Spheres Of Influence: Growing Chinese Ambitions And American Laxity In Latin America
China is currently South America’s top trading partner.
Back in 2000, China's market accounted for less than 2 per cent of Latin America’s exports.
By 2021, trade touched $450 billion and analysts predict that it could exceed $700 billion by 2035.
Why should we care about China's influence in South America? More importantly, should we even care?
China, from a comprehensive power perspective, is second only to the US. Many believe, for good reason, that if the trends continue, China will eventually displace the US.
To successfully displace the US, apart from meeting certain economic and demographic targets, China has to become a regional hegemon in Asia. This is not in India's interest as the emergence of a regional hegemon next door makes us vulnerable to the intentions of that hegemon.
It creates a situation where we have to wish that the hegemon has benign intentions towards us instead of ill intentions. Isn't such a scenario, where we are vulnerable to the intentions of another nation, threatening to us? Is ignoring the actions, of that which threatens us, advisable?
South America may indeed be on the other side of the world, but China's success/failure in the Western Hemisphere, impacts us, indirectly.
Western Hemisphere has for long been considered America's backyard. The roots of this go back to the Monroe Doctrine. In other words, South America, has for long been a region which is considered to be under the US' sphere of influence.
For decades in the twentieth century the US fought the Cold War with Soviet Russia on the turf of Latin nations attracted to Marxism.
Now, Latin America is becoming the turf for another tussle. The slow burning conflict between the US and China is showing signs of having a fissiparous impact on the world.
On whose side will most countries of Latin America fall? That, is not a forgone conclusion, yet.
Few weeks ago, the US hosted a Summit Of the Americas in Los Angeles. It was the first time the US hosted the Summit since the inaugural meeting in Miami, in 1994.
The summit, by all accounts, was less than ideal, to put it delicately. It was as if the summit was 'thrown together' at the last moment.
The summit agenda was not given out in advance. Biden gave some remarks but skipped the closing press conference. US trade representative Katherine Tai showed up at the summit for a q&a but didn't actually give a talk and then she left the town for some other meeting.
People who attended the summit said that the region was left with a feeling that the US didn't care.
Most of the attention was directed towards the guest list instead of issues such as, say, growing Chinese influence in the region and the allure of Chinese credit lines.
US decided to not invite presidents of Cuba, Nicaragua, and Venezuela. As a result, AMLO refused to attend the summit. AMLO is Andrés Manuel López Obrador, the president of Mexico.
Leaders of El Salvador, Guatemala, Bolivia, the Grenadines, St. Vincent and Honduras too didn't bother to show up. El Salvador's Nayib Bukele refused to even take calls from U.S. officials.
Clearly, Biden administration's decision to not invite the leaders of Cuba, Nicaragua and Venezuela didn't go down well, to put it mildly.
Chilean President Gabriel Boric attended the summit. He had some words for the Americans.
“When we disagree, we need to be able to speak to each other face-to-face,” he said.
The Prime Minister of Barbados perhaps best summarised the sentiment that a lot of other Latin American countries, at the summit, were feeling.
She looked at the US Secretary of State Anthony Blinken and said, "It is wrong that Cuba, Venezuela and Nicaragua are not here. We need to speak with whom we disagree and we don't only need to narrow cast. That's the part of the problem of the world, there is too much narrow casting instead of broadcasting. There is too much of talking at instead of talking with".
The goal of the summit was to show to the region that the US cares, and to offer the region something tangible so that the nations in western hemisphere don't drift away too much, towards China.
The unspoken intention, one assumes, was to counter Beijing's rising influence in the region. Did it succeed?
Richard Haass, the President of Council on Foreign Relations tweeted, "The summit of Americas looks to be a debacle. A diplomatic own goal. The US had no trade proposal, no immigration policy and no infrastructure package. Instead, the focus is on who will and will not be there. Unclear is why we pressed for it to happen".
Nicholas Cull, professor of public diplomacy at the University of Southern California said, "It's freaking amateur hour. It doesn't seem like they (USA) prepared with image in mind. Chinese summits are a very different animal".
So, what is the nature of China's relationship with Latin America and what is China's goal?
To understand this, it is essential to consider how China perceives the situation, so to say.
China believes that regions such as East Asia should be part of a Chinese sphere of influence (due to geographic proximity and the common cultural milieu).
They are not under Beijing's sphere of influence due to American 'malign' influence. That is to say, they perceive America influence in the region as American meddling in what should be a Chinese backyard.
