Beijing has every interest in deepening strategic economic ties with Latin American countries. Here’s how and why
For the countries of Latin America, it is increasingly difficult to maintain the balance between the United States and China. A bit like what is happening to the nations of South-East Asia, here too the key players in the region have suddenly found themselves caught between two fires.
A fire on the rise, the Chinese one, with the Dragon having developed solid relationships with various local governments over the last two decades. The other in partial retreat, the United States, distracted by more strategic dossiers and convinced, until recently, that South America now had very little to offer to the cause.
Following the BRICS expansion and increased popularity in public opinion, the polarization between the Western-driven world and the rest of the planet, and the desire for redemption of the so-called Global South, the territories beneath the United States have become relevant again. Or rather: they have regained strategic importance.
Beijing has every interest in deepening strategic economic ties with Latin American countries, many of which are characterized by disastrous public coffers and chronic internal political crises, but rich in rare earth, energy resources and crops. They also seem to be ready to please the Asian giant in exchange for loans and investments.
Loans and investments: China consolidates in Latin America
As highlighted by the Council on Foreign Relations, China is South America’s main trading partner as well as, thanks to the Belt and Road Initiative, a major source of foreign direct investment and loans in local energy sectors and infrastructure.
The rise of the Dragon has been impressive. In 2000, the Chinese market accounted for less than 2% of Latin America’s exports, but the Asian giant’s rapid growth and subsequent increase in demand drove the region’s subsequent commodity boom. Over the next eight years, trade grew at an average annual rate of 31%, reaching a value of $180 billion in 2010. By 2021, it had already reached $450 billion, a figure that remained substantially unchanged in 2022 but which could exceed 700 billion dollars between now and 2035.
Specifically, Latin America’s exports to China mainly involve soybeans, copper, oil , and other commodities that the country needs to drive its development industrial. In exchange, the Latin American region mainly imports manufacturing products with high added value. As if that wasn’t enough, from 2023, the Chinese government can count on free trade agreements with Chile, Costa Rica, Ecuador, and Peru, while 21 Latin American nations have joined the Belt and Road Initiative.
In 2022, China’s foreign direct investment in Latin America and the Caribbean amounted to about $12 billion, or about 9% of the total. Meanwhile, the state-owned China Development Bank and the Export-Import Bank of China are among the region’s major lenders; between 2005 and 2020, together they lent approximately $137 billion to Latin American governments (often in exchange for oil) used to finance energy and infrastructure projects.
New dynamics, new balances
China’s growing influence in Latin America is reshaping the region’s trade dynamics. Brazilian agro-industry and iron ore interests, for example, are becoming heavily dependent on Beijing, now their main point of contact. Speaking of Brazil, in 2022, Brazilian exports to China reached a staggering $89.72 billion, with the South American giant transforming into a key supplier of agricultural products for the Dragon, including beef.
We also highlight China’s interest in Argentine lithium mines. Companies like Ganfeng Lithium and Xi Jin Mining are making significant investments, changing the dynamics of critical supply chains for electric vehicles and other technologies. In Venezuela, however, China’s strategy involves offering credit lines guaranteed by raw materials. The list goes on and on.
But why, apart from economic reasons, is the Chinese government so interested in Latin America? First, we find China’s desire to expand its sphere of influence through what it calls South-South cooperation.
This strategy is also linked to the infamous Taiwan dossier. Beijing is attempting to diplomatically isolate Taiwan by gaining more "friends" in the international arena.
What about the United States? As mentioned, they have lost ground. For the reasons summarized above but also because of their narrative, too often focused on issues such as illegal immigration, drug trafficking, and human rights. Issues that cause inconvenience or complexity for governments in Latin America. On the opposite front, China’s direct and pragmatic approach avoids similar thorny issues. And this is precisely how the Dragon is managing to gain space for maneuvering in the US backyard.
Original article published on Money.it Italy 2024-01-21 17:47:00. Original title: La Cina si consolida in America Latina: così Pechino si espande nel cortile degli Usa
