China’s Plans to Use Latin America for Economic, Political Agenda Detailed in US Report

A container ship belonging to Cosco, China's state-owned shipping company, is seen near Panama City on May 2, 2017. Rodgrio Arangua/AFP/Getty Images

A new wide-ranging report by a U.S. congressional commission on China has outlined the Chinese regime’s strategies in Latin America for gaining advantages that boost its political and economic interests.

The report, released Oct. 17 by the U.S.–China Economic and Security Review Commission, described in blunt terms what China’s objectives are in the Latin America and Caribbean region: to gain access to the region’s natural resources and consumer markets, shape foreign policy and public opinion in favor of China; and gain “geopolitical influence in a region geographically close and historically subject to U.S. influence,” the report said.

Aside from increasing military engagements in the region that can be seen as worrisome to the United States, the report noted that the uptick in trade with China has directly led to the demise of local manufacturers in Latin American countries.

Trade

The Chinese regime in 2015 laid out an economic plan to increase trade with 33 Latin American countries, with the goal of reaching at least $250 billion by 2020. The region serves as a growing market for Chinese firms to secure market share before moving onto more established markets in the United States and Europe, according to the report.

China’s concerted efforts have now made it the largest source of imports in Panama, Paraguay, Chile, Peru, Cuba, and Bolivia.

Of the Chinese imports in the Latin American region, 91 percent are manufactured goods. Meanwhile, the region primarily exports natural resources to China, such as soybeans, copper, iron ore, refined copper, and oil. These commodities accounted for 72 percent of the region’s exports to China in 2016.

That level of trade has further deepened the region’s reliance on low-value products to fuel its economy, the report shows. Meanwhile, Latin American manufacturing sectors that provide more jobs to locals are being subsumed by competition from cheap Chinese imports.

The U.S. report cited a 2017 report from the International Labor Organization that found Argentinian, Brazilian, Chilean, and Mexican employment from 1995 to 2011 in “computers, textiles, and footwear, as well as trade—was reduced by 1 million jobs due to the Chinese imports.”

Another analysis, by two economic scholars at Boston University, estimated that the rise of Chinese imports threatened 75 percent of Latin American manufactured goods for export between 2008 to 2013.

Foreign Investment

Beijing has also targeted foreign investments in the region for its own interests. In Panama, for example, it has sought to gain control of the Panama Canal, a critical commercial hub for both the United States and China—by acquiring and constructing port facilities on both sides of the canal. Beijing is even building a new embassy near the canal.

Perhaps unsurprisingly, Panama became the first Latin American country to sign an agreement to partner with China in its One Belt, One Road (OBOR) initiative—whereby Beijing builds infrastructure projects in countries around the world as a means for gaining geopolitical influence.

The U.S. report noted that China’s influence over the Panama Canal could pose security concerns: Adm. Kurt W. Tidd said in a February congressional hearing that China’s “increased reach to key global access points like Panama create[s] commercial and security vulnerabilities for the United States.”

As with other countries where China has OBOR ambitions, China has serviced high-interest loans to Latin American countries that have little capacity to repay them. In 2017, China owned about a third of Ecuador’s total public debt, for example.

China also often places particular conditions on its loans, such as in 2009, when China Development Bank gave a $1 billion loan to Mexican telecommunications firm América Móvil for a telecoms network infrastructure project. The loan’s terms included a provision requiring the purchase of equipment from Huawei, the Chinese telecoms giant.

Military

The U.S. report also indicates that China has increased its arms sales to the region in an effort to curry political favor.

China also has several projects with worrying military implications: It plans to construct a $50 million satellite and space mission control station in the Patagonia region of Argentina.

China has claimed the base only will be used for civilian space activities but “experts assert that the facility could be used to collect intelligence on satellites, missile launches, and drone movements, and to interfere with communications, electronic networks, and electromagnetic systems in the Western Hemisphere,” the report said.

In addition, some think tanks have reported that China has agreements with the Cuban government to use Soviet-era facilities that can intercept satellites and collect signals intelligence.