The Cipher Brief spoke to R. Evan Ellis, a professor at the U.S. Army War College, who said that while China does not directly challenge U.S. interests in Latin America, it in essence underwrites rogue regimes in the region that are opposed to U.S. policies.
The Cipher Brief: What are China’s strategic interests in Latin America? Does this pose a threat to U.S. foreign policy objectives in the region?
Dr. Evan Ellis: China’s interests in the region are primarily economic in nature, but this does not make them any less strategic, nor any less impactful for the region or the position of the United States. These interests include:
- Reliable access to primary products, such as petroleum, minerals, and metals to feed the Chinese demands for industrial production, capital formation, and urbanization
- Access to agricultural goods (principally animal feed such as soybeans and fishmeal) to help the PRC feed its 1.35 billion people
- Markets for Chinese goods and services, particularly as PRC-based companies move up the value-added chain
- Access to technology in order to achieve Chinese industrial competitiveness, particularly in strategically valuable industries, such as defense, electronics, and aerospace, and indirectly, to support a strong state with a diversified economic base
The pattern of Chinese engagement has facilitated an increase in Latin American commodity exports in recent years while simultaneously undercutting manufacturing in the region (including competition for exports to traditional markets, such as the United States and Europe). As a result, Chinese engagement has increased the region’s concentration on low value-added primary product sectors, leaving it more vulnerable to falling international commodity prices.
While the PRC is careful not to directly challenge U.S. interests in Latin America, its commodity purchases from, loans to, and investments in the region have sustained the life of regimes that are opposed to U.S. policy objectives—in areas such as democracy and human rights, transparency and good governance, and respect for private property and contracts.
Indirectly, Chinese money has helped weakened the accountability of populist leaders of regimes, such as Venezuela, to their institutions and populations, short-circuiting corrective mechanisms in those countries, where, under normal circumstances, leaders exercising poor governance and unsustainable policies are reined in by their own people and institutions. By helping to decouple populist leaders from the short-term consequences of their policies, Chinese commodity purchases and loans have increased the risk of profound crises within those regimes. These not only prejudice their own people, but China’s willingness to “cash in” on the desire of such regimes to escape from Western norms of democratic controls and good governance, contributes to the insecurity of the neighbors of these regimes, and to insecurity and stability of the region as a whole. This can be seen by the increasing use of Venezuelan territory as a drug transit corridor, the border crisis that Venezuela has manufactured with Colombia, and Venezuela’s sending of troops into Guyanese territory.
At the end of the day, it is the United States, whose fate is bound to the region by ties of geography, economy, and family, which is prejudiced by such hemispheric insecurity, rather than China, half a world away.
Beyond its underwriting of rogue regimes in the region, China’s choice to use the Community of Latin American and Caribbean States (CELAC) as its vehicle of choice for multilateral engagement with the region, supports efforts by the ALBA states (a Latin America regional bloc) and independent actors, like Brazil, to disempower multilateral institutions, such as the Organization of American States (OAS), undercutting the voice of the U.S. and Canada in regional affairs.
Furthermore, should the current competition between the PRC and the U.S. give rise to a conflict in the future, it is likely that the PRC would not resign itself to allowing the U.S. to conduct such a fight as an “away game.” Rather, it would use its economic leverage and global assets (including commercial assets in Latin America and the Caribbean) as part of the struggle.
Such actions might include, but are not limited to: using China’s economic influence to block states in the hemisphere from providing diplomatic, intelligence or other support to a coalition opposing the PRC in Asia; using Chinese commercial assets to introduce and sustain agents in the region to conduct intelligence or other operations against the U.S. and its allies; and in extreme cases, combining knowledge gained from its ongoing military activities in the region with that obtained from Chinese commercial companies operating in the region for staging or resupply, if invited to do so, in the course of a U.S.-China conflict.
TCB: What makes China’s activities in Latin America different from other outside actors in the region? How much of an impact have those differences had?
