China’s growing influence in Latin America a CEU-CEFAS Report

In this first report “China’s influence in Latin America” we present the challenges of the new multipolar world and we want to reflect on the role that Western powers want to play in a region with which we share history, culture, language and relations that go beyond trade and economic relations.

With growing economic exchange, and in the absence of a clear policy for Latin America on the part of the United States, Spain and the rest of Europe, China is increasing its political and cultural influence in the region, becoming an alternative role model to the West in an increasingly contingent world.  

• China’s great economic development over the last 25 years has made the Asian power a major consumer of raw materials – from Latin America to a large extent. China receives 14% of all Latin American exports, including a third of the oil and mining material produced there.
• Since 2000, trade between China and Latin America has grown at six times the rate of trade with the United States and the European Union. China has overtaken the European Union as Latin America’s second largest trading partner and, with the exception of Mexico, has been the main partner since 2018.
• China’s dependence on Latin American imports is very high: 74% of soybeans, 68% of copper, 43% of meat, 22% of iron and 10% of oil purchased by China come from Latin America.
• To ensure access to raw materials, the Chinese government has taken control of part of the Latin American supply chains, acquiring mining rights and agricultural distribution companies in producer countries.
• Moreover, China has become the region’s largest sovereign creditor and the main source of financing for some governments, such as Venezuela, Ecuador and Argentina, through loans repaid or secured with raw materials.
• Unlike Western financial institutions, Beijing does not attach heavy financial, democratic or environmental requirements to its loans, in some cases even including clauses on political or technological alignment with China.
• Although direct investment by the United States and the European Union in Latin American companies and new projects is still higher than that of China, the Asian giant has increased its direct investment to a greater extent than the others in the last decade, allocating the equivalent of 3% of regional GDP to replace Western investment in the control of strategic assets such as electricity, ports and basic infrastructures.
• Since 2008, China’s foreign policy has sought to add to its economic preponderance a greater political and cultural influence in the region, considered the “backyard” of the United States. Thus, China has evolved from a situation of ‘cold politics and hot economics’ to one of ‘hot politics and hot economics’ with respect to Latin America.
• In addition to China having signed strategic partnerships with major governments, twenty countries have already joined a cornerstone of the country’s diplomacy, the “Belt Road Initiative”, and three Latin American states have joined the Beijing-based Asian Infrastructure Investment Bank. At present, there are only three Latin American states with a population of more than one million that recognise Taiwan.
• The Chinese government has promoted cultural, scientific, technological and tourist exchanges, expanding its network of Confucius Institutes in 40 countries and drawing on the descendants of Chinese immigrants who have been integrated in some cities for generations. In Peru, for example, they account for 8% of the population.
• Similarly, the Chinese government has promoted collaboration with the main Latin American media groups, has created content in Spanish in the main Chinese media, and has fostered exchange centres and forums for disseminating its culture and the “Chinese miracle” in the region with political leaders, diplomats and communicators.
• Although Latin American societies still consider the United States and Europe as the main democratic references, people’s opinion of China in the region has improved significantly in the last decade, increasing the positive perception of the Asian power.
• The pandemic provided China with an opportunity to increase its influence and project its power by increasing direct aid and scientific and technological cooperation through “COVID diplomacy”, spreading Chinese health products and technology across the continent.
• An example of the EU’s lack of commitment to Latin America is the failure of the Mercosur-EU free trade agreement. After more than twenty years of negotiations, the two blocs reached a preliminary agreement in 2019. However, the final texts have neither been concluded, nor signed, nor ratified, and therefore have not entered into force.

The United States and Europe have retreated from their historical positions as the Latin American community’s main partners, making it easier for the region’s enormous economic dependence on China to become a vector of political and social influence. The challenges presented by the new strategic configuration invite reflection on the role that Western powers wish to play in a region with which we share history, culture, language and ties that go beyond trade relations.