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A Lotus Growing In ‘America’s Backyard’ – China’s Influence In Latin America

  • Trade between China and Latin America has increased massively over the last two decades, say experts Prof. Chris Alden and Prof. Alvaro Mendez from LSE IDEAS
  • Yet the relationship between the two regions is not a modern development, with trade ties that date back to the Spanish Empire, the professors reveal
  • The US and some groups within Latin American countries increasingly view China’s economic investment through the lens of geopolitics, they explain

The concept of ‘America’s backyard’ refers to the US’ historic sphere of influence in Latin America. Its roots run back to the death throes of Spanish colonialism and the Monroe Doctrine.

To cut a long story short, in the 1800s the Spanish Empire was staggering through a sovereignty crisis with two black eyes administered by Lord Nelson and Napoleon respectively. Many of its Latin American colonies sought to capitalise on the situation by pushing for independence.

However, by the 1920s, Spain was on the verge of restoration. Britain and the US were keen for it not to reassert its control over Latin America, so that trade could be improved with new independent countries.

So, US President James Monroe proposed a doctrine that any further attempts by European nations to colonise land or interfere with states in the Americas would be viewed as a threat to the US and necessitate a military response. In turn, the US pledged not to tamper with any existing European colonies.

Two centuries later, the idea of ‘America’s backyard’ lives on, though Washington’s security concerns in the area are directed not at Europe, but China.

Increasing trade, increasing investment

China has been Latin America’s largest trading partner since 2010, and Chinese demand for Latin American resources is probably the key element in the region’s positive economic growth trajectory in the past decade, write professors Chris Alden and Alvaro Mendez at LSE IDEAS in their new book, China and Latin America: Development, Agency and Geopolitics.

As Alden, Director of LSE IDEAS (the foreign policy think tank of the London School of Economics), explains, “China’s involvement in Latin America continues to grow exponentially. Since the turn of the century, bilateral trade between China and Latin America has increased massively, going from $12.17 billion in 2000 to $307.94 billion in 2019. China is financing roads, railways, dams, and ports that are transforming economies and societies within the region. And this is all happening to the dismay of other major actors, not least the US.”

But what is the reason for this hand-wringing? According to Alden and Mendez, China’s heavy investment in Latin America is not simply motivated by development and commerce, though these are large factors. There is also a geopolitical aspect.

The authors describe the scene of Panama City in May 2018, around the signing of the Panama-China Maritime Agreement. Two years earlier, China’s Landbridge Group had signed a $900 million deal to build a deep-water port on the Atlantic side of the Panama Canal. The project was officially launched in June 2017.

“China’s involvement in Latin America continues to grow exponentially. Since the turn of the century, bilateral trade between China and Latin America has increased massively, going from $12.17 billion in 2000 to $307.94 billion in 2019,”

– Professor Chris Alden, LSE IDEAS

A matter of mere days later, Panama announced it was breaking diplomatic ties with Taiwan in favour of China, the professors note.

Similar events transpired most recently in Honduras, which announced in March that it would be ceasing direct engagement with Taiwan in favour of pursuing diplomatic relations with China.

An announcement from Honduran deputy foreign minister Antonio Garcia reported by the Independent and elsewhere, revealed the Taiwanese embassy was given 30 days to close its embassy in Tegucigalpa, and Honduran students studying abroad in Taiwan would have the option of transferring their studies to China.

On local television, Garcia suggested China could invest up to $10 billion in Honduras, a massive boost for local workers.

“We have to go there to explore the big projects that China can give us,” he told reporters.

The decision leaves Taiwan with only 13 diplomatic allies (as of August 2023) as more countries capitulate to Chinese influence and support the “One China Policy”, which does not acknowledge Taiwan as a separate entity to mainland China. Seven of these remaining allies are Latin American countries.

With China-US tensions mounting over the island, shrinking the pool of Taiwan’s diplomatic allies weakens its international position should Beijing decide to pursue military action. This is especially alarming since Mike Minihan, Head of the US Air Mobility Command, issued a memo that predicts the US could go to war with China as early as 2025.

Returning to Alden and Mendez’s description of Panama City five years ago, Zhang Yujing, Head of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) claimed Panama was a “natural extension of the silk road and a gateway to Latin American markets.”

