China’s economic influence on Latin America has grown dramatically in the last decade.
The Chinese loan portfolio aimed at supporting infrastructure in Latin America is estimated at more than $150 billion. The Sino-Latin American trade exchange has grown from $17 billion in 2002, to more than $350 billion in 2019. The Chinese government’s multi-year plan is to bring this exchange to levels of 500 billion in 2025, and despite the adjustments that these objectives may have, given the regional economic contraction due to the pandemic, China has done its best to lead initiatives to face the health and economic impacts of COVID-19 in Latin America.
For countries like Brazil and Peru, China is their main export market, as it is for Chile. For all Mercosur countries, China is one of the three main trading partners, with Brazil at the forefront, which, as explained, increases its trade connection with China every day. In the entire region and the Caribbean, China’s commercial positioning is growing, and it is gaining ground from the United States. Mexico maintains the United States as its main trading partner, but China is already consolidating in a solid second seat. Regional development banks such as the IDB and CAF, every day, count on China as a growing financial partner.
Of course, we could get into another chapter to highlight the level of Sino-US economic and trade interdependence, and China’s position as the main creditor of the United States; but the focus of this article is to highlight the loss of US influence in the destiny of its natural and historical partner: Latin America.
There is no doubt that the region, with all its developmental challenges aggravated by the COVID-19 crisis, should be a priority of US foreign policy. But posing this as a policy without putting a suitable financial ingredient in the design is simply a rhetorical exercise.
For the United States to regain its leadership in the region and build powerful and promising alliances, it must assume the economic magnitudes of the challenge that this poses, because China is clear about it and is making it a reality. First, let’s look at the financial figures of the U.S. International Development Corporation (IDC) or the Export Import Bank of the U.S. (EXIM Bank), the cooperation funds administered by USAID, or the financial commitments that the United States maintains in the IDB and the CAF, to conclude that they do not compete at this time with the resources invested by China in the region. EXIM Bank’s total exposure in Latin America as of 2019 is $8.7 billion. The total financing and financial guarantees granted by the IDC in Latin America amounts to about $5 billion. USAID for 2019 manages about $1 billion in cooperation funds.
And having said the above about the financial scope of public action, let’s think about how China’s economic diplomacy is accompanied by an articulation of mechanical precision with its public, mixed and private business sectors. Achieving these financial magnitudes and public/private articulation in the relationship with Latin America should be a bipartisan objective, and a purpose of US society.
For the United States and Latin America to be partners capable of taking advantage of the opportunities that this strategic relationship presents, they must move from rhetoric to action. From public policy statements, to budgets and resources that compete with the financial magnitudes that China is committed to investing in the region. And this is not a philanthropic exercise. It is linked to the construction of supply chains and enclaves of added value in the economic and business sphere, energy transitions to redress climate change, growth with equality, solution of hemispheric problems such as the fight against violence, organized crime and migratory movements from their root causes; and also, offering all countries social and environmental sustainability in their economic developments, respecting democracy and human rights.
If the hemispheric relationship is to be worked with due impact, the United States has to invest more than China. As simple as that. One must put in the money to back up one’s words.
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