Since the year 2000, China’s influence has grown in Latin America. Does China want to be an alternative instead of the USA in the region? What are the fields that attracted Chinese influence, in Latin America? Let’s discuss this in this post.
Basically, Latin America consists of the continent of South America together with Mexico, Central America, and the islands of the Caribbean. Latin America has a long history of conquest and colonization.
After 2000, the relations between China and Latin American countries mounted rapidly. The importance of Latin America to China is most of the time based on economic advantages. Latin America is a well popular hub of raw materials such as copper, iron, and petroleum. These raw materials are important for Chinese industries to boost their production.
However, China has extended its cooperation with Latin America from trade to finance, political, security cooperation, technology, culture, and military.
Chinese Influence On Trade
China has a long-term history of trade with Latin America, with the Manila galleon trade route that facilitated the trade between China and Mexico. The trade relations between China and Latin America was significantly growing since 2000.
In 2001, the exports from Latin America to China were 1.6% of its total foreign sales and it increased in 2020 to 26%. The significant point here is that the region’s exports to the USA were 56% in 2001 while it decreased to 15% in 2020. What exactly are the reasons for this significant shift? The growing influence of China in the region and its demand for Latin American raw materials such as soybeans, copper, oil, and petroleum from the countries like Peru, Chile, and Brazil has created a close relationship between China and Latin America.
Moreover, Chinese companies are willing to buy companies in Latin America related to the fields like infrastructure, raw material production, and the energy sector. These sectors are vital to China in its production and industries. China also acquired energy firms in Peru.
When it comes to Trade, China is the top trading partner of South America and 2nd largest in Latin America. Also, on the other hand, China had free trade agreements with Peru, Chile, and Costa Rica and in 2022 China began Free trade agreement talks with Ecuador. 20 countries in Latin America have signed up for China’s massive global linking project One Belt One Road initiative.
Chinese Presence in Finance Sector
The finance sector is another factor that attracted China to the region. Lending money to Latin American countries by China was increased in recent years. According to the Inter-American Dialogue, in 2020 China Development Bank and China Export-Import Bank had given 94 loans to many Latin American countries such as Venezuela, Brazil, and Argentina. Most of the loans are given for the development of the infrastructural facilities in the region.
On the other hand, Chinese Overseas Foreign Direct Investment plays a vital role in the advancement of the China – Latin America ties. In 2020, the Chinese Overseas Foreign Direct Investment is calculated as roughly $17bn.
Chinese Presence in Political Sector
One of the characteristics of Chinese Foreign policy is that China is never involved with the internal matters of a country. Also, China always acted as a soft power which is dealing with the sectors like culture and education. China applies these methods in the context of Latin America. Encouraging cultural and educational ties between China and Latin America can create political goodwill in the region.
During the Trump and still, the Biden administrations, it seems like the USA is apparently distanced away from Latin America when it comes to foreign policy. This will always create a space that China can fill. For example, during the pandemic period, the USA struggled domestically with the virus while China recovered easily and helped the rest of the world as well. China supported Latin America by donating medical supplies and thousands of vaccines to recover from the virus.
Most importantly, the Chinese – Taiwan issue also affected the ties between China and Latin America. China very strictly prohibits diplomatic relations with the countries that recognized the independence of Taiwan. However, in front of the Chinese financial assistance, most of the Latin American countries such as the Dominican Republic and Nicaragua changed their minds to supporting China, which supported Taiwan at the very beginning. There are only 8 Latin American countries that still recognize Taiwan’s independence.
The political high-level meeting between China and Latin American countries are very important as well. Among the dozens of meetings, the thirteen days tour of Latin America in 2001 by former Chinese President Jiang Zemin was significant. Also, the incumbent President of China Xi Jinping visited Latin American countries 11 times since 2013.
The ties between China and Latin America were rapidly increased since 2000 in various sectors such as trade, finance, politics, energy, and many others. However, the financial assistance of China for the countries can be seen as a blessing for them. But the thing is the various conditions imposed by China can make the economies of the countries unstable and push them into the so-called Debt Trap.
On the other hand, giving more and more loans, and increasing imports and exports with China can create an economic dependency which means it highly depends on China. For example, in 2020, Chile sent 39% of its exports to China. This can be an advantage but the thing is if Chile cannot maintain a healthy relationship with China, China can control chile using the trade factor.
Moreover, the lower environmental and labor standards brought by Chinese companies can create environmental pollution, risks the most valuable ecological landscape, and creates migration issues as well. For example, Peru has the region’s highest amount of Chinese diaspora 5% of its total population.
However, the USA raised its concern over the Chinese presence in the region. Meanwhile, the USA has mainly focused on the Asia Pacific and the Middle East regions rather than missing its historical responsibility to guard the Latin American region.
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