On August 21, the Central American Parliament — a regional body representing Guatemala, El Salvador, Honduras, Nicaragua, the Dominican Republic and Panama — voted to expel Taiwan as a permanent observer and replace them with the People’s Republic of China (PRC).
The move comes amid a growing trend of regional countries dropping diplomatic relations with Taiwan in favor of China. Over the past five years alone, five Central American and Caribbean countries have made the switch: Panama in 2017, the Dominican Republic and El Salvador in 2018, Nicaragua in 2021, and Honduras just this past March.
That leaves only 13 countries that recognize Taiwanese statehood, seven of which are in Latin America and the Caribbean. China’s desire to flip these seven countries and further isolate Taiwan may explain, in part, the PRC's investment and economic cooperation agenda in the region. Despite China's current economic woes, some analysts argue that the PRC is likely to continue funding foreign infrastructure projects to bolster its struggling construction industry, given the saturation of the Chinese market.
Countries in Latin America have already strengthened their economic relations with China, understanding Beijing’s economic growth as an opportunity for increased trade and investments in key sectors such as infrastructure, communications and logistics.
But such regional dynamics come during a period of heightened geopolitical competition between the United States and China, in which the diplomatic and economic advances of the PRC in Latin America are perceived as a potential threat to America’s interests in the region. Some policymakers and analysts also fear that Beijing’s armed forces could be concealing double-use installations behind many Chinese-funded infrastructure projects — which would allow for the projection of Chinese military power in the region and escalate a U.S.-China relationship already marred by mistrust and animosity.
Managing the relationship between the United States and China is the diplomatic challenge of the century. In the case of Latin America, how this challenge is resolved could be the difference between a fragile region conducive to conflict, divided by ideology and polarization, and an economically developed and socially prosperous hemisphere in peace.
The United States is in a unique and privileged position to partner with its Latin American neighbors to pursue the latter by focusing on its comparative advantages in diplomacy and culture. Those partnerships can contribute to the strengthening of local democratic institutions and social cohesion and mitigate the potential negative effects of Chinese economic practices while harnessing Beijing’s infrastructure developments for the socioeconomic benefit of the region.
China’s Infrastructure Boom: Highways, Ports and Stadiums
Several countries in the region, hungry for investments in infrastructure, energy and debt financing, have found a willing and capable partner in China, whose big pockets have remained accessible irrespective of a country’s political regime or ideology. Latin American governments, both left- and right-leaning, see China’s impressive infrastructure development and economic rise as a model for their own countries and a way to consolidate and strengthen their relations with the PRC. The results have been stunning: In the last 20 years, trade between China and Latin America has grown a staggering 2600 percent. China is now South America’s main trading partner and the second largest trading partner for Central America.
For Latin American countries that already recognized the PRC over Taiwan, those trade relationships have evolved into a development and cultural agenda, with 21 countries in the region now part of the Belt and Road Initiative.
And for those nations who still recognize Taiwan, China’s pitch includes ambitious infrastructure projects and cooperation agendas that not only aim to bring them over to Beijing’s side, but also serve to entice others sitting on the fence in a sort of domino effect. For instance, El Salvador’s decision to recognize the PRC was met with an ambitious, multi-million infrastructure plan (which has nonetheless stalled in the past years).
However, Chinese investment, which at first glance seems a net positive, has also provided a lifeline for authoritarian regimes such as Venezuela, which have used such alternative sources of income to counter sanctions and keep their strong grip on power. Whereas Western financial institutions, such as the World Bank and the Inter-American Development Bank, use their investments as a channel for both developing local economies and strengthening rule of law, the flow of capital from Chinese export credits or alternative financial institutions such as the Asian Infrastructure Investment Bank or the New Development Bank have done little to consider the human rights records of recipients or improve the transparency of its local partners. In Peru and Bolivia, massive investments in port and mining infrastructure have come under heavy criticism from local communities due to their overwhelming negative effects on local social fabrics and ecosystems.
The Power of Hemispheric Connections
Despite China’s exponentially growing economic influence in the region over the past 20 years, the United States remains and will continue to be the most important partner for Latin America as the result of more than 200 years of shared history, culture and economic interdependence. While the position of China as a trading partner is indeed increasing, the overall economic links between the United States and Latin America far surpass any other actor in terms of private investment and remittances. This is even before factoring in the vibrant cultural relationships that have grown from cross-border family and friendships and created an almost transnational identity in the hemisphere.
Latin America is also a region where, despite recent concerning trends in specific countries, support for democracy and the rule of law as the preferred system of governance throughout the population is high. Furthermore, the United States continues to be perceived as the more trustworthy partner for the region when compared to China, a perception that has been on the rise since 2020. Additionally, countries in the region have found the United States to be an unrivaled security partner, with Colombia and Brazil representing some of the most important American allies in the world on counternarcotics and hemispheric stability.
The Future of U.S.-China Policy in Latin America
Strategic competition with China in Latin America should be analyzed through different lenses for a better understanding of the situation and to deliver more effective responses. A relationship between any two actors is not only economic, but also political, historical, geographical, social and cultural. It is specifically the cultural, historical and social realms where the United States does not only have an advantage, but a virtual dominance over China, providing an opportunity to shift the competition and discourse away from over-securitized and over-politicized approaches that will certainly encounter resistance in Latin America and be exploited by rivals referencing “imperialism” and “colonialism.”
Shifting the competition toward America’s advantages also requires a change in paradigm from understanding Latin America as a “problem to be solved” to an opportunity to build a common future.
A desirable future for the United States and the region could see a quality infrastructure network built with Chinese investments where local and U.S. businesses can thrive, and where growing local economies provide the platform for strong democratic institutions and inclusive societies where people do not have to leave their home countries to achieve their life goals.
These strong, inclusive and transparent institutions will provide a check on any nefarious effects of Chinese investments by ensuring a strict application of the law, the protection of citizens’ data, and the protection of Latin America’s sovereignty. In other words, the United States cannot protect Latin American countries from perceived Chinese threats. Instead, the United States should be a partner who helps them develop their own capacities to navigate the coming rough seas.
The United States would have the key role in fostering such strong and inclusive democracies by leveraging its competitive advantages through the insertion of local economies in specialized regional production chains (nearshoring); strengthening social ties not only with national governments, but also between cities and communities (public diplomacy); and accompanying Latin American leaders in the defense of their natural resources, ecosystems, democratic institutions and sovereignty (regional alliances).
This approach will also need to recognize Latin America’s agency and autonomy amid a changing world order. A strategy for countering the PRC that is heavily focused on imposing costs on adversaries and denying access to markets or communities will run the risk of alienating the countries of the region and pushing them into the embrace of China and other rivals.
More than two centuries of shared history between the United States and Latin America lead inevitably to a shared future. The opportunity of today’s changing international system, then, is to make sure that this shared future is one of mutual respect, prosperity and peace.
Alberto Mejía is a former general commander of the Armed Forces of Colombia.