China's influence in Latin America is increasing. A new situation for the established great power USA. But is Beijing behind it a targeted strategy?
< p>Business with Latin America is booming. According to China's official statistics, trade between China and Central and South America increased by eleven percent to around 437 billion euros in 2022. This makes Beijing the second largest trading partner, right behind the USA. China is already the undisputed leader in the foreign trade balance of the largest economies in the region, such as Brazil, Chile and Peru.
Analysts expect this development to continue. According to estimates by Germany Trade & Invest (GTAI) to double in the next ten years. “When you travel to Latin American countries, you will find many customers who appreciate the Chinese products because they are inexpensive and have good value for money,” says Stefanie Schmitt, GTAI director in Chile. “Many live here on the edge of the poverty line. They can afford cheap products from China, cell phones and cars.”
Unbalanced foreign trade
In return, Latin America mainly supplies raw materials to China. Iron, aluminum, tin to name a few. Latin America is therefore doubly interesting for China: as a sales market and as a supplier of raw materials. This is also confirmed by Jiang Shixue, a professor at the Institute for Latin American Studies at Shanghai University, in a written exchange with DW.
However, in some cases the business is very unbalanced. Resource-rich Chile, for example, achieved an export surplus of around USD 10 billion with China in 2021. “Copper is Chile's most important export good, and that also applies to trade with China,” says trade expert Schmitt. The sweet cherries from the Andes are also very popular with Chinese consumers. In 2021, China imported the juicy drupe worth 1.4 billion US dollars from Chile alone.
Coveted natural resources
However, from the point of view of the Chinese economy, the Andean country with just 19 million inhabitants is not really a big sales market. In 2021, Chile imported only $1.3 billion in Chinese cars. “A very asymmetrical market situation,” summarizes Schmitt.
Highly sought after in China: lithium from Bolivia, Chile and Argentina
According to Schmitt, China's business interests are primarily based on the purchase of mineral resources. “Let's take lithium as an example, which is plentiful here in Latin America. The Chinese buy lithium here and then they're gone. But of course it would be better for the countries here if they didn't just sell agricultural products or commodities like lithium, but if they could also manufacture lithium batteries and export them as a higher value product.”
New course?
Argentine President Alberto Fernández therefore wants to take a new foreign trade course, reports the Clarin newspaper from Buenos Aires. According to this, Fernández is said to have appealed to the Chinese leadership on the sidelines of the opening ceremony at the 2022 Winter Olympics in Beijing to “even out the very unequal trade balance, from which only China has benefited so far.”
Chinese expert Jiang sees things differently: “The Latin Americans complain that China only buys raw materials. But that's not correct.” In trade with the region's most populous countries, such as Mexico, Colombia and Argentina, China runs a trade surplus only because consumer markets are larger and domestic production capacity is low. “Latin American countries need to build their own manufacturing capacity and strengthen their competitiveness to boost exports, including to China,” Jiang said. However, a change would take years. So the imbalance will remain for the foreseeable future.
China's influence is increasing
In addition to trade, China is also stepping up its involvement in infrastructure projects in the region. State credit institutions or large private corporations from China invest in Brazilian container ports, Argentine nuclear power plants or the Chilean power grid. Chinese companies such as the telecommunications giant Huawei, which is controversial in the West and has been the main supplier of 4G and 5G networks in Brazil for many years, are also there.
Does Xi Jinping set a course for Latin America?
In addition, China's institutions and research institutions have invited numerous political, economic and academic leaders from Latin America to China for paid study tours and conferences in recent years. This also contributes to the Chinese influence in the region.
Does China have an LA strategy?
So China is active on many levels in Latin America. The question arises: Is there a Latin America strategy behind it?
From the point of view of the Shanghai Latin America expert Jiang Shixue, probably not. Latin America, he says, is not the focus of Chinese foreign policy. “There aren't that many Latin America experts in China. The region receives quite little attention in China,” Jiang notes. The fact that China's influence is increasing rapidly is also the case on other continents such as Africa or Europe and simply has to do with the increasing importance of the world's second largest economy.
Other Chinese political scientists hold a similar opinion. He Shuangrong, Latin America expert at the state think tank China Social Science Academy, wrote in a specialist journal in 2019 that China needs a “long-term Latin America strategy”. It's obviously missing one. However, he added, the strategic importance of this region for China is not great. In 2022, Guo Jie, a political scientist at Peking University, wrote in the English-language Chinese daily China Daily that China's influence in the region was “still significantly smaller than that of traditional powers from North America and Europe”. China does not want to and cannot “endanger American geopolitical interests in Latin America at all.”
The Chinese political scientist Jiang Shixue sees only advantages in expanding Sino-Latin American relations. “Trade with China is good for the region's economy and globalization. When Latin America gets richer, it's good for countries like the US and Europe, too,” he told DW.
Chinese pragmatism
Still, the US and EU are increasingly concerned about China's influence in the region. Because with the economic influence also grows the political one. Last year, the former Spanish foreign minister and adviser to the World Bank Ana Palacio warned in an op-ed for the “Handelsblatt” that Western influence in Latin America was waning. This is shown by the fact that many governments there have not joined the western sanctions against Russia, like China.
< p>The goods from the Chinese factories are in great demand in Latin America because of their good price-performance ratio
Stefanie Schmitt from GTAI attributes China's rapidly growing influence in Latin America to China's pragmatic approach, among other things. According to Schmitt, the fact that American and European influence in this region is slowly disappearing is also partly a home-grown problem. Beijing doesn't have to do much at all. “Because the influence of the USA on this region has not always been positive. Many countries do not want to be called the backyard of the USA.”
But if the West and Europe really want to counter China, it would have to be more specific in cooperation with Latin America. “It's not enough just to talk about environmental and social standards. Those are important points because they are part of our values. But it's better if a project is specified at some point. Otherwise it's too late,” says Schmitt. China is not waiting.