Updated July 1, 2021 China’s Engagement with Latin America and the Caribbean As the People’s Republic of China (PRC) has increased its dialogues, trade and investment, agriculture, energy, engagement with Latin America and the Caribbean (LAC) infrastructure, manufacturing, and technological innovation. over the past 20 years, U.S. policymakers have raised The paper states that China will “actively carry out military questions regarding potential implications for U.S. interests exchanges and cooperation” with countries in the region but in the region. China’s engagement with the region has also emphasizes that China “does not target or exclude any grown significantly since 2001, particularly in terms of third party.” diplomatic and economic ties. This growth reflects China’s global “soft power” efforts and “influence operations” Another apparent goal of Beijing in the region is to isolate worldwide. A succession of Chinese leaders and other Taiwan by attempting to lure away Latin American and officials have visited the region to court governments. In Caribbean countries that still maintain diplomatic relations turn, regional leaders and officials have frequently visited with Taiwan, also known as the “Republic of China.” China. The PRC has signed a variety of bilateral partnership Currently, 9 countries in the region (out of 15 countries agreements with countries throughout the region, including worldwide, including the Vatican) recognize Taiwan, and “comprehensive strategic partnerships” with Argentina, the remaining 24 countries in the region recognize the PRC. Brazil, Chile, Ecuador, Mexico, Peru, and Venezuela. In 2017 and 2018, Panama, the Dominican Republic, and El Salvador switched recognition to the PRC. Diplomacy Beijing’s diplomatic overtures in Latin America underpin Economic Relations China’s economic activities and help it to institutionalize its China’s economic goals in LAC include securing access to engagement in the region and garner support in raw materials (such as oil, ores, and minerals) and international fora. Some analysts argue that China’s agricultural goods (especially soybeans); establishing new activities in the region reflect a global strategy to reduce markets for Chinese goods, including high value-added U.S. dominance, although they do not aim to challenge the products; and partnering with Latin American firms to United States directly or militarily. China’s diplomatic access and develop technology. China also has sought to efforts include being an observer at the Organization of secure investment opportunities in Latin America for its American States, a member of the Inter-American infrastructure firms. Development Bank and the Caribbean Development Bank, and a participant in the Asia Pacific Economic Cooperation Just as Latin America’s economic linkages with China forum. Amid the Coronavirus Disease 2019 (COVID-19) helped the region withstand the 2008 global financial crisis, pandemic, China has sold vaccines and provided medical China’s post-COVID-19 economic rebound could play an assistance and loans to about a dozen countries throughout important role in Latin America’s post-pandemic recovery. the region. Total China-LAC trade increased from almost $18 billion in PRC President Xi Jinping participated in a January 2015 2002 to almost $316 billion in 2019. In 2020, despite the summit in Beijing with leaders and foreign ministers of the decline in world trade due to the pandemic, China’s total Community of Latin American and Caribbean States trade with the region dipped only slightly, to $315 billion. (CELAC), a region-wide organization that excludes the In 2020, China’s imports from LAC amounted to $165 United States and Canada. At the meeting, China and billion, consisting primarily of natural resources, including CELAC countries agreed to a five-year cooperation plan ores (35%), soybeans (17%), mineral fuels (12%), meat covering politics, security, trade, investment, finance, (7%), and copper (6%). China’s exports to the region in infrastructure, energy, resources, industry, agriculture, 2020 amounted to $150 billion, with major exports science, and people-to-people exchanges. At a second including electrical machinery and equipment (23%), China-CELAC ministerial held in January 2018, both sides machinery and mechanical appliances (16%), motor agreed to an updated cooperation plan extending through vehicles and parts (6%), and a wide array of industrial and 2021. China also invited Latin American and Caribbean consumer products. China has become the top trading countries to participate in its Belt and Road Initiative (BRI), partner of Brazil, Chile, Peru, and Uruguay and the second- which is focused on PRC-backed infrastructure largest trading partner for many other countries. China has development around the world. Currently at least 19 free trade agreements with Chile, Costa Rica, and Peru. countries in the region are participating in the BRI. According to the China Global Investment Tracker database In 2016, the PRC government released its second policy maintained by the American Enterprise Institute (at paper on LAC. The document states that China seeks to https://www.aei.org/china-global-investment-tracker/), strengthen cooperation on the basis of “equality and mutual which tracks large transactions of $100 million or more, benefit” in several key areas, including exchanges and China’s investments in LAC from 2005 to 2020 amounted https://crsreports.congress.gov China’s Engagement w ith Latin America and the Caribbean to $136 billion, with Brazil accounting for $61 billion and investment opportunities in the hemisphere, and continuing Peru $27 billion. Energy projects accounted for 57% of all to lead in international organizations and multilateral fora. investments, and metals/mining accounted for almost 27%. In addition, the database shows China’s construction The Biden Administration’s Interim National Security projects in LAC from 2005 to 2020 were valued at $62 Strategic Guidance, issued in March 2021, broadly billion, with energy projects accounting for 51% and describes China as a strategic competitor and asserts that transportation 28%. the Administration will work to reinvigorate and modernize U.S. alliances and partnerships around the world to hold Chinese banks (China Development Bank and China countries such as China to account. The guidance notes that Export-Import Bank) became large lenders in LAC more the United States will confront China when its behavior than a decade ago, although amounts have been declining in threatens U.S interests and values. recent years and there were no such development loans in 2020. Accumulated loans amounted to over $137 billion The U.S. Southern Command (SOUTHCOM) has from 2005 to 2020, with Venezuela, Brazil, Ecuador, and expressed strong concerns about China’s activities in LAC. Argentina the top recipients, according to the China-Latin Its 2021 posture statement states that China continues to America Finance Database hosted by the Inter-American increase its activities across all domains in the region: Dialogue (see Figure 1). A majority of the lending (68%) cyber, space, extractive and energy industries, has been for energy projects, and 18% has been for transportation hubs, roads, infrastructure, infrastructure projects. Such loans typically lack policy telecommunications, legal and illegal fishing, agriculture, conditions and have less stringent terms and less rigorous and military training. SOUTHCOM contends that China environmental guidelines compared with the loans of major donates security supplies and equipment to gain access and international financial institutions. win favor with regional security forces and uses medical diplomacy to its advantage as leverage. It also warns the Figure 1. China: Financing in LAC, 2005-2020 PRC is “seeking to establish global logistics and basing infrastructure in our hemisphere in order to project and sustain military power at greater distances.” In recent years, U.S. warnings about China have been met with some skepticism in LAC and among some regional experts. Some analysts contend that China’s primary interests and influence in the region remain largely economic and diplomatic and that the possibility of the PRC creating a military sphere of influence in Latin America remains small. Some argue that China’s appeal is limited due to deep political, social, and cultural differences and language barriers. Source: Created by CRS with data from Kevin P. Gallagher and Margaret Myers, “China-Latin America Finance Databases,” Inter- Some analysts have concerns about the potential harmful American Dialogue, 2021, at https://www.thedialogue.org/map_list/. effects of China’s economic engagement on the region’s U.S. Policy Concerns and Considerations development, including that many Chinese companies do Under the George W. Bush and Obama Administrations, not adhere to international environmental, labor, and safety U.S. officials, while recognizing concerns about China’s standards. They maintain that some countries have amassed influence, generally viewed China’s engagement in LAC unsustainable levels of debt owed to the PRC and have positively. The overarching goal of U.S. policy was for become dependent upon commodities exports to China. China to contribute economically to the region in a Some argue that PRC support extends a lifeline to leaders transparent fashion, following international rules and with poor governance records and exacerbates corruption. complying with local or international labor