Latin America’s turn to China: a pivot or a pull? And USA outlook
20/01/2025 - Written by Martha Cheek
Introduction
From commodity trading, to consumer goods, to electricity, and now direct investment in infrastructure projects, China’s activities have been expanding in Latin America. Western media primarily focuses on the threat or problem this poses, given China’s perceived aggressive expansion of its spheres of influence – its growing lead over the US in other, non-economic areas (ambassadorial, journalistic, academic) contributes to these fears. Given the region’s status as the US’s ‘backyard’ and the historical special relationship, it appears that the upcoming Trump administration will treat the region as a battleground for influence. Marco Rubio stated that they “can’t afford to let the Chinese Communist Party expand its influence and absorb Latin America and the Caribbean into its private political-economic bloc”, exemplified further by Trump’s recent refusal to deny using military or economic coercion to seize the ‘Chinese operated’ Panama Canal.
On the other hand, Latin American players assert their agency in a strategic pivot towards China, insisting on the cooperative and transactional nature of the partnership – it is simply filling a vacuum left by the USA. This report considers this pull/pivot dichotomy, before discussing opportunities and risks for the region.
Latin America slips from the USA’s grip
US influence in Latin America (LATAM) developed throughout the twentieth century, from the Good Neighbour policy to the Alliance for Progress, direct interference in regime change, to IMF-driven economic reforms. However, the region has been on the backburner of US foreign and trade policy since around the 2000s, becoming reactive (rather than interventionist), assuming democracy (and its preeminence) would hold. Concerns with other regions took priority (Russia-Ukraine, China), a more inward-looking and protectionist trade policy, and constraints on the budget, furthered by tensions over border politics, distanced the region further from policymakers' orbits. Latin America, too, played a role in this: the ‘pink tide’ of left-wing governments both took advantage of and contributed to waning US power in the region, with a rejection of US unilateralism and a move towards nonalignment.
Watering down around 2010, with many claiming the Latin American left was at its end, a new pink tide has been rising post-pandemic. Where democratic consolidation and economic growth fostered braver diplomatic confidence, multilateral (and/or) South-South cooperation has been encouraged, often seen as efforts to promote counter-hegemonic unity. Trump’s threat of 100% tariffs against BRICS’ alternative currency and de-dollarization talks demonstrates how much this shift antagonises US leadership.
Turn to Asia
The USA is not filling the investment void in Latin America anymore; Chinese development banks like the Asian Infrastructure Investment Bank (AIIB), and endorsements like the Belt and Road Initiative (BRI) are offering substantial support for the dire levels of connectivity and infrastructure in the region. There are many examples of China stepping in when LATAM countries were sanctioned or trade deals rebuffed by the USA: Venezuela, Cuba, and Bolivia are just some examples, with the latter two invited to join BRICS in October 2024.
As stated at the Latin American development bank CAF with the LSE this year, “not all roads should lead to Washington”.
Dependency continued?
Many of the Chinese loans have been concentrated on the production of raw materials fundamental to its own growth interests, are contingent on the purchase of Chinese equipment, and are low in transparency. Some worry these conditions simply mimic US export-import bank loans, those of which have been staunchly criticised time and time again by Latin Americans for being imperialistic, under frameworks like dependency theory.
It has been suggested that a higher consciousness around North American imperialism in the region is why Chinese companies are allowed privileges without the same kind of vetting of imperialistic conditions. It continues with concerns about Chinese monopoly over electricity supply to Lima, through which China “has acquired a tool for applying more subtle pressure” – political consequences of which leaders are seemingly “oblivious”.
Debt entrapment to China, however, has largely disappeared since 2015, meaning some analyses are more confident in the purely commercial or transactional nature of relations. In the case of Brazil, there is clearly a dependence on relations with China (as its number one trading partner) however a number of bilateral deals from November 2024 actually demonstrate a prioritisation of a fairer balance of power in Brazil’s foreign relations. For example, Brazil hasn’t officially signed the BRI, simply committing to “establish strategic synergies”. This aligns with its foreign policy of balanced partnerships, strategic autonomy and non-alignment, given US-China tensions as well as potential entrenched dependencies.
