China benefits from Trump's big stick in Central and Latin America

Beijing is already South America's top trading partner and source of investment

Photo by Rikin Katyal on Unsplash

The dispute between Colombia’s Gustavo Petro and U.S. president Donald Trump over the issue of deported migrants crystallized a trend that is already at an advanced stage across Central and South America - a reduced dependence on the United States.

Colombia was once America’s greatest strategic ally in the region but since Petro’s election, the country has been moving closer to China.

The Trump administration is determined to curb China’s influence in the Western Hemisphere but it is not winning friends as it does so.

When Petro refused entry to two flights carrying deported migrants because they were military, not civilian, transport planes, Trump imposed 25 percent tariffs and implemented a tariff ban on officials.

That would have affected one in three foreign sales for Colombia and Petro quickly backed down.

But it was a lesson to all governments in the region to diversify export destinations away from the U.S.

It would not be accurate to say that China is now seeking to exploit such divisions - Beijing has been targeting Latin America for the past two decades.

China is already South America’s top trading partner and a major source of foreign direct investment, and energy and infrastructure lending, through its Belt and Road Initiative.

But the aggressiveness of the Trump administration has brought what was happening in the shadows into the light.

The tone was threatening - do what we say or you are not on our side and you will be punished.

The first international trip by Secretary of State, Marco Rubio, was to Panama with the message that José Raul Mulino’s government had to reduce China’s influence in the region or see the U.S. assume sovereignty over the canal.

Mulino denied Chinese influence over the operation of the canal but Chinese companies have invested heavily in ports and terminals along the canal.

A crisis appears to have been averted by the sale of the ports by CK Hutchison Holdings of Hong Kong to U.S. asset management company, Black Rock.

It was hailed as a victory for Rubio’s America First policy in the region, which preceded Trump’s victory and sought to counter China’s “malign influence” through security and counter-narcotics efforts.

But it was heavy-handed and will likely only accelerate the rise of China across Latin America.

China is looking to expand its sphere of influence, focusing on aid, investment and trade.

At the opening of China’s parliament in March, foreign minister Wang Yi promoted China as “an anchor in an uncertain world”.

Wang highlighted the Trump administration’s retreat from multilateral forums, the freezing of international aid and the aggressive approach to dealing with traditional allies as an opening for China - and its allies.

The first fruits of a trade war between the U.S. and China appeared in early March when Beijing revealed new tariffs on U.S. farm goods, creating an opportunity for more meat, dairy and grains from South America.

China’s chief exports to Latin America used to be porcelain, silk, spices and coolies who worked on sugar plantations and silver mines in Cuba and Peru.

But since its entry into the World Trade Organization in 2001, China has seen its share of trade in the region grow 10-fold. Trade exceeded $450 billion in 2021 and is forecast to reach $700 billion by 2035.

In the background, are the geopolitical implications of tighter ties. Peru and China recently updated a free trade agreement and inaugurated the $3.6 billion Chinese-funded Port of Chancay, which is expected to boost bilateral commerce by 50 percent.

China even has plans to link Chancay to Brazil.

The former commander of the U.S. Southern Command, Laura Richardson, has warned Congress that Chancay could become a dual-used facility used by the Chinese navy.

There are around 40 port building or upgrades involving Chinese companies in Latin America and the Caribbean.

Richardson cautioned that another Chinese state-owned enterprise is trying to secure the rights to build another dual-use polar logistics facility on Argentinian soil, in proximity to the Straits of Magellan, the Drake Passage and Antarctica.

Colombia offers a good case study of what is happening in many countries.

It has recently upgraded its political relationship with China to become a “strategic partner” - an agreement that required Petro’s government to recognize a “one China” policy that says Taiwan is an inalienable part of Chinese territory and backs efforts to achieve Chinese reunification.

Only Belize, Guatemala, Haiti and Paraguay in the region still recognize Taiwan, after Honduras flipped in 2023.

One senior Colombian businessman said China has been very strategic in filling space that the U.S. and Europe have been vacating.

When it comes to infrastructure, there is a great appetite from local governments for cheap loans, he said. This has led to significant approval from the general public. A recent Pew Research Center report found that Latin American countries were second only to those in Africa globally, when it came to favourable impressions of China.

The relationship is almost entirely trade-based, with China looking for resources, minerals and coffee.

Chinese investment is not always welcome.

A Chinese mining company, Zijin, has recently begun production of a gold mine near Medellin, which has sparked human rights and environmental concerns with local miners.

Beijing sends back electronics, computers and other devices, using competitive prices to penetrate markets.

But, as the senior businessman said, there is an understanding that Chinese political influence will eventually follow, raising concerns about what might happen.

Countries across the region enter into business agreements with China aware of the potential downside but apparently unable to resist the favourable terms offered by Beijing.

The Chinese Harbour Engineering Company won the contract to build Bogotá’s metro system, even though the company has been accused of bribery and substandard construction in other countries, including the main road between San José and the main port of Limon in Costa Rica. In that case, the offer of a 20 year, $396 million loan by a Chinese bank persuaded the government, even though the project is now five years behind schedule and “poorly designed”, the words of one minister.

These loans offer fewer conditions but can create debt traps when not repaid.

A report by the Colombia Risk Analysis consultancy suggested that the country lacks a strategic vision when it comes to its approach to China. Rather than pursuing a well thought out international agenda, it simply advances immediate domestic political objectives. It categorized the Petro government’s policy as “improvised”, while on the other side there is a “studied, considered approach towards Colombia and the rest of Latin America”.

However, it concluded that the benefits of Chinese investment will remain hard to resist, as China continues to underbid the U.S. and the European Union on public tenders and contracts.

The implications will only be felt when it is too late. Twenty two countries in the region have already signed up to China’s “Belt and Road” initiative, with Colombia set to make it 23 in the near future.

Only Costa Rica has banned Chinese technology from its 5G telecommunications network build out.

Inflation and financial pressures mean that cheaper Chinese solutions offered by Huawei and ZTE form the basis of many 4G networks. Brazil was set to exclude Huawei from 5G until it realized that the Chinese company could stop supplying the 3G and 4G equipment on which half of the country’s mobile networks run.

Nobody is immune to the financial fentanyl Beijing is supplying. Javier Milei, the firebrand libertarian president of Argentina, entered office decrying deals made with the “murderers and thieves” in Beijing.

Yet at the G20 meeting in Rio de Janeiro last November, met with his Chinese counterpart, Xi Jinping, and now calls China “an interesting trade partner” - a shift in perspective that may be linked to currency swap agreements that allowed Argentina to pay down its debts to the International Monetary Fund.

Also at the G20, Xi and Brazilian president Luiz Inácio Lula de Silva, signed 37 bilateral agreements, making them, in Xi’s words, “golden partners”.

All of this is the culmination of a decade of the U.S. and Europe ceding influence to China.

It is clearly beyond time for the Americans to address this strategic neglect in its own backyard.

But the Trump Doctrine that treats enemies better than friends, and revels in permanent destabilization, is unlikely to extricate China from the region.

As one former Latin American diplomat put it, when a Canadian complained about being bullied by the Americans: “Now you know how we feel.”

THIS ARTICLE WAS COMMISSIONED BY THE CENTRE FOR INTERNATIONAL GOVERNANCE INNOVATION AND APPEARED ON ITS WEBSITE: https://www.cigionline.org/articles/trump-aims-to-curb-chinese-influence-in-south-america/