $12 billion to $315 billion); and is expected to more than double by 2035, reaching more than $700 billion.
Another interesting dimension is outward direct investment (ODI), a comparatively new phenomenon. China has invested more than $130 billion in the region between 2005-2020, and countries like Brazil, Peru, Chile and Argentina have received $60 billion, $27 billion, $15 billion, and $12 billion of Chinese ODI, respectively. It is expected that China will keep creating stronger bonds with the region, moving into cultural and education exchange, technology transfer and scientific research, among other areas of influence.
Ecuador: Paúl Mena Mena, El Universo
Covering China and its relationship to Latin America is challenging for Latin-American journalists, as we have to face some serious difficulties, such as secrecy, technical issues, and cultural and language barriers. My colleagues and I tackled those problems while investigating Ecuador's public debt to China. First, state-owned Chinese banks, which act like Western multilateral ones, do not have transparency policies. Indeed, the credit contracts between the Chinese banks and the Ecuadorian government were declared confidential, breaking local rules. We could get three of those 16 contracts thanks to the Panama Papers’ leak and other sources. Second, understanding those documents is too difficult because they created a new way of payments through advance sales of crude.
The contracts are so complex that they involve four or five parts: the Chinese bank, the Chinese petroleum company, the Finance Ministry of Ecuador, the Ecuadorian petroleum company and, eventually, the Central Bank of Ecuador. To comprehend this structure, not only is a background in finance needed, but in international trade of crude also, as it is a very technical issue. Finally, the lack of knowledge on China is generalized in Latin America, as we do not know how that state works, how its control institutions operate, how the decision makers approve their operations, and so forth. All these difficulties must be overcome to ensure that the relationship between China and Latin America develops in a strict democratic environment.
Brazil: Luiza Duarte, Wilson Center
The expansion of Chinese state-media content directed to foreign audiences in the Global South points to an imbalanced relationship over information. Latin American countries are far from being able to engage Chinese audiences or being active in the Chinese social media ecosystem. Latin America needs a healthy and strong media environment to be able to tell its own stories.
More specifically, Sino-Brazilian relations have become more complex over the last decade, entering a new phase with the election of President Jair Bolsonaro and the onset of the trade war between China and the United States. China has deepened sub-national level relations through parliamentary exchanges and building relationships directly with governors and mayors. State-level connections with China ended up playing a crucial role in negotiating medical supplies and Chinese vaccines during the pandemic, despite opposition at the federal level.
Argentina: Fermin Koop, Diálogo Chino
The relationship between Latin America and China has changed deeply over the last 20 years. While in 2001 the region’s exports to China accounted for just 1.6% of total exports, in 2020 this figure had grown to 26%. This big shift is largely because of China’s accelerated growth during this period and its growing demand for raw materials from Latin America. As well as the growing trade flows, China has also intensified its political relations with Latin American governments, 21 of which having already signed the Belt and Road Initiative (BRI).
China has published two policy papers on Latin America, which identify areas of potential cooperation with the region, with public health being the most relevant one amid the pandemic. A dozen countries in Latin America have signed vaccine contracts with China, which also distributed medical equipment. Another key factor in understanding the relationship centers on financing. In recent years, Chinese banks have increased lending to Latin American governments. Up to 2020, the China Development Bank and the China Export-Import Bank had granted 94 loans in the region to the tune of $137 billion, for example. Looking ahead, China will continue to have a strong role as an investor and trade partner to Latin America. It will be interesting to see how the relationship shapes up amid climate change and biodiversity commitments, with China already discussing approaches on how to green its BRI investments.
Nicaragua: Javier Meléndez, Expediente Público
In the last 10 years, the presence of China in Latin America has increased exponentially. For some countries, Chinese influence has meant opportunities to diversify markets and increase exports. However, for other countries, such as Bolivia and Ecuador, China has left in its wake a legacy of excessive debt and losses of tens of billions of dollars that have favored corrupt elites and left countries at the mercy of their Chinese creditors. In Central America, the presence of China presents a credible security threat for the region and the United States in the form of a platform that exacerbates corruption and works against the overall prosperity of countries.
Costa Rica (2007) and Panama (2017) were the first Central American countries to break diplomatic relations with Taiwan to establish themselves as partners of the Chinese. Later, El Salvador (2018) and Nicaragua (2021) joined Panama and Costa Rica in breaking ties with Taiwan. For Costa Rica, Panama, and, at the beginning, El Salvador, the goal of relations with the Chinese was to improve trade relations and expand traditional markets. But Nicaragua is another story. Chinese relations are an explicit effort to increase ideological pressures and confrontations with the United States. Since 2019 with the rise of Nayib Bukele as president, El Salvador has followed a similar path.
In countries with robust and independent institutions that function in an environment conducive to respecting and promoting accountability and civil liberties, including press freedoms, the presence of China could, although not free of risks, provide market advantages and growth opportunities. On the other hand, in countries where secrecy is the name of the game, accountability lags, and there are no guarantees for civil liberties, the consequences are clear: China uses these countries to increase its predatory presence, back repressive regimes and promote an anti-Western narrative, especially regarding the United States.