Over the past two decades, as China’s breakneck economic growth turned it into the engine of the global economy, Beijing became an increasingly powerful player in Latin America. It displaced the United States, long the top trading partner in South America, allowing Beijing to strengthen its political and diplomatic influence in the region.

But now, China’s growth has suddenly slowed, creating significant economic consequences for Latin America—and opportunities for the U.S. not only to restore its primacy in trade but to undercut Beijing’s uncritical support for governments with authoritarian tendencies.  

Beijing’s emergence as an economic force in the region was dramatic. In 2000, Latin American exports to China didn’t even reach 2 percent of the region’s total exports. But after that, trade started expanding at an astonishing rate, growing by more than 30 percent each year and propelling an economic boom across the region. South America, in particular, fed China’s insatiable appetite for raw materials, fueling its commodity-exporting economies and making possible the success of the so-called Pink Tide. Flush with money, leftist governments in Venezuela, Brazil, Argentina, Ecuador and Bolivia expanded social services and helped lift millions out of poverty.

By 2010, Latin America’s trade with China had reached $180 billion. By 2021, it soared to $450 billion. Several countries signed free trade agreements with Beijing, and more than 20 joined China’s Belt and Road Initiative. China became the top trading nation in South America and the second for all of Latin America. For nine countries—Cuba, Venezuela, Bolivia, Uruguay, Peru, Argentina, Chile, Brazil and Paraguay—China became the biggest partner.

All along, however, a shadow of controversy surrounded the increasingly close ties.

Economic growth in the region became overly dependent on growth in China, some warned. It was a theoretical problem that has suddenly became reality. The slowdown in China has become a major obstacle facing Latin America’s efforts to regain the ground it lost during the pandemic.

Critics had also complained that the structure of the trade relationship, which saw raw materials heading out and finished products coming in, was stifling modernization in Latin America, flooding the region with cheaper Chinese-made products that stifled the growth of locally manufactured goods. Government coffers were filling from the export of oil, gas, mining and agricultural products, but the region’s economy as a whole struggled to compete with Chinese imports.

China’s massive foreign investment and lending in the region also raised eyebrows. Ecuador, in particular, was hamstrung by loans that were to be repaid with oil. Elsewhere, easy credit left countries deeply in debt. And, as in other parts of the world, critics complained that Chinese-funded projects disregarded environmental and labor protections.

In addition, critics said China was boosting authoritarian governments, which found an uncritical backer in Beijing. Trade grew across the hemisphere, but bilateral ties became particularly strong with Venezuela, Nicaragua and Cuba, Latin America’s least democratic and most authoritarian regimes.

China’s agenda was clearly not just economic. President Xi Jinping has visited the region repeatedly, signing wide-ranging strategic agreements with multiple countries across the hemisphere. The region became a showcase of soft power diplomacy, bolstering Beijing’s role in the Global South, strengthening its campaign of diplomatic isolation for Taiwan and providing a boost in its geopolitical competition with the United States.

But then, in the aftermath of the COVID-19 pandemic, China’s economy entered a sharp slowdown that doesn’t seem likely to end anytime soon.

During the 20 years between 1991 and 2011, China’s economy soared, growing at an incredible 10.5 percent per year. After Xi took power, it slowed to a still-impressive 6.7 percent until 2021, when the pandemic slammed the brakes.

When Xi lifted his draconian “zero COVID” policy at the end of 2022, something unexpected happened: Instead of entering the period of fast growth so many had expected, China’s economy sputtered. According to China’s official statistics, GDP grew by 5.2 percent in 2023, though outside observers are skeptical. Regardless, the figure may seem like a solid number, but it is lower than the pre-pandemic growth, amid alarming signs that the economy is in trouble.

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The slowdown in China has become a major obstacle facing Latin America’s efforts to regain the ground it lost during the pandemic.

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Youth unemployment rose so much that Beijing stopped issuing data for it. Then the real estate bubble, which authorities had tried to keep from bursting by pumping seemingly unending amounts of credit into the sector, finally crashed. Millions of Chinese who had prepaid for their homes were left in limbo, with no homes and their savings depleted, as giant firms collapsed—none larger than Evergrande, which went into liquidation last week with a debt load at an eye watering $300 billion.

For the first time in the country’s modern history, foreign direct investment turned negative, with more money flowing out of China than into it.

Large numbers of Chinese citizens have now started appearing at the U.S.-Mexico border, the crossing point traditionally used by migrants from impoverished countries.

Worse yet, economists predict that 2024 will be worse than 2023. And, most alarmingly, projections suggest that the problem is not a short- or medium-term one. China’s demographic squeeze, long viewed as a crisis for the future, is now arriving. Low birth rates are on track to create labor shortages and an explosion of social spending needs.

If the working population doesn’t grow, it’s very hard for an economy to expand. Just ask Japan.

Economists say China may be entering the middle-income trap, which poor countries can experience when they grow quickly out of poverty but then can’t achieve higher income levels.

For Latin America, this is a problem. If its principal customer is having trouble growing, its own growth suffers. It’s time to look elsewhere.

Luckily for the region, the U.S.—still the world’s largest economy—is not only growing faster than just about any other major economy, it also offers unique advantages for Latin America.

At a time when Washington is seeking to reduce its dependence on Chinese manufacturing, Latin America is particularly attractive. The physical proximity offers the first obvious benefit, reducing transportation costs and times. It’s no accident that Mexico has just surpassed China as the United States’ top trading partner. In addition, the U.S. is home to tens of millions of Spanish speakers—immigrants and children of immigrants—who understand both cultures and could ease any deepening of relations. The cultural contrast with China, which remains linguistically impenetrable and culturally opaque for most in Latin America, is stark.

Global trade, with all its geopolitical ramifications, stands at a turning point. For economic and political reasons, China’s ascendance has at the very least lost momentum. Latin America is poised to become the first region where the coming shift becomes reality. That will be a challenge, but also an opportunity for revitalizing ties with the United States.