US must review its policies to counter China in Latin America

The United States is drafting policies to counter the rise of an aggressive China in different regions of the world. India, Australia, US and Japan are planning a quadrilateral coalition in the Indo-Pacific region. But such moves alone are not enough for the US as China is expanding its foothold in Latin America. US President Donald Trump’s policies like protectionism and re-negotiation of trade pacts may only serve to work in China’s favour.

China held its second ministerial meeting with the Community of Latin American and Caribbean States (CELAC), in Santiago, Chile recently. Latin America refers to those countries in America where a Romance language (a language derived from Latin) like Spanish, Portuguese and French dominates. The CELAC is a regional bloc created in December 2011 of 33 countries not including Canada, United States and overseas territories of European countries. One of the aims of CELAC is to reduce the influence of the US on Latin America and China is apparently cashing in on this rift between CELAC members and the US.

At the meeting with CELAC, China announced plans to invest for its Belt and Road Initiative (BRI) in Latin America. According to the Washington Post, over the last decade, Chinese banks have provided more than $14 billion in loan commitments to Latin America. The advent of the BRI will further integrate China with the region’s trade. Chinese Foreign Minister Wang Yi claims Latin America is the second largest destination for Chinese overseas investment.

According to Stephen Kaplan of Washington Post, unlike the Western approach, Chinese lending takes the form of ‘patient capital’, which includes non-intervention in sovereign affairs and non-imposition of conditions like fiscal austerity or transparency, as Western governments do. Chinese state-to-state financing packages aimed at boosting exports and commerce, often featuring guaranteed contracts for Chinese contractors.

Kaplan points out that as the United States retreated from its lead role in globalisation, first because of the 2008 financial crisis and now under President Trump’s leadership, China has become a major global economic player. Both China and members of the CELAC are positive about the outcome of the talks. According to Xinhua, both sides agreed that the joint construction of the BRI will boost the China-CELAC partnership and open up new prospects.

According to The Santiago Times, China is testing US dominance in Latin America, offering the region US$250 billion in investment over the next decade. It is the top trading partner of many countries in the region, including Brazil, Chile and Argentina.
According to Foreign Policy, China has pledged to increase trade with the region by $500 billion and foreign investment to $250 billion by 2025. China’s two development banks, the China Development Bank and the Export-Import Bank of China, provide more development finance to Latin America than the World Bank, Inter-American Development Bank and the Andean Development Corporation combined each year.

As China builds ports and infrastructure in Latin America as part of the BRI, it could also set up bases there. There is no cold war between the US and China today, but as China grows aggressively and the stakes grow higher, it is a possibility. The US could end up facing a situation similar to the Cuban missile crisis in the 1960s when the US discovered that the Soviet Union had secretly stored nuclear missiles in Cuba, which during the Cold War, brought the two superpowers to the brink of a nuclear war.

These forays by China into Latin America mean that the United States can no longer afford to be shackled by its own policies and must review them to be in a position to tackle China effectively or else it may find it an uphill task to counter China in Latin America. The US must act while there is time.