America-China Rivalry in Latin America: Competing for Influence and Power

The Complex Dynamics of U.S.-China Influence in Latin America

The geopolitical landscape in Latin America has become increasingly intricate, with both the United States and China vying for influence through economic and strategic investments. As nations in the region strive for economic growth, the rivalry between these global powers is reshaping the terrain of international relations, where there might not be a singular victor.

Recently, U.S. Secretary of State Marco Rubio embarked on his first international visit, issuing a warning to Panama about China's growing influence over the Panama Canal. His op-ed on the importance of U.S. engagement in the Western Hemisphere reflects the American concern over China's economic and diplomatic maneuvers in Latin America.

China's Expanding Economic Ties

Since joining the World Trade Organization in 2001, China has cemented its economic presence in Latin America, significantly increasing its trade volume with the region by thirty-five-fold between 2000 and 2022, according to ECLAC data. This expansion has positioned China as a key trading partner, second only to the United States. Beyond trade, China's development finance institutions (DFIs) have been pivotal in funding extensive infrastructure and resource extraction projects, driving 21 out of 26 Latin American countries to join the Belt and Road Initiative. Chinese DFIs have issued 117 loans worth $138 billion from 2005 to 2022.

Nevertheless, the terms of Chinese loans and environmental concerns have sparked criticism. With China's economic growth slowing, DFIs have decreased their investments, prompting private Chinese companies to focus on digital technology, energy, and mining sectors. PowerChina, among others, has been active in over fifty projects in the region, with notable control over Peru’s mining sector.

U.S. Initiatives and Challenges

In response, the United States has launched numerous initiatives over the past two decades. The ambitious Plan Pueblo-Panama, initiated in 2001, aimed to enhance integration through infrastructure development but faced setbacks due to corruption. Subsequent efforts like Plan Mesoamerica and the Alliance for Prosperity Plan faced challenges in execution and funding, leading to limited success in fostering substantial economic collaboration.

During the Trump era, the United States implemented a mix of restrictive sanctions and new investment strategies, including the América Crece initiative, to counter China's influence. However, criticisms arose over these projects' adherence to labor rights and environmental standards. The Biden administration has since sought to improve cooperation through the Americas Partnership for Economic Prosperity, yet faces hurdles related to funding limitations and long-term commitment.

Environmental and Social Implications

The intensifying competition has raised concerns about sustainable development, with 1,200 social and environmental conflicts recorded in Latin America since 1990 due to projects impacting local communities. As global entities like the World Bank compete to finance energy projects, there has been a worrying rollback of safeguards designed to prevent such conflicts.

Experts highlight that investments from both the U.S. and China often lead to environmental and social degradation. Conflicts have delayed projects 81% of the time, sometimes escalating costs by $20 million per week.

Future Directions for U.S. Relations

Looking ahead, the United States has an opportunity to strengthen its position by enhancing transparency and engaging in diplomatic dialogues that prioritize mutual economic benefits. By addressing past shortcomings and fostering direct cooperation with Latin American governments, the U.S. can develop investments that align with the region’s infrastructure and energy goals.

Improving project transparency and engaging with local communities can mitigate conflicts, as the lack of proper consultation has historically led to significant disputes. By promoting a pragmatic approach that respects local sovereignty and environmental standards, the U.S. can foster a healthier, mutually beneficial relationship with Latin America, steering away from the pitfalls of aggressive competition with China.