China is a voracious buyer of Argentina’s lithium, crude oil from Venezuela and Brazilian iron ore and soybeans. The $286.1 billion in Chinese projects in the region tallied by the AidData research lab at William & Mary in Williamsburg, Va.—including metro lines in Bogotá and Mexico City and hydroelectric dams in Ecuador—is approaching the value of China’s work in Africa, but with a revamped lending model and less backlash. 

Xi is visiting South America to take part in leadership summits, including an Asia-Pacific Economic Cooperation forum this week in Lima, Peru, and a Group of 20 summit next week in Rio de Janeiro. Both are likely to illustrate what some have called China’s economic marginalization of the U.S. in the region. While President Biden is also expected, his stature will be much diminished in the wake of Donald Trump’s election victory—and Xi as China’s leader has visited the region more than both of them.

Few see Latin America as the U.S.’s backyard anymore.

The region’s nations are generally sincere in their desire for warm relations with the U.S., but they are often seen as a secondary priority in Washington. Beijing’s diplomats and executives, meanwhile, actively engage with local and national governments almost regardless of their political leanings. 

“It’s super frustrating because this region has everything you’d think American companies would want,” said Ryan Berg, director of the Americas program at Washington’s Center for Strategic and International Studies.

On top of deepening economic linkages, Xi promotes a governance model that breaks with the U.S.-led postwar order that he suggests is an outdated relic of colonialism. Xi’s sustained attention to the region “is symbolic, and countries of the Global South need that recognition,” said Alvaro Mendez, director of a unit at the London School of Economics and Political Science that studies China’s influence.

Trump, who in his first term mostly focused on the region as a source of unwanted immigration, could now force some of its countries into difficult choices if he pushes them to limit their China links. “Many Latin Americans are apprehensive about what’s in store for them over the next four years on this critical issue,” said Michael Shifter, a scholar of Latin America at the Inter-American Dialogue policy group in Washington. At the same time, higher Trump tariffs could potentially drive some nations closer to Beijing.

Chinese trade and investment have boomed across the approximately 40 nations of Latin America and the Caribbean, home to more than 660 million people stretching from Mexico to Chile and Argentina, plus island nations such as Jamaica and Cuba.

China’s construction of infrastructure including ports to move commodities mirrors how, all over Asia and Africa, China under Xi has cemented its presence by building bridges, power plants and stadiums. China also has less of a debt-collector reputation in Latin America than it has in other developing parts of the world, in part because Beijing has slowed new project commitments and adjusted how it has financed some work.

Beijing’s largess isn’t always beneficial, and its exports of capital and consumer goods plus chemicals and machinery, in particular to Mexico, give China a trade surplus with the region overall. 

China is crowding in with manufactured exports such as Huawei Technologies’ telecommunication hardware and electric vehicles from BYD, which has taken over an abandoned Ford plant in Brazil. An influx of Chinese steel recently forced the closure of a large Chilean mill. Already some countries are raising tariffs on Chinese goods, and others see threats from big Chinese entrants to traditional sectors, such as fishing. China’s image has also been tarnished by shoddy construction, such as on a hydroelectric project in Ecuador, and by limited regard for the environment and indigenous people, such as around copper mines in Peru.

New model

China is attracted by the same attributes that should make U.S. multinationals eager to compete in the largely democratic region: abundant natural resources including critical minerals; human capital to deploy for manufacturing products such as pharmaceuticals; growing consumer bases; and rule of law.

Trade has given a lift to broader Beijing influence in a region that has traditionally allied itself with the U.S. Brazil recently joined China in putting forward a proposal for ending the Ukraine war and has stressed a vision of a Global South to challenge the traditional U.S.-led order. Argentina allows China to run a satellite tracking station there for its space program, one of an expanding number of quasimilitary linkages. And Washington’s nemeses in the region—Cuba and Venezuela—consider Beijing a friend and protector. 

Washington worries that China’s growing economic clout will provide Beijing with deep influence over Latin American governments. The head of the U.S. Southern Command, Gen. Laura Richardson, has repeatedly warned about Beijing’s encroachment in the region. In response to China’s advances, the White House has sought to build lasting institutions in developing nations to attract investment. 

The Biden administration “has focused very much on how we try to bring private-sector investment overseas” and make an impact through high standards that contribute to “host countries’ longer stability or long-term fiscal stability,” a senior administration official said, adding that China has slowed its commitments in the midst of headwinds at home and problems with some overseas projects.

A leading motivation for Xi’s attention to Latin America and the Caribbean is isolating the democratically governed island of Taiwan. Seven of the 11 nations worldwide that maintain diplomatic relations with Taipei are in the region, including Guatemala, Paraguay and Haiti. Five that switched recognition to Beijing under Xi’s watch, including Honduras and Panama, were showered with Chinese deals.