The reference to the Silk Road might strike the casual reader as an archaic reference. The great Eurasian trade route trodden by the likes of Marco Polo faded from cultural, political and economic importance in the mid-15th century, following the fragmentation of the Mongol Empire around 100 years earlier.

However, the authors point out that China’s relationship with Latin America started far earlier than many believe.

Historical ties

“China’s interest and influence in Latin America might appear to be a modern phenomenon but their ties run deep. That said, one cannot and should not ignore Beijing’s clear and unwavering interest in the region. The US certainly isn’t,” says Mendez.

According to the authors, China was not an alien presence in Panama when it started funding expansions to the canal in the late 2010s; it was a country with long-standing familial ties.

Roughly 10 percent of Panama’s population has Chinese heritage, and one of its national dishes is a variation on the classic Cantonese ‘chaufan’. Panamanians of Chinese origin could claim ancestry from Cantonese and Hakka migrants who came to work on the railroads in the mid-19th century.

Their sweat and blood, like that of their contemporaries in Peru, Mexico, and the US, contributed to the building of Panama’s formative infrastructure, explain Alden and Mendez.

Nevertheless, they believe the level of Chinese investment in the Panama Canal should ring alarm bells in Washington. Built and occupied by the US military between 1904-1914, the canal was a symbol of the US’ determination to dominate its so-called ‘backyard’, and dubbed “the goose that laid the golden egg” for the US by one American politician cited by the authors.

Panama continued to be of strategic importance during the Cold War, home to the headquarters of one of the US military’s key regional nodes, South Command.

Delving yet deeper into history, Alvaro and Mendez illuminate connections between the Spanish Empire and China under the Ming and later Qing dynasties. Having overthrown indigenous empires in South and Central America, Spanish conquistadors recognised the mineral wealth of these newly acquired territories and embarked on forging the Silver Route (Via de la Plata) linking mining interests in Peru and Mexico to the Spanish port city of Manila in the Philippines.

From there, Spanish, Dutch, and Portuguese merchants shipped these cargoes to the Portuguese colony of Macau, where they were traded for silks and porcelain with Imperial China.

According to Alden and Mendez, estimates suggest that from 1500-1800, a handful of mines in Peru and Mexico accounted for 80 percent of the total global trade in silver, with a third of their production being directed to the Chinese market.

In their book, the authors describe how the decline of the Spanish Empire and resulting independent republics of Peru, Mexico, and Colombia birthed several national programmes to expand infrastructure into interior territories. Governments sought to open up regions, build new roads and railways, clear virgin jungle, and improve harbour facilities.

Labour consignments, beginning in the 1840s, brought thousands of Cantonese and Fujianese immigrants to Latin America, including the Caribbean. Migrants set up small businesses and their communities grew over the following decades in cities like Lima (Peru), Tijuana (Mexico), Panama City, and Havana (Cuba).

While the Overseas Chinese Affairs Office estimated the Chinese community in Latin America was around 2 million in 2011, Alden and Mendez believe this is a very conservative figure. Other guesses place the number much higher. In Peru alone it could be between 1.5-3 million, they say.

Modern developments

In November 2004, China’s new leader Hu Jintao used the Asia-Pacific Economic Cooperation (APEC) summit in Chile as a starting point for ground-breaking diplomatic visits to Brazil, Argentina, and Cuba. The steady surge in economic involvement led to China supplanting the US as the principal trading partner for many of the leading regional economies within six years, the authors claim.

“China is not buying in Brazil, it is buying Brazil,” Jair Bolsonaro, former President of Brazil (2019-2022).

– Jair Bolsonaro, Former President of Brazil 2019-2022

Alden and Mendez suggest Chinese Foreign Ministry white papers on Latin America published in 2008 and 2016 reveal Beijing’s interest in the region is first and foremost driven by economic motives. China views harvesting natural resources and opening new markets in Latin America as crucial to growth and stability at home, they argue.

“Simultaneously, China’s economic outreach and diplomatic forays appeal to the development aspirations of a Latin America intent on seeking new sources of finance, unencumbered by the structures imposed by US-led neo-liberalism and alignments that broaden commercial and diplomatic opportunities,” says Mendez.

For instance, China absorbs over 40 percent of Brazilian soya exports. However, importing competitively priced finished goods is challenging the market position of Latin American firms, as well as their established development gains in sectors such as textiles and aviation.

