Boosting Leverage: How Chinese Economic Expansion in Latin America Challenges U.S. National Security
U.S. national security adviser Jake Sullivan and Chinese Foreign Minister Wang Yi met in Beijing in August for trade talks.
Credit: AP
Since the turn of the century, economic expansion has become a weapon in global superpowers’ fights for regional control. Such is the case for China in Latin America. As of 2010, Chinese companies have invested an average of $10 billion yearly in Latin American trade and infrastructure. Economic endeavors in Latin America, most notably BRICS outreach and trade agreements, cut the United States off from potential allies by manufacturing Latin American dependency on China. This expansion, though welcomed by Latin American governments, threatens U.S. national security; China’s newly established economic partnerships increase its influence and bolster authoritarian ideology.
BRICS as a Barrier
BRICS, an intergovernmental organization originally consisting of Brazil, Russia, India, China, and South Africa with the recent addition of various African and Asian nations, was established as a “geopolitical and geoeconomic counterweight to the West.” BRICS’ current attempts to expand in Latin America challenge the U.S.'s ability to participate in trade in the region, as thanks to intensifying East-West rivalries, Latin America faces difficulty balancing BRICS and U.S. partnerships.
Chinese President Xi Jinping boldly envisions BRICS as an instrument of Beijing-led initiatives. As such, the organization’s global partnerships and influence evoke Sino-American rivalries — cementing BRICS expansion as a means of dismantling Western hegemony. For example, Russia and China support the creation of a BRICS currency that would overhaul the global financial system to end U.S. “dollar dominance.” This alternative would diminish the power of U.S. sanctions and trade payments, undermining U.S. attempts to fortify alliances or inhibit acts of aggression. While such a reserve currency has yet to land significant support, its potential presents divisions that would isolate the U.S.
The countries comprising BRICS represent 45% of the global population and 29% of global economic output. As threatening as this might be for the U.S., BRICS’ involvement in the region empowers Latin American nations. Access to such large, varied growth incentivizes economic partnerships for emerging or struggling economies; Bolivia and Colombia, for example, have sought out BRICS collaboration through bilateral trade and borrowing. Increased BRICS interest in Latin America is at odds with U.S. partnerships in the region; “Global South solidarity” fostered by BRICS challenges existing agreements meant to protect U.S. endeavors in Latin America. This strengthens connections to China at the expense of the U.S.’s long-held hegemony in the Western Hemisphere, manufacturing responsiveness to Chinese ventures.
Compromising Loans and Trade
China’s comprehensive economic partnerships in Latin America ensure that regional policies favor Beijing. China’s rise to become the top trading partner in South America and the second-largest in Latin America, with trade growing at an average of 35% annually, contests U.S. regional power by giving China the ability to shape economic outcomes. For instance, China is the leading source of loans for the region — totaling $813 million in 2022 — and uses them to force political alignment away from U.S. aims. Through vague and misleading terms, the loans’ “coercive measures” leverage benefits for China and destabilize borrowing countries by tying economic well-being to Chinese geopolitical goals.
These measures also further Sino-American tension with clauses that require nations to denounce diplomatic relations with Taiwan and collateral arrangements that prioritize repayments to China over other foreign creditors. This gives China the leeway to shape financial partnerships in the region to be partial to Chinese objectives. For example, a billion dollar oil-backed loan to Ecuador allowed Beijing to rescind financial support should Quito pursue any policies deemed “unfavorable” to China. Despite these policy preferences, Latin American governments are increasingly attracted to Beijing’s assistance because it requires no institutional reforms, unlike American assistance which stipulates commitments to democracy and human rights. Chinese assistance could be perceived as less demanding than that of the U.S. and therefore weakens U.S. national security by allowing Latin American governments to diverge from U.S. principles of democracy and human rights.
