China’s Growing Presence in Latin America

The arrival of Asian economic interests into Latin America has been cautious, yet decisive. Throughout the last decade, the People’s Republic of China (PRC) has displaced the European Union as Latin America’s second largest trading partner. Moreover, today, the PRC is the main trading partner of some of the region’s major economies, such Brazil and Chile. Chinese investment and economic interests include a variety of markets, such agriculture, mining, and consumer goods. This article explores the development of contemporary relations between China and Latin America.

China’s Growing Presence in Latin America

After Mao Zedong’s communist revolution, the first political exchanges between Latin America and China were dominated by the dispute for legitimate diplomatic recognition between Beijing and Taipei (Taiwan). Throughout most of the twentieth century, Taipei (Taiwan) enjoyed greater political recognition in Latin America as the legitimate representative of China than Beijing did. However, over the last two decades the tables have turned. Today, only a handful of countries still recognize Taipei (Taiwan) as China’s legitimate representative, these include Nicaragua and Paraguay, among other Central American and Caribbean nations.

Towards the 1990s, a wave of Latin American countries began breaking formal relations with Taiwan in order to recognize Beijing and the PRC. In order to achieve this political transition, Beijing deployed a series of political and economic incentives to persuade Latin American foreign policy. As was to be expected, those countries with ideological and political affinities towards Beijing’s communist agenda were amongst the first to establish bilateral relations, particularly Cuba. Meanwhile, other Latin American countries shifted their positions in favor of Beijing in return for generous loans, economic aid, and the prospect of new markets.

For the PRC, Latin America is a key economic region and an indispensable trading partner for the 21st century. Therefore, since the 1990s, Beijing has been collaborating with a variety of regional mechanisms including the Andean Community, the Common Market of the South (Mercosur), and the Caribbean Development Bank. Since then, trade and cooperation between the two regions have multiplied. In 2004, the PRC became an observer country within the framework of the Organization of American States (OAS) and, furthermore, Beijing began to promote educational cooperation programs through the establishment of Confucius Institutes in the region as well as countless scholarships for Latin American students.

Similarly, in 2008, “China’s Policy Paper on Latin America and the Caribbean” was published and, in 2009, Beijing became an extra-regional partner to the Inter-American Development Bank (IDB). Afterwards, in 2012, at the initiative of then-Premier Minister Wen Jiabao, the Community of Latin American and Caribbean States (CELAC) established a permanent forum for interacting and consulting with Beijing known as the CELAC-China Forum. Since then, Latin America has been a key focus region for Chinese foreign policy and the aforementioned document “China’s Policy Paper on Latin America and the Caribbean” established the principles upon which bilateral and multilateral relations are to be developed. Firstly, this document reaffirms the centrality of the “One China Policy” under which Beijing is recognized as China’s only legitimate government. Secondly, five additional principles of Chinese foreign policy are outlined: mutual respect for sovereignty and regional integrity; non-aggression; non-interference in the internal affairs of a sovereign nation; equality and mutual benefit; and peaceful coexistence.

Today, Latin America has become one of the most important suppliers of mineral and agricultural commodities to the Chinese economy, a relationship that has been driven by the establishment of bilateral free trade agreements and foreign direct investment by Asian corporations. Some of the most important mechanisms employed by Beijing in Latin America are very low interest loans considered to be aid to development by some, but not all, international indices. In principle, these Chinese financial instruments give better terms and greater freedom for the lender than the traditional mechanisms offered by the World Bank (WB) or the International Monetary Fund (IMF) because they are not conditioned by an effective loss of sovereignty in order to ensure repayment. However, even though these Chinese mechanisms of financing will not force “structural adjustments” upon governments, Beijing does set other conditions, such as the hiring of Chinese labor and the purchase of Chinese goods within certain industrial sectors.

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