By Kathryn Wallace
The historically integral role of the United States (U.S.) in Latin America and the Caribbean (LAC), disparagingly termed its “backyard,” has been substantiated by the U.S,’ hemispheric preeminence. China’s booming trade, expanding investment, and generous loans in LAC are seen as a strategic maneuver to oppose the U.S.’s previously-unchallenged regional influence. These “soft” balancing tactics are best-emphasized by China’s primacy in Brazilian exports and investments in Ecuador’s oil and infrastructure. Counterbalancing efforts by the U.S., as well as an historical legacy of political and economic commitment to the region, belie most concerns about the replacement of the U.S. as a regional hegemon.
Historical Context: Uncontested U.S. Power
The U.S.’s regional hegemony dates back to the Monroe Doctrine, an 1823 foreign policy initiative which thwarted European colonization and promoted hemispheric integration. Throughout the next century and a half, a bifurcated approach to U.S. foreign policy, both aggressive and inclusive, maintained its supremacy throughout the region. In security matters, the U.S. asserted its dominance and ensured its national security through arbitrary military intervention, revolutionary subversion, and the assertive protection of its economic assets. In economic and political matters, an ideology of Pan-Americanism and political integration emerged, resulting in the creation of what would later be called the Organization of American States and numerous bilateral trade agreements.
Soft Balance: Emerging Chinese Influence
China’s increased economic presence is challenging the future of U.S. regional hegemony. Over the past decade, China has disbursed more than $100 billion in trade credits and investments to the region, instigating fears that as it grows, China is providing an alternative to Western funds and their associated policy prescriptions. Undemocratic or fiscally imprudent regimes will not have to acquiesce to the U.S.’s demands for improved political and economic standards, finding solace in China’s noninterference foreign policy. The precarious ideological status quo in the Americas – the result of centuries of U.S. influence – is contested by China’s rising great power status. Through trade, investment, and loans, Beijing is gradually penetrating Latin America, providing a new conceptualization of the regional order.
Trade Ties: Burgeoning Brazilian Business
Between 2000 and 2014, annual bilateral trade between China and Latin America swelled from $12 billion to 285 billion; by 2025, China estimates that it will jump to $500 billion. Increased Chinese trade is an ostensible threat; as Beijing increases bilateral trade, the U.S.’s economic and political sway diminish. In 2009, China became Brazil’s number one commercial partner due mostly to the exponential rise in Sino-Brazilian soy and iron ore trade. Together these primary goods comprise roughly 70 percent of Brazil’s exports to China. Following a corruption scandal engulfing its national oil company, Snowden’s leaks exposing U.S. surveillance on Brazil, and a five-year slump in Brazilian economic growth, Brazil views trade with China as a rare opportunity for economic progress. In May, China announced its $50 billion trade and investment plan, while the U.S. and Brazil are still struggling to reach a détente.
Investment Opportunity: Deepened Ecuadorean Dependence
The $22.1 billion in new Chinese loans in 2014, larger than combined loans from the World Bank and the Inter-American Development Bank, go to securing long-term contracts on strategic resources and encouraging infrastructure buildup. Since 2010, China has lent LAC $93.7 billion, about half of which was designated for infrastructure projects; most of the remaining half went to damns, oil and gas, and mining projects. Infrastructure investment facilitates the freer movement of Chinese imports and exports as well as expands the market for Chinese construction technology.
Since 2009, China has loaned Ecuador more than $10 billion. Sluggish economic performance in recent months has heightened President Rafael Correa’s demands for funds to shore up its widening deficit, a call only China can answer. After Correa’s 2008 default on Western-held debt which Correa called “immoral and illegitimate,” China has served as its primary investor, holding 30 percent of its external debt and providing 57% of all FDI. For example, Chinese investments are being used to build a hydroelectric plant in northern Ecuador for $2.2 billion, to drill for oil in the Amazon region of the northeast claiming $25 to $50 per barrel from Ecuador for fees, to mine copper in the southeast with a committed investment of $1.4 billion, and to redirect the flow of three rivers near Guayaquil. In exchange for China’s generous and non-conditional funding, China guarantees Ecuador as a long-term economic partner. An emergent China extending generous and non-conditional monies to a precariously-allied Latin America magnifies the perceptibly-adversarial relationship between the world’s strongest democracy and the world’s strongest autocracy.
US Response: Strengthening Existing Partnerships
Calls to revisit a long-forgotten idea of the Free Trade Area of the Americas (FTAA) were made by Hillary Clinton in her tenure as Secretary of State. She specifically advocated for increased “economic competitiveness,” and integration with the “Latin American jaguars” in order to solidify the U.S.’s role as a resident economic power. In lieu of the FTAA, the U.S. has made numerous bilateral free trade agreements in the region, most recently with Colombia, and is involved in the promulgation of the Trans-Pacific Partnership, which includes Chile, Mexico, and Peru, three nations frequently considered the most competitive in the region. Although Chinese economic influence is assuredly increasing throughout the region, geographic proximity, a legacy of political and economic interconnectivity, and the absence of a zero-sum game in trade make China’s ascension to regional dominance extremely unlikely.
As Chinese-Latin American interconnectivity intensifies, the U.S.’s regional hegemony is challenged. Augmented Chinese trade, investment, and loans, provide a condition-free alternative to the U.S.’s ideologically-framed assistance and interaction. From Brazil to Ecuador, and to broader Latin America, Beijing’s soft balancing techniques are seen to threaten to the current U.S.-dominated regional balance of power. But enduring economic, political, and security relationships throughout the Americas discredit the idea that China will overtake the U.S. as a dominant figure in Latin America.
Kathryn Wallace is the Editor-in-Chief of the ExPatt Magazine and a Master’s Candidate for Diplomacy and International Commerce at the Patterson School. She is passionate about women’s rights, Latin America, and making international issues accessible to all audiences. Feel free to contact her at email@example.com with employment opportunities.