China and Trump are fighting for Latin America | Article by Alberto Islas

President-elect Trump has outlined his strategy for restoring the US presence in the Americas. His proposal aims to increase territorial control in Canada, Panama, Latin America and even the purchase of Greenland. The negotiation strategy is tariffs, expulsion of migrants, and I do not rule out the use of force.

This is a foreign policy shift because after September 11, 2001, this region was ignored. Latin America had reduced its priority on the US foreign policy agenda, the only thing that mattered was the information received from Guantanamo Bay. At the end of the George W. Bush administration, foreign trade and organized crime were topics of interest to Latin America, but there was no agenda with medium-term goals. Democratic elections, free trade agreements, and the adoption of free market measures showed that the threat of socialist governments backed by the defunct Soviet Union was not a risk; Guerrilla leaders now belonged to political parties, and the demographic bonus indicated steady growth.

However, China, the communist regime, began a quiet invasion, using capitalist financial instruments to provide structured loans, joint investments, purchase of concessions and even commodity derivatives contracts. Today, there are more than 100 loans worth about $120 billion between Chinese banks, companies and governments in Latin America. The commercial exchange between them is estimated at $400 billion. China has become the major trading partner of more than 10 Latin American countries and is the largest trading partner of Brazil, Chile and Argentina.

This growth was not organic, but rather a planned and successful foreign policy based on a program called the Economic Belt and Silk Road, which was silently and clearly carried out by the Chinese state and companies in this country. China has signed free trade agreements with Chile, Peru, Costa Rica, Ecuador and Nicaragua. Seven South American countries, including Brazil, Peru, Venezuela, Chile, Bolivia, Argentina and Ecuador, have joined the Asian Infrastructure Investment Bank.

To integrate the financial sector, China has signed bilateral local currency swap agreements with the central banks of Argentina and Chile. Many Chinese banking institutions have opened branches in many Latin American countries. Chile, Brazil and Argentina have established RMB (Chinese currency) clearing banks, and Brazil, Argentina and Bolivia have announced the use of RMB for foreign trade settlements. By the end of 2022, the yuan will surpass the euro and become Brazil’s second international reserve currency.

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This institutional framework has allowed trade and investment to grow in the region over the past 15 years. China has dedicated itself to building infrastructure to transport agricultural products, minerals and oil from the region. Investment in the port of Chanchay in Peru; high speed train in Chile between Santiago and Valparaiso; road infrastructure in Bolivia; Lithium Triangle Investments; satellite launch stations in Chile and Venezuela; ports and bridges in the Panama Canal and possible investments in the Atucha III nuclear power plant in Argentina.

Last February, Nucleoeléctrica Argentina and the China National Nuclear Corporation signed a framework contract to build Argentina’s largest nuclear power plant. China is offering to finance 85 percent of the $8.3 billion effort, while Argentina will contribute $1.2 billion.

President Milei discussed the issue with Chinese Prime Minister Xi Jinping during the G20 meeting in Rio de Janeiro, Brazil, and they agreed to close the agreement in the first half of 2025. Argentina’s dependence on the communist regime, since China will not only be the main trading partner, but will also be the main investor.

However, Chinese investment is subject to political conditions. In 2017, when Panama joined the Silk Strip initiative, it severed diplomatic relations with Taiwan. Today, Chinese companies control three of the five ports at the entrance to the canal and bridge. Commercial dependence on a centralized economy also threatens the economic stability of the region, since China is not only the main trading partner, but also controls the strategic infrastructure of the region, which determines the exit of exports and the entry of imports. Ironically, the tools of a communist country are control over cash flows.

President-elect Trump wants to close the region’s 20-year gap with tariffs, sanctions and threats of force. Trump is right that China’s presence in Latin America, Africa and Asia could reduce supplies of strategic raw materials such as lithium, precious minerals and arable land for agricultural products, both for the US and the region.

But Trump’s strategy is wrongmust copy and improve the Chinese state’s offering by increasing co-investments and loans to improve infrastructure in the region, as well as create jobs to reduce migration incentives, otherwise it could turn the region into an economic battleground that will only push more migrants into the US, bringing benefiting human trafficking networks.

Today, China has the upper hand, and the United States must seek comprehensive long-term options. The interoceanic corridor, located on the Isthmus of Tehuantepec in Mexico, could provide a counterweight to the Panama Canal, but it requires cargo and investment, which could be facilitated by the Trump administration.

The architects of this strategy were two women with experience at China’s central bank: Zhu Jun, CEO of the global Silk Road Initiative, and Wu Hongying, vice president of the Chinese Association of Latin American Studies. They selected projects and approved investments, and also selected Chinese companies that would partner or execute the projects. Trump needs officials who can complement government initiatives with private companies and the loan portfolio to stem the China tide.

In Mexico, investments by Chinese companies amounted to $5.3 billion in 2023, while they are present in the telecommunications sector – Huawei and infrastructure – Hutchison Ports; Tik Tok is estimated to have more than 105 million users in Brazil and 77 million in Mexico, its two largest markets. Chinese companies know our tastes and customs and control the operation of our physical and digital infrastructure. On November 29, Chinese Ambassador to Mexico Zhang Rhun held a farewell reception; the name of the new ambassador has not yet been announced. But it is important to know the profile and goals it pursues in the face of this new geopolitical recomposition.