As a result of this, the Chinese intend to undermine America's influence in its own backyard i.e. the Western Hemisphere.
China's ties to South America goes back to the sixteenth century. It was the period when the Manila galleon trade route facilitated the exchange of porcelain, silk, and spices between China and Mexico.
Three centuries later, hundreds of thousands of Chinese were being shipped to Cuba and Peru to work as indentured servants on silver mines and sugar plantations.
In contemporary times, most governments in South America began recognising the People's Republic of China after Richard Nixon visited Beijing in 1972.
When China entered the WTO in 2001, the deepening of cultural, economic, and political ties began.
It may surprise some people to know that today, around 5 per cent of Peru's population are Chinese (by ethnicity). Countries such as Brazil, Cuba, Paraguay, and Venezuela too have large Chinese diaspora communities.
Beijing's largest space facility outside of China is located in Argentina’s Patagonian Desert. Beijing also has satellite ground stations in Bolivia, Brazil, Ecuador, and Venezuela.
Latin America is important to China because, apart from being US' erstwhile backyard, it is also the region where eight countries exist that still recognise Taiwan.
Some countries, such as El Salvador, stopped recognising Taiwan and began recognising China's claim over Taiwan as recently as 2018.
Dominican Republic and Panama too switched their recognition from Taiwan to China during this time period, signifying Beijing's growing influence in the region.
Much of China's development of closer ties with South America and, as a result, China's influence in the region, has been under the radar.
President Xi Jinping has visited the region eleven times since he took office in 2013.
China is currently South America’s top trading partner. Back in 2000, China's market accounted for less than 2 per cent of Latin America’s exports, but China’s rapid growth and resulting demand drove the region’s subsequent commodities boom.
Over the next eight years, trade grew at an average annual rate of 31 per cent, reaching a value of $180 billion in 2010. By 2021, trade touched $450 billion.
Analysts predict that it could exceed $700 billion by 2035.
The growth of trade and the influence it grants to Beijing certainly isn't something that has made it to the headlines, although, arguably, it is something that is more important than anything that makes the headlines.
Consider China's role in Brazil's energy sector. Brazil is a nation of 200 million people and the biggest economy in South America. China’s State Grid Corp. is the largest power-generation and -distribution company in Brazil.
China Three Gorges (CTG), which is the the world’s largest hydropower provider, controls 17 out of a total of 48 hydro plants as well as 11 wind farms in Brazil.
It is not just Brazil. The China Development Bank has funded major wind and solar projects in other countries. Latin America’s largest solar plant in Jujuy, Argentina, and the Punta Sierra wind farm in Coquimbo, Chile, are all funded by the China Development Bank.
China’s growing control over critical infrastructure such as energy grids and its influence over the energy sector, poses national security risks.
Why is China able to dominate the energy sector? Perhaps it may have something to do with the region's 'slight' economic dependency on China.
Latin American exports mainly soybeans, copper, petroleum, oil, and other raw materials to China. These exports are necessary for revenues, and to drive industrial development in the region.
Brazil's bilateral trade with China surged from $2 billion in 2000 to $100 billion in 2019. Brazil sends 30 per cent of all its exports to China. Thirty per cent (Chile is 'ahead', sending nearly 39 per cent of its total exports to China). This includes 80 per cent of its soybean crop and 60 per cent of its iron ore.
China is also the biggest importer of Argentine beef and soybean. Since 2007, China has supplied over $17 billion in financing to Argentina.
According to a report from the Council for Foreign Relations, "the state-owned China Development Bank and the Export-Import Bank of China are among the region’s leading lenders; between 2005 and 2020, they together loaned some $137 billion to Latin American governments, often in exchange for oil and used to fund energy and infrastructure projects."
Argentina and Brazil, among other nations in the region, depend on China's Huawei for their cellular networks.
China Cosco Shipping, a Shanghai based firm, is building a new $3 billion port at Chancay in Peru.
Beijing has invested roughly $4.5 billion in lithium production in Mexico and the so-called Lithium Triangle countries of Argentina, Bolivia, and Chile. Together, the triad contains more than half of the world’s lithium, a metal necessary for the production of batteries.
The list of projects flagging China's influence in the region is rather long.
The question that arises is this - what is US doing to counter growing Chinese influence in the region, apart from hosting summits which end up being counter productive.
As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.
Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.
We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.
Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.