When Congress returns to the Hill this fall, the House Foreign Affairs Committee will listen to a panel of foreign policy experts regarding China’s growing involvement in Latin America and the Caribbean (LAC). Although the true extent of China’s influence in LAC countries is disputed in academic circles, one thing is certain: China is open, and looking, for business.
To understand China’s current dealings in LAC countries, one must first understand the similar inroads the ‘Asian Giant’ made in Africa over 30 years ago. Starting in the 1970s and 1980s, China began sending ‘economic assistance’ to Africa, a term describing a mix of development aid, loans, technical assistance, and state-sponsored investments. What was China’s ultimate goal in providing economic assistance? To diplomatically isolate Taiwan from the rest of the world.
At the time, many African countries were ‘non-aligned’ with either nation. As such, China sought to secure diplomatic relations with these nations before Taiwan could woo them with its cries of self-governance. To this extent, China was largely successful. As Thomas Lum of the Congressional Research Service notes, “Only three of 48 Sub-Saharan African countries (Burkina Faso, Sao Tome, and Swaziland) still maintain official relations with Taiwan.” China has since been proactive in keeping this number low. For example, “in 2007, China reportedly offered Malawi ‘aid and investment’ worth $6 billion in major economic sectors. In January 2008, Malawi switched diplomatic relations to the [People’s Republic of China]” (Lum, 8).
Economics, of course, has also played a major role. As a manufacturing powerhouse, China is constantly on the lookout for new sources of raw materials and primary goods. In Africa, it found just that: new trading partners capable of providing China with raw materials like copper, minerals, and oil. “Nearly 70% of [Chinese] infrastructure financing on the continent reportedly is concentrated in Angola, Nigeria, Ethiopia, and Sudan,” Lum argues, “all of which have major oil fields” (Lum, 9).
What do China’s efforts in Africa tell us about why and how the ‘Asian Giant’ is looking to develop its presence in LAC? As in the case of China’s ‘economic assistance’ to Africa, LAC countries may provide the former with diplomatic and economic opportunities. As far as diplomacy is concerned, only one country in South America (Paraguay) maintains full diplomatic relations with Taiwan. Increased Chinese presence in the region could ensure that this number remains low, or even lessens to zero. An attempt to fully isolate Taiwan from diplomatic connections may be more difficult in the Caribbean; nevertheless, the ‘Malawi syndrome’ could prove to be an important tool in China’s diplomatic arsenal.
As in Africa, LAC countries could also serve as a supplier of primary goods and raw materials to fuel China’s manufacturing industry. Already, the China-Latin America trading partnership functions in the following way: LAC countries export predominantly raw materials to China, and China exports primarily manufactured goods to LAC countries.
China has also increased its economic assistance for infrastructure projects in Latin America in order to facilitate this trading partnership. As recently as May of this year, Peru and China agreed to study the feasibility of a railroad that would cross the Andes and the width of the South American continent, all to make the shipping of grains and minerals to China cheaper.
Why should the United States care about these ongoing developments? For starters, the U.S. should be concerned about its trade relationship with both China and Mexico. While many LAC countries and economies have benefitted from increased attention, money, and trade from China, Mexico’s global market share has begun to falter. As an exporter of manufactured goods like China, Mexico has suffered from the former’s ability to export manufactured products at astronomically cheap prices.
A steady influx of raw materials from LAC countries might further hinder Mexico’s export capacities. This matters for the United States because China and Mexico were its second and third top trading partners in June of 2015. If China were to overtake Mexico too comprehensively, the U.S. would have fewer market options for manufactured goods, and consequently, China would have even more influence on the global trade of these goods. It could manipulate prices and even the economies of other countries, including those of LAC.
Kevin P. Gallagher and Roberto Porzecanski, both extremely knowledgeable of the China-LAC relationship, expressed this last concern in their article, “China Matters: China’s Economic Impact in Latin America.” According to the scholars, one of the consequences that can result from China’s demand for LAC raw materials is export specialization. In short, LAC economies could become so reliant on raw materials and primary goods that they may never become a manufacturing hub for themselves (Gallagher & Porzecanski, 186). The authors also cite additional research (Lall and Weiss, 2005), suggesting that, “Chinese growth may thus constrain [LAC’s] ability to diversify into more dynamic and technologically advanced products, with potential harm to its dynamic comparative advantage” (Gallagher & Porzecanski, 198).
In an NPR interview earlier this year, Margaret Myers, Director of the China and Latin America Program for the think tank Inter-American Dialogue, stated that Chinese ‘economic assistance’ in LAC countries, whether in the form of increased trade or hotel construction projects in the Bahamas, come with “strings attached.” Certainly one of the goals of the House Foreign Affairs Committee hearing this fall will be to find out what exactly those ‘strings’ are, but such a statement reveals that Chinese involvement in LAC countries is worth examining by our policymakers.
Despite the ongoing noise surrounding the Iran nuclear deal, it will be important to keep tabs on China as its influence slowly creeps westward into our own hemisphere.
This article presents the views of author Cole Horton, not necessarily those of the Georgetown University College Republicans or GUCR Board. This piece belongs solely to Mr. Horton and cannot be reproduced in any way without his express consent. For more GUCR updates, like us on Facebook or follow us on Twitter.