Furthermore, China is carrying out “goodwill” gestures like ending its tariff on Brazilian chicken, opening an opportunity to expand market access for Brazilian products in China, a step towards softening the trade imbalance that has previously been a point of tension in talks for Lula. China now calls this the “best period in history” of Brazil-China relations, committing to cooperation on renewable energy, telecommunications, and agricultural sectors even without demanding formal BRI membership.
Some argue that this demonstrates a growing adaptability in Xi Jinping’s LATAM policy, one that is more responsive and emphasises mutual benefit over strict alliance, thus prioritising the sustainability of relationships through respecting LATAM’s trend of non-alignment. Indeed, Matias Spektor, expert and professor in Brazilian Foreign Relations, stated “Latin America appreciates that China doesn’t have a preachy foreign policy” [as opposed to the USA]. “Brazil’s example”, it has been argued, “could signal to other developing nations that BRI membership is not a precondition for substantial cooperation with China, reinforcing Beijing’s narrative of the BRI as a flexible and globally inclusive initiative”. However, many Latin American countries – without the same negotiating power as Brazil as a kind of de-facto regional ‘leader’ or ‘power’ – have already formally joined. Brazil’s carefully calculated dances with China and the other BRICS members may mean it keeps itself from drowning in dependency theory 2.0, however, it may be leaving its neighbours behind to bear the brunt of unequal deals and Trump’s wrath.
USA outlook: Risks and Opportunities
While it is clear that most of LATAM, especially Brazil, see the move towards China as a pivot, Trump sees it as a pull. Indeed, his threats over the Panama Canal, Canada and Greenland suggest a revival of the Monroe Doctrine, which treated any intervention in the Americas as hostile against the United States itself. A dramatic departure from Biden’s liberal internationalism, this completely contradicts the oversimplification of his foreign policy style as isolationist, more reminiscent of a Cold War-esque great-power-bloc-centred, anti-multilateral approach. It has been warned the misguided Monroe Doctrine would be “deeply counterproductive”, and indeed, we have already seen his Panama threats bring the governments of the left and the right in Bolivia, Chile, Colombia, Mexico, and Venezuela together to defend the Panamanian sovereignty. After many tensions between them, Colombian leftist President Gustavo Petro pledged his defence of right-wing Panama’s President José Raúl Mulino “until the last consequences”.
A growing Latin American unity, now spanning across party binaries, could push the US’s neighbours further towards China, whose aforementioned supposed respect for nonalignment and ‘non-pushy’ policy could, in fact, welcome LATAM with open arms, even forging some sort of new bloc which inadvertently self-fulfils Trump’s prophecy and antagonises him further.
If the USA does not want stronger anti-American sentiment (already festering amongst many ‘new pink tide’ left-wing populist governments) and a militarisation of the region against potential attacks, probably funded by its rival, it should focus on reorienting economic attention and support for investment back to LATAM, without the hegemonic Monroe-style aggressive demands. Mauricio Claver-Carone (who Trump has named as LATAM special envoy) argued in July 2024 for the need to “Make the Americas Grow Again” under the new Trump administration, including high levels of US investment in LATAM like funding for infrastructure, especially in small countries, a more straightforward pathway to joining free trade deals, and further opportunities for nearshoring (as well as America First reshoring).
It is unclear whether Congress would approve these plans, let alone in a way that would respect a continuation of multilateralism by LATAM countries. Indeed, the developing Mercosur-European Union trade deal has been interpreted as a collective South American response to the possibility of deteriorated relations with the USA under Trump.
However, at its best, the seemingly ‘Latin America first’ tailored Trump team could well be harnessed as an opportunity for more of the USA’s southern neighbours (than just strongmen that Trump likes the personality of, like Brazil’s Bolsonaro in his previous term, and currently Argentina’s Milei) to benefit massively. Latin American leaders will have to work out a careful balancing act, ask the right questions to each potential investor, and choose the right partner for each job if they truly want to remain non-aligned and minimise risks in a US-China trade rivalry whilst carrying out precious development. Whether they will successfully reduce dependence (whether on the USA, China, or otherwise) by making their economic structures more sophisticated and less reliant on foreign markets will depend on how they use this rivalry to their advantage.