“Beijing has been able to secure access to local resources through large-scale loans aimed at major infrastructure projects. Often tied to these loans are provisions for the employment of Chinese firms, labourers, and suppliers, providing much-needed sources of capital for investment-starved developing countries in Latin America and at the same time a way for Beijing to underwrite the expansion of its own firms overseas,” explains Alden.

The authors suggest Beijing initially showed caution in its diplomatic engagement with Latin America, especially in sensitive cases like Venezuela and Ecuador, in order to allay US concerns.

However, Latin America’s enthusiastic embracing of China and the lack of a preventive reaction from Washington took even the Chinese by surprise and forced the pace of deepening ties, they believe.

Now that it has dipped a foot into the pond, as it were, Alden and Mendez suggest China feels it needs to take the plunge, as the volatility of the regional policy environment, including resource nationalism and the revival of populism, have introduced unexpected risks to Chinese investments and loans in Latin America.

The deepening exposure of Chinese firms and citizens to hazards in the region create a reason for China to enhance the security of these interests, say the authors. They note that both of the Chinese white papers on Latin America call for closer bilateral cooperation between police forces, judiciaries, and militaries, to combat transnational crime and improve the safety of China’s interests.

US concerns

The launch of the China-CELAC (Community of Latin American and Caribbean States) Forum in 2014, notably without the presence of the US or Canada, is marked by Alden and Mendez as a bold departure from the more cautious approach of Hu Jintao towards China-Latin American relations.

Chinese scholars and analysts remain divided on whether caution and prudence are the best avenues for implementing foreign policy in the region, or if China should use its presence in ‘America’s backyard’ to pursue retaliatory diplomacy against the US for its interference in China’s sphere of influence in the South China Sea.

“The idea that China could challenge the primacy of the US in the Western Hemisphere was considered nonsensical. Since then, attitudes have changed in Washington,”

– Professor Alvaro Mendez, LSE IDEAS

“The US’ initial complacency towards China’s economic engagement with Latin America saw it as fitting within the broader ambit of US-led globalisation. The idea that China could challenge the primacy of the US in the Western Hemisphere was considered nonsensical. Since then, attitudes have changed in Washington,” says Mendez.

The authors explain that the US now increasingly views Beijing’s relationship with Latin America in the light of its geopolitical ambitions.

“Donald Trump’s ‘trade war’, launched in 2016, and his administration’s formal designation of China as a ‘strategic competitor’ in the US National Security Strategy two years later were signals the era of ambiguity had come to an end,” says Alden.

However, the authors note that some observers suggest Trump’s ‘America First’ policies acted as an own-goal, effectively undermining US influence in Latin America.

Latin American concerns

At the same time as concerns have risen in the US, the authors note that China’s growing influence has not met with zero resistance in Latin American countries.

Rising debt tallies owed to China by Ecuador, Jamaica, and Argentina are expressions of ‘debt-trap diplomacy’ designed, some US analysts and their Latin American counterparts believe, to ensnare these governments into crippling dependency on Beijing by giving huge loans with strings attached, they explain.

They find that local concerns have been raised across the region that Chinese engagement mirrors its approach to acquiring natural resources in Africa, stirring worries over de-industrialisation in addition to more primal racist beliefs.

One example of this is in Brazil, where deepening engagement with China has been a national priority since the first election of current president Lula Da Silva in 2002.

Two-way trade soared from $6.7 billion in 2003 to $36.9 billion six years later, with China hungry for agricultural products and in return financing the development of Brazilian infrastructure. Brazil’s global ambitions also received a boost, with Beijing endorsing its bid for a permanent seat on the UN Security Council and invitation for Brazil to become a founding member of BRICs.

While this gives the impression relations were off to a good start, Alden and Mendez note that after a few years, Brazilian businesses started complaining about competition from low-cost Chinese imports. On top of this, in the wake of the Global Financial Crisis, the Brazilian government struggled to raise capital to fund its mounting debt burden.

The result was an unprecedented surge in Chinese-financed mergers and acquisitions by its state-owned enterprises, making Brazil the third largest recipient of Chinese FDI in 2016. Two years later, former military captain Jair Bolsonaro was elected president, appealing to anti-China sentiment.

In his own words, “China is not buying in Brazil, it is buying Brazil.”

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