Likely with Taiwan in mind, Beijing has locked in mineral and foodstuff purchase agreements, plus deals to operate ports in such places as Peru and trade in yuan, to fortify supply lines against risks that Chinese militarism one day sparks calls among Western powers to impose an embargo. In such a scenario, Beijing could be expected to offer inducements toward such G-20 nations as Brazil to defuse the kind of decoupling pressure Russia faced after it invaded Ukraine, according to a new report from the Rhodium Group and the Atlantic Council.

Not everything cuts Beijing’s way. Shortly before Xi’s trip, Brazil appeared to reject its overtures to formally join the Belt and Road Initiative, a blow to a program that by the Center for Strategic and International Studies’ count includes 22 of the 26 Latin America and Caribbean nations eligible for it and a sign of displeasure from the region’s biggest economy about limited reciprocal access to China’s market. 

Bumpy road

It has been 110 years since the U.S. completed the Panama Canal and over a half-century since Washington sought to check the spread of communism during the Cold War by meddling in Latin America’s democracies. Today, U.S. policymaking toward the region is heavily slanted toward illegal immigration and narcotics, instead of how its more recent general political stability and growing middle class could work to America’s advantage.

Washington’s smaller-scale and less deal-oriented engagement has provided space for China to win regional recognition for boldness. When two of the region’s pro-trade nations, Uruguay and Ecuador, got nowhere seeking free-trade agreements with the U.S. near the start of the Biden administration, they turned to Beijing. Last year, Uruguay and China said they were in talks for an agreement, while Ecuador completed a deal, Beijing’s fifth in the region compared with the U.S.’s 11. 

Ecuador’s priority remains setting a trade agreement with the U.S. but in recognition of Washington’s current political climate, “Ecuador is prioritizing alternative strategies to boost exports to the U.S.,” according to the country’s ambassador in Washington, Cristian Espinosa Cañizares.

China’s financing for projects in Latin America—such as construction of a tunnel for a hydroelectric project in Ecuador—is getting close in value to its activity in Africa. Photo: XINHUA/Zuma Press

China hasn’t displaced the U.S. so much as it has taken advantage of uncontested opportunities, said Jorge Guajardo, a former Mexican ambassador to China now with the Washington advisory firm DGA Group. As he puts it, “The U.S. sees Latin America as ‘ours to ignore.’” 

The indifference runs counter to a Pew Research Center survey published in July that showed the U.S. has a higher favorability rating than China in the economies of Argentina, Brazil, Chile, Mexico and Peru.

Guajardo said U.S. economic buoyancy makes it the more attractive export market for Latin American and Caribbean nations in the face of slowing Chinese import demand and caution from Beijing on project financing compared with the last time Xi toured, in 2019.

One of Washington’s tools to counter Chinese inroads is funding from the U.S. International Development Finance Corp. The agency has touted as a success $30 million in funding for a cobalt and nickel mining project in Brazil to support lithium-ion battery production. But in the Americas under the agency’s current mandate, all but Bolivia, Honduras, Nicaragua and Haiti are too wealthy to qualify for most of its project support; the Brazil mine funding was approved only after a special multiagency U.S. government review.

More characteristic is the situation in Guyana, which was seeking financing to expand a port to unload oil produced by Exxon Mobil and Hess but didn’t qualify for U.S. support because its oil reserves made the country too wealthy. That opened the door to Chinese contractors. “The U.S. is doing all the oil pumping, but China is doing a lot of the infrastructure,” said Berg of the Center for Strategic and International Studies.

An International Development Finance Corp. official didn’t address questions about specific nations but said a priority for the agency is winning funding reauthorization in Congress.

Resounding silence

When John Feeley arrived in Panama to serve as U.S. ambassador in early 2016, plans were afoot for a fourth bridge across the Panama Canal, and he wanted an American company in the mix. “The canal is what bound us,” he explained.

Yet, Feeley said his cables to Washington failed to generate much attention to the bridge project. He said he even cold-called the Reston, Va., engineering giant Bechtel to drum up interest. “What I was trying to do was make some noise about this, and I got a resounding silence,” Feeley said. Bechtel didn’t respond to questions.

Panama in 2018 awarded the $1.42 billion project to a consortium of companies owned and operated by China’s government. Beijing’s interest followed Panama’s decision the previous year to sever relations with Taiwan, and Chinese state media trumpeted the bridge deal as the country’s largest such win in the Americas.

The U.S., Feeley said, “looks at Latin America as a problem not an opportunity.”