19-05-2025
China fills the US void in the Americas
Chinese dictator Xi Jinping hosted his fourth annual Latin American and Caribbean ministerial meeting in Beijing last week. His message to the more than 30 countries represented was simple: As the U.S. retreats from trade with the Americas, China is ready to step into the void.
China has been methodically working toward greater political influence in the region for more than two decades. But Mr. Trump's tariff increases have opened new inroads for the Middle Kingdom. In July I noted that JD Vance's selection as Mr. Trump's running mate raised the odds that a second Trump presidency would 'double down on Biden protectionism." As I pointed out, that would be 'nothing but upside" for Mr. Xi. And here we are.
Mr. Xi's Latin gathering was no free-trade bonanza. Rather, China made a point to publicize its preference for Latin suppliers over Americans and its intention to continue influence-buying with loans. Given Chinese corruption, this isn't likely to end well. But in the meantime, U.S. security risks will go up.
Brazil is so far the biggest Latin American winner in the Trump trade war. To punish the U.S. for higher tariffs on its imports, China is cutting back on its purchases of U.S. farm exports and buying more from Brazil. During his visit to Beijing, Brazilian President Luiz Inácio Lula da Silva signed more than a dozen bilateral trade deals and discussed more than two dozen potential new ones, according to Infobae, an Argentine news outlet.
In exchange for buying more Brazilian exports, China is supposed to gain greater access to the Brazilian market for its cars and machinery. How much is unclear. Domestic Brazilian manufacturers, which have substantial political power, are already complaining about threats to their protected markets. The opening between the two countries may be less than advertised.
Still, excitement among politicians like Colombia's President Gustavo Petro, a left-wing former terrorist, around the reported Chinese offer of $9.2 billion in new lines of credit for the region can't be overstated. The unreconstructed Marxist has dollar signs in his eyes.
More trade with China doesn't threaten Latin sovereignty, and in the absence of U.S. openness, it might even be a positive. But it won't happen in any significant way without infrastructure upgrades. That's where the danger for the Western Hemisphere appears, as China uses its Belt and Road Initiative to increase poor countries' indebtedness, send thousands of workers to the Americas, and become a player in ports, railways and communications.
Ecuador learned the costs of such entanglements the hard way with the Coca Codo Sinclair Dam, a hydroelectric project built by Chinese contractor Sinohydro. Initially financed with a $1.7 billion loan from Beijing and inaugurated in 2016, its final price tag, with delays and cost overruns, was about $3 billion. Design flaws, shoddy construction and alleged corruption have kept it from meeting its promised capacity. The U.S. Army Corps of Engineers has been called in to try to fix the dam while Ecuador has spent a decade selling discounted oil to China to repay the loan. Ecuador borrowed an estimated $14 billion from China during a decade of rule by Rafael Correa, its leftist anti-American president from 2007-17. Servicing that debt has been a burden for the little country and only after much renegotiation has it slowly recovered.
Countries with stronger institutions may fare slightly better. The Peruvian deep-water port of Chancay, completed last year, is 60% owned by China's Cosco Shipping. The port is an emblem of China's ambitions in the region. It can handle ultralarge container vessels that can't unload elsewhere on South America's Pacific coast. The modern facility is good for trade. But it also gives China a place to dock military ships.
The Chinese agricultural conglomerate Cofco International and China's state-owned port developer are already investing heavily in Brazil, as is China Railway. Both countries, along with Peru, talk of connecting Chancay to Brazil's Atlantic coast by rail, a journey of about 2,700 miles. China is offering to finance the project.
Brazil's recent history in building railways isn't encouraging. The first 333-mile phase of a 950-mile rail line crossing the state of Bahia, begun in 2011, was supposed to be completed by 2014. But the project has been repeatedly delayed by financial, legal and logistical problems. In March it was put on hold indefinitely.
As Diogo Costa, president of the Foundation for Economic Education in Atlanta and the former head of Brazil's National School of Public Administration, puts it: 'When it comes to building infrastructure, Brazil's problem isn't money. It's execution." That's true for most of Latin America, where transparency and the rule of law are foreign concepts, and piling on Chinese debt will inflict more pain. It isn't too late for the U.S. to push back by re-engaging commercially.
Write to O'Grady@
