美中全球议题对话项目

China’s interest in Latin America can be seen as a threat to U.S. interest because, much like the United States, its interest is driven by its appetite for resources.  Under former president Jiang Zemin, China launched a national strategy of zouchuqu zhanlue (“going out”) in 1999, seeking oil and natural resources in worldwide markets. Latin America is particularly attractive due to commodities such as Venezuela’s large oil supply and Chile’s copper. Although there is little evidence that China is seeking to replace the role of the United States in Latin America, its cooperation with countries like Colombia and Ecuador tells us that not all countries in the region are bound to the U.S. economy.

In fact, China has been quite successful in building its trade networks. According to the Inter-American Dialogue Database and CNBC, China’s foreign direct investment (FDI) in Latin America has grown nearly 300 percent since 2003 from a base of $226 million.  Over the past 30 years, trade between China and Latin America has grown exponentially, while the American private sector has been losing ground in trade with Latin America. According to an article by David Dollar of the Brookings Institution, "China’s Investment in Latin America," between 2015 and 2019 China’s President Xi Jinping has set a goal of $500 billion in two-way trade and $250 billion in Chinese direct investments. This will mean that China is trying to match the United States in direct investment and to take second place in trade balance in Latin America.

China’s desire to deepen its relationship with Latin America is further expressed in the Chinese government’s second white paper on its policy toward Latin America and the Caribbean on November 21, 2016. In the document, China notes the wish to continue building a consolidated multilateral trading system that extends beyond the bilateral free trade already negotiated in some countries, and establish a framework mimicking that in Asia where there is a multilateral trade regime across the Pacific. They might be able to set up trade with rules favorable to China due to the U.S. withdrawal from the Trans-Pacific Partnership.

China’s entrance into Latin American countries that pursue socialist policies is edging out the U.S. private sector. Some Latin American countries, like Venezuela, share China’s traditional outlook on the world, from anti-imperialism to anti-colonialism. These developments concern the United States; a greater dependence on China’s investments could potentially leave more of these countries under heavy Chinese political pressure. By the same mechanism, Latin America would be under less pressure to comply with U.S. policies. As Chinese corporations are effective in competing for public projects and commercial markets, American business interests will be increasingly challenged.

Rather than being a threat, China’s investments provide economic growth in these countries that in turn could benefit the United States and the global economy as a whole by increasing Latin American countries’ capacity to turn the engine of world trade. According to the new International Monetary Fund report, Latin America and the Caribbean trade less among all the regions.  Trade represent only 44 percent of the regional GDP, which is below other emerging market regions. The report recommends an effort for trade integration and enhancing trade with countries like the United States and China. There could be technological and knowledge spillovers that would decrease income inequality as a whole. 

Although the prior analysis highlights areas of concern to the United States, this is in fact a unique opportunity to collaborate with each other. Should the United States help to increase trade ties and the openness of Latin American markets, there is great potential for trilateral economic integration among Latin America, China, and the United States. As FDI increases inside of Latin America, coordination can maximize the effectiveness of infrastructure and industry projects across the continent. As Latin America develops further and becomes economically robust, there is the potential for mediation through market forces to counteract economic hegemonic forces in the region at large. Finally, stronger economic ties would facilitate a trilateral dialogue that would result in social and cultural programs in Latin American and Caribbean countries. This will depend on the understanding between China and the United States in the region, which could also facilitate political and military discussion in the future. This further proves Evan Ellis’ words that collaboration is the key to a safer nation and a peaceful world. 

Thus, it is important to establish this economic cooperation among these three regions as we move forward. Common infrastructure and resources can be the gateway to dealing with more challenging issues like the South China Sea disputes or Chinese investments in Africa. From stabilizing economies to securing the sovereign integrity of countries, international cooperation is essential to ensure that our actions are effective.

Yamillet Payano is a senior at American University majoring in economics and mathematics with a minor in Chinese.