Paired with China’s assumed role as a “strategic partner to authoritarian regimes," economic dependence keeps compliant regimes in power. China has reintroduced exploitative labor practices to Bolivia, funded military infrastructure in Cuba, and acknowledged Venezuelan President-elect Maduro’s “successful reelection,” despite controversy over electoral integrity. China’s increasing diplomatic influence counters U.S. security partnerships, lessening U.S. access to regional leaders and policy.
Venezuelan president Nicolas Maduro meets with Chinese president Xi Jinping last year to upgrade ties with Beijing.
Image Credit: AP/Liu Bin
Margaret Myers of the Inter-American Dialogue highlights China’s ability to shape “the external environment in Latin America according to its interest.” Trade agreements favoring Chinese export and import demands undermine Latin American attempts to exchange with other nations. Beijing’s intolerance forces specialization by focusing investment on a single resource or sector, like oil in Venezuela and copper in Chile. China’s fixation on natural resource supply also intensifies Latin America’s resource curse, as Chinese loans provided on the basis of resource repayment limit Latin American countries’ ability to expand their domestic manufacturing beyond that of commodity exporters. This lack of diversification and over-reliance on foreign assistance could undermine regional self-sufficiency and makes the region vulnerable to economic fluctuations, both domestic and foreign. Such destabilization in the Western Hemisphere renders the supply and extraction of natural resources — critical to the region’s primary industries — dependent on geopolitics.
Economics as a Threat of Conflict
Chinese infrastructure plans further harm U.S. national security by increasing military control in Latin America. A growing Chinese presence in strategic chokepoints like the Panama Canal and the Strait of Magellan and plans to build a vast new port in Peru later this year presents a significant security concern for Washington. This “dual-use” infrastructure counterbalances U.S. presence in Latin America by disguising military control as economic development. Possible interference with U.S. access to Latin America and the Indo-Pacific would inhibit the U.S.’s ability to respond to threats, effectively challenging the nation’s military capacity.
A recently declassified intelligence report reveals China has access to active spy facilities in Cuba which, given Cuba’s proximity to the U.S., would allow China to strategically observe and glean information on U.S. economic activity and military communications through electronic surveillance. Similarly, Chinese investment in space programs and facilities in Argentina enables monitoring of U.S. satellites and telecommunications. Although China is unlikely to assume an offensive role, this growing military presence will be a persistent concern for American leaders aiming to uphold cordial ties and discretion in the Western Hemisphere.
Transnational crime is another worrying development for U.S. national security. Chinese-administered ports overlook shipments of illicit commodities, for example fentanyl and wildlife, granting latitude to organized crime and illegal businesses. Turning a blind eye to networks of prohibited activities perpetuates violence and instability in Latin American countries by enabling drug trade and cartels, facilitating the importation of illegal drugs into American communities. This inaction bolsters Beijing’s economy while promoting corruption in Latin American governments. Such friction requires greater U.S. investment and protections to sustain and strengthen national and regional security. The U.S. cannot simply pressure Latin American allies to end business with China, but must make its case as the preferred partner and incentivize security cooperation so China can’t exploit assets in Latin America to fuel intra-regional conflicts.
While Chinese involvement in Latin America is not inherently hostile, Beijing’s increased influence means they have the leverage to display their strength in the Western Hemisphere. U.S. economists indicate the need for a “multilateral system” in which the U.S. provides competitive alternatives for Latin American nations by acknowledging their concerns over lack of agency. Such a system would ensure that Latin America reaps the benefits of economic collaboration that Chinese and U.S. investment offer without compromising democratic values to coercive diplomacy.
China’s engagement in Latin America guarantees it will remain a threat to U.S. national security until the U.S. regains regional power through Americas-based collaboration — a path economic advisers and policymakers must promptly pursue to prevent President-elect Donald Trump’s anticipated withdrawal of development aid and proposed tariffs that could drive Latin American countries to work even closer with adversaries such as China. Failure to pursue such collaboration risks democratic backsliding in the Western Hemisphere and an economically isolated U.S. that could be susceptible to global conflicts.