The United States maintains close cultural, economic, and security ties with countries in Latin America and the
Caribbean (LAC).
1 While the United States remains the largest economic and security partner in LAC, in the last
decade China has rapidly deepened its economic, diplomatic, and military engagement to become the region’s
largest creditor and second-largest trading partner. China’s efforts in the region are driven by four key objectives:
(1) ensuring its access to the region’s abundant natural resources and consumer markets; (2) gaining LAC support
for its foreign policies; (3) shaping LAC perceptions and discourse about China; and (4) gaining geopolitical
influence in a region geographically close and historically subject to U.S. influence.
2 If the infrastructure financed
by Chinese loans helps LAC counties boost regional connectivity and economic growth, the positive spillovers
would benefit not only the host countries, but also the region as a whole. However, closer ties with China can also
reinforce the region’s overreliance on highly cyclical exports and create unsustainable debt burdens for some LAC
countries, which China could use for political leverage.
• China is the region’s second-largest trading partner after the United States, and the number one trading
partner for Brazil, Chile, and Peru. In 2016, China accounted for nearly 9 percent of LAC exports and 18
percent of LAC imports.
3 The size and continued expansion of China’s market creates enormous growth
potential for LAC exporters that the U.S. market cannot match. In addition, the rapid growth of LAC
imports from China is decreasing U.S. market share in the region and increasing the region’s economic
dependence on China.
• LAC exports to China remain primarily focused on agriculture, mining, and oil extraction, with these three
sectors accounting for 70 percent of LAC exports to China, 70 percent of Chinese state financing to the
region, and 52 percent of Chinese foreign direct investment to the region by value.
4 The predominance of
soybeans, copper, iron ore, and oil in exports has deepened LAC’s dependence on highly cyclical
commodities for economic growth. In addition, increasing imports of low-cost Chinese manufactured goods
are directly competing with LAC’s manufacturers.5
• Since 2005, Chinese state policy banks have provided over $150 billion in loans to the region, exceeding
the combined lending from the World Bank, the Inter-American Development Bank, and the CAFDevelopment
Bank of Latin America.6 This financing has weakened the ability of the United States and
multilateral organizations to influence LAC governments’ behavior, and has led to increased indebtedness
for countries such as Venezuela and Ecuador.7 As in other parts of the world, China could leverage a
country’s financial and economic dependence to ensure support for its foreign policy objectives and gain
control of strategic assets.8
• Chinese firms have participated in 91 LAC infrastructure projects. While some of these projects enhance
regional integration and spur economic growth, others have not been subjected to proper cost-benefit
analysis, and have no clear economic rationale. Countries borrowing from China to fund white elephant
projects are saddled with high-interest loans they have no means of repaying; this can create unsustainable
debt burdens, threatening long-term economic growth.
• The Chinese government has strengthened its bilateral relations with ten LAC countries and gained official
support from nine LAC countries to support its Belt and Road Initiative (BRI). Since 2015, Beijing has
coordinated its regional engagement through the China-Community of Latin American and Caribbean
States (CELAC) Forum; CELAC is a regional organization of which the United States and Canada are not
members.
9 Through the China-CELAC Forum, China is able to push forward its foreign policy objectives
and shape regional discussions without U.S. or Canadian involvement.
• After a break of eight years, China is renewing efforts to diplomatically isolate Taiwan in LAC, a region
that accounts for 9 of Taiwan’s 17 remaining diplomatic partners.10 In June 2017, Panama cut ties with
Taiwan and established diplomatic relations with China, followed by the Dominican Republic in April 2018
and El Salvador in August 2018.
• China seeks to leverage growing people-to-people exchanges in politics, media, and educational exchanges
to shape LAC opinions of China and engender support for China’s foreign policy objectives.
• China is expanding military-to-military exchanges, arms sales, and nontraditional military operations to
strengthen its political capital and goodwill among LAC states, deepen its relationships with LAC military
leaders, and position China strategically in the region.13 While Chinese arms sales to LAC are relatively
low in amount and sophistication, they are undermining U.S. and EU restrictions or bans on arms sales to
countries in the region. In addition, China’s alleged access to multiple Soviet-era intelligence facilities in
Cuba and the reportedly dual-use tracking and space telemetry station in Argentina enhances China’s
intelligence collection capacity in the region and its ability to interfere with U.S. space assets.