REE: While China has not used its presence in the hemisphere to challenge the United States in the same manner as extra-hemispheric actors, such as Russia and Iran, its engagement is far larger and more broadly distributed across countries and sectors than these other actors. Simply put, Latin American and Caribbean politicians and businesspeople do not dream of access to vast markets in Russia or Iran in the same way that they hope to gain access to the demand of one billion Chinese consumers, or to the loans and investment of the Chinese state.
On the other hand, while other actors, such as Japan, South Korea, and the European Union do have an important trade and investment presence in Latin America and the Caribbean, these states do not challenge investment and financing norms, or turn a blind-eye to violations of intellectual property and environmental norms, in the way that China does with its companies.
TCB: Has China focused on some countries in Latin America more than others?
REE: China has applied a policy of “flexible engagement” with the region, pursuing relations with each country according to the opportunities and constraints of its government’s prevailing ideology and the nation’s institutions.
In general, the PRC has concentrated the majority of its loans in Argentina and the ALBA countries, because these regimes have had the greatest need and desire to escape from dependence on Western institutions and replace them with alternate sources of capital.
Yet China has also focused its manufacturing investment disproportionately in large mixed-market countries, such as Brazil (which offers an enormous internal market and access to other countries through MERCOSUR) and Mexico (with both a vibrant internal market and access to U.S. and Canadian markets through NAFTA).
TCB: How has increased Chinese investment and influence changed the U.S.’ relationships with countries in the region? Should the U.S. view this as a zero sum game?
REE: In the short term, Chinese commodity purchases, loans, and investments have sustained the lives of the ALBA regimes and, in the process, the continuing hostility of their governments to the United States.
Yet Chinese money has also provided enhanced economic and political options for other states in the region, re-orienting that subset of pragmatic political figures in the region who once supported U.S. policies out of a calculation of interest, and leaving behind a diminished pool of “true believers”; those who believe that alignment with the U.S. and pursuit of the values that it represents—western-style representative democracy, individual human rights, respect for private property, and a market-based concept of economic organization—is the best way to achieve broad-based prosperity, development, and human dignity in their countries.
Despite the erosion of the U.S. position in the short term, however, the impact of PRC engagement over the long-term in the region may be more benign. Ironically, even without a strong U.S. response, accumulating frustration in the region with the behavior of Chinese companies, the inability to secure access to the Chinese market comparable to the access gained for Latin American products in the U.S. and Europe, and increasingly stark examples of “China-financed populist socialism,” help the region to temper some of its harsher judgments of U.S. shortcomings.
TCB: How do you see Chinese influence in the region changing in the near future?
REE: Short of an economic and political collapse in China, the attractiveness of the PRC as a partner will probably decrease in the coming years.
While Chinese companies will become more adept at doing business in Latin America and the Caribbean, decelerating demand for primary products from the PRC will lower international commodity prices and thus decrease the value of Latin American exports to China, deepening hardship in the region.
Such decelerating Chinese commodity demand will also likely lead to delays in some investment projects in the petroleum and mining sectors by those Chinese firms who can do so without losing their concessions, further souring the relationship between the PRC, and Latin American and Caribbean governments. At the same time, delays in the “take-off” of Chinese consumer demand, and the evaporation of opportunities for construction and other investment projects in the PRC, will likely push Chinese banks, construction companies, and manufacturing firms to more aggressively pursue markets in Latin America and the Caribbean, increasing competition with Latin American counterparts at a time in which the region’s economy is stagnant, due in part to other aspects of the Chinese slowdown.
On top of such factors, to the extent that China’s aggressive behavior in the South and East China Seas continues, it may undercut some of the appeal that the PRC has sought as a “benevolent” global actor. While fear of offending China, hopes of profiting from it, and a general lack of knowledge will likely suppress the explosion of negative sentiments toward China in the region, the disposition of the region towards the PRC in the coming years is likely to be notably cooler than it has been to date.
