How the US could compete with China in Latin America

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As China became an economic superpower, its banks and companies planted five-star red flags all over the world. But nowhere has booming Chinese business caused Washington as much concern as in Latin America. “They are on the 20-yard line to our homeland,” said General Laura Richardson, commander of US Southern Command, last year.

Latin America possesses plenty of what the world needs most: lithium and copper for electrification, fresh water and fertile land to grow food, and prime locations for generating solar and wind power.

Keen to dominate these sectors, Beijing has invested accordingly. Trade between China and Latin America exploded from $12.5bn in 2000 to more than $480bn in 2022. Chinese firms are building ports, roads, railways and hydro dams across the region. Beijing’s state-backed banks loaned more than $136bn to Latin American nations from 2005-22.

Many Latin Americans have welcomed China’s arrival. It adds a third investment string to a bow previously limited to Europe and the US, plus a giant market for meat, soy and minerals. Chinese companies have delivered some infrastructure cost-effectively. Beijing’s tech firms offer advanced gear at keen prices.

Initially distracted elsewhere, the US has awoken to what it regards as an alarming incursion by its strategic rival into home turf. Washington has lobbied Latin American governments against the supposed security dangers of Huawei’s 5G mobile equipment, warned of the perils of Chinese debt-trap diplomacy and lectured on the risks of over-dependence on a single market.

Latin Americans were not overly impressed. Many grew up in economies that relied too heavily on one market: the US. Lectures about China’s fondness for authoritarianism sounded rich coming from a nation that backed anti-communist coups across the region in the last century. And where are the concessional US loans or the American 5G suppliers?

Yet it would be naive to dismiss American concerns. At a time of heightened geopolitical tension, it cannot be wise for any one nation to control supplies of critical minerals or key technologies. Not all China’s projects are benign: the giant antenna of a deep space listening station in Argentine Patagonia run by the People’s Liberation Army operates on wavebands that can be used for missile guidance and weapons tracking. Supplies of Chinese coronavirus vaccines depended partly on Latin American nations’ willingness to toe Beijing’s line.

An obvious US response would be to resurrect the 1990s vision of a single free trade area across the Americas, but bipartisan hostility to big new pacts makes that impossible. However, there is an alternative. In a rare show of collaboration, Republicans and Democrats in both houses of Congress joined forces last month to introduce legislation that could give a useful boost to US trade and investment in Latin America. 

The Americas Act would put muscle into the Biden administration’s hitherto flabby economic partnership initiatives. It could allow Latin American nations that meet standards on democracy, trade and the rule of law to eventually join the US-Mexico-Canada free trade agreement. It would expand US concessional lending and offer up to $70bn to promote the nearshoring of production from China. A biennial presidential summit would track progress.

Latin American nations like the idea. The White House is said to be supportive. Yet the bill will struggle to win attention from legislators in an election year. Congressional leaders should get it passed. If the US misses the opportunity in Latin America, China certainly will not.