Chinas Latin American Power Play

Second the financial arrangements cost Peru a lot more than they do China. For a relatively small investment of about $1.6bn of the total $3.6bn state owned port giant Cosco has booked a 60 percent stake.Third courtesy of the Peru government which rewrote the rules of foreign ownership Cosco gets exclusive use of the deep water port for up to 60 years. Overall the deal is so beneficial for China in the long term that President Xi who formally opened the port promised in early 2025 at least another $9bn in credit for B&R type projects in Latin America.

We ride the tide of progress together to pursue win win cooperation he told Latin American dignitaries in Beijing. Although the Chinese economy has weakened in the last two years there is still money on the table for the right B&R projects. Typically the funds come from what a UN report described as a complex web of policy banks commercial banks state owned enterprises sovereign funds and public private partnerships.Until recent years B&R funded projects were mainly to build conventional infrastructure such as new roads, railways airports dams and ports.

For instance the Chancay port is one of at least a dozen wholly or partly owned or run by China. Now though Chinas state owned and controlled giants are moving in new directions. Currently according to recent studies PowerChina has invested in no fewer than 11 Latin American countries including once again in Peru where it acquired two electricity suppliers for some $3bn in a deal that gave China virtual control over the nations electricity distribution. In other energy coups Chinese companies are running Latin Americas largest solar plant in Jujuy Argentina and a wind farm in Coquimbo Chile.

Huawei is one high tech Chinese company that has established a strong foothold in new infrastructure such as artificial intelligence smart cities and 5G technology. By 2020 in Curitiba Brazil Huawei was running over half of internet connections. Although not officially under the B&R umbrella Brazil has quietly become Beijings biggest trading partner in the region. Even though Brazil is not formally part of the Belt and Road we are in many ways very much aligned with its spirit.

Tulio Cariello director of content and research at the Brazil China Business Council told Dialogue Earth a non profit environmental media outlet. We have been receiving investments in infrastructure for quite some time now  especially in the energy sector  but also in ports storage logistics and more.In a region hungry for foreign investment Brazil is one of 20 other countries to sign deals with China the most recent being Colombia.

Of these nations Brazil Argentina Peru Chile Ecuador and most controversially Venezuela have gone in the deep end  to the regret of numerous activist organisations that argue Beijing has too much control over their countries future.For instance China is also heavily invested in Perus mines hydropower transmission and copper projects. On top of existing projects Brazil is discussing with Beijing a trans continental rail link that would run from the Amazon where China already has significant interests to the Pacific thus by passing the Panama Canal.

Argentina which was only too pleased to grab an $18bn currency swap lifeline from Chinese banks to tide it over a debt crisis is also home to B&R financed hydropower dams and space tracking facilities the latter of great concern to the US. Billions of Venezuelas debt to China is paid in oil exports much to the detriment of the domestic economy.The main attraction for China remains Latin Americas critical minerals notably the lithium triangle that links Chile Argentina and Bolivia.

This has aroused fierce domestic criticism over the wholesale export of raw and rare materials that could be exploited much more profitably at home.In the first years of B&R in Latin America it was Chinese officials who opened the door preferring to work with dictatorships or at least authoritarian governments rather than with democratic market led nations. Talking to Dialogue Earth Colombia based expert on China Parsifal D Sola puts it diplomatically by saying that Beijing has tended to favour state to state relations which facilitates the entry of projects and financing in countries where decision making is concentrated in a small group and the market plays a secondary role.

Others put it more bluntly. Chinas role in such countries is that of an incubator of populism argues Evan Ellis professor of Latin American Studies at the US Army War College Strategic Studies Institute. Its not that Chinas trying to produce anti democratic regimes but that anti democratic regimes find a willing partner in the Chinese. Until President Xi promise of $9bn or more of extra credit for Latin America China had held the purse strings tighter in the last two or three years at least for big ticket projects as Beijing waits for the original investments to pay off.

And they are paying off handsomely in 2024 total trade between China and Latin America and the Caribbean  the LAC region hit $518bn  according to official Chinese figures. China imports agricultural produce to feed its 1.4 billion people and metals and minerals to supply its high tech industries such as BYD the world largest manufacturer of electric vehicles that incidentally has taken over a former Ford owned plant in the Bahia region of Brazil.

In short Latin America sells to China vast quantities of low value products such as soy copper lithium iron ore and oil while buying high value machinery electronics electric vehicles turbines and other cleverly mass produced technologies. Economists would say that Latin America is on the wrong end of the supply chain. Yet China is widely applauded for its consistent long term implementation of an economic strategy while Latin America nearest neighbour and natural economic partner the US sat on its hands. For instance in the last few years few American companies even bothered to bid for the many infrastructure projects that B&R was able to snap up under Uncle Sam nose.

Peru Chancay Port provides a good example it is an investment that capital rich America could have made to its enormous benefit. Yet Peru a nation of 38 million has a substantially bigger trade with China than it does with the US and it can only get bigger.While China has been assiduously cultivating Latin America the US has neglected it lately even though the US is still the region biggest trading partner. Former President Joe Biden visited South America just twice while Donald Trump made just one visit to the region in his first term. Trump has gone out of his way to put the region offside rather than cultivate it for instance by imposing punitive tariffs on Brazil and by threatening to seize the Panama Canal.

Although it is far too late senior US military are increasingly concerned about Beijing leverage in Latin America. General Laura Richardson of the US Southern Command has warned that China is on the 20 yard line to our home land citing Chancay Port potential to be used for military vessels spying on American naval and commercial ships.Strategic think tanks like the Atlantic Council has warned.If a conflict were to break out in for example Taiwan or the South China Sea this global network of 38 Cosco operated ports could pose a serious logistical challenge for foreign militaries looking to move ships or supplies to the Indo Pacific.

Some B&R projects go wrong. New research shows that up to a third globally arent completed or run into trouble a dam in Ecuador is mired in dispute over structural defects and recipient nations all too often end up with unsustainable debt burdens against which China extracts payment in kind for instance Venezuela oil exports. Complaints about severe ecological damage at Chancay were quickly shut down.Yet only one nation has signed itself out of B&R. Although he told Trump that our canal sovereignty is not negotiable Panama president Jose Raul Mulino kicked China out of planned projects there.

Others are nervous of Beijing involvement and like Mexico prefer to remain outside the fence.In the meantime China trading boom looks unstoppable. In 2021 trade with Latin America was worth over $450bn. Three years later it was worth $518bn for an increase of over 40 times since the turn of the century. And there are plenty of experts who predict $700bn within another decade.