Latin America becomes the theater of the trade dispute between China and the United States

After leaving the region aside, the United States returns to invest in Latin America. The movement aims to counter the expansion of Chinese influence in Latin American countries. In recent months, American government authorities have made a series of statements about the need for the country to pay more attention to Latin America, especially due to the Chinese presence in the country. region. Meanwhile, China, known for a number of large infrastructure projects, has diversified its partnerships, for example in the electric vehicle chain, into what has been called “new infrastructure”.

These initiatives reveal the international importance that the region has acquired in recent years, partly due to geopolitical conflicts such as the war in Ukraine and the trade dispute between Washington and Beijing. Latin America’s energy potential has also contributed to the region’s entry into the list of Western priorities.

“Latin America has a large market, as well as being a rich source of energy and minerals. As the United States has retreated over the last decade, China has increased its presence in the region, strengthening trade ties and investments in infrastructure”, evaluate Christopher Garman, executive director for the Americas in Eurasia, and Julia Thomson, researcher at the same consultancy firm.

“Some countries, such as Mexico, benefit more than others from their proximity to the United States”, the experts recall, highlighting above all the phenomenon known as Nearshoring – a strategy that brings production closer to consumer markets -, with Washington trying to guarantee its supply chain in the closest countries and with which it has the greatest alliance.

With the aim of expanding Nearshoring across the continent, the so-called US Commercial Investment Law is being drafted by the American Congress, which provides for an investment of 14 billion dollars in Latin America and a tax reduction plan. Furthermore, US Commerce Secretary Gina Raimondo has repeatedly mentioned the possibility of Brazil being part of the country’s investment chain in semiconductors, one of the most sensitive topics in current trade disputes.

In turn, diplomat Marcos Caramuru, who was Brazil’s ambassador to China, has a more skeptical opinion on Washington’s real ability to cope with Beijing’s investments in the region. “China works with state-owned companies, which often have a vision more closely tied to that of the government, which is not the case in the United States,” he points out, suggesting that for American private capital to reach the region, political will is needed rather than Enough.

“New infrastructure”

Meanwhile, China is expanding its investment plans, focusing above all on what is defined as “new infrastructure”. For Margaret Myers, director of the Asia and Latin America program at the Inter American Dialogue and author of a recent study on the topic, these sectors include the production of electric vehicles and other cutting-edge industries, telecommunications, renewable energy and of energy transmission. very high voltage.

In recent months, Chinese automakers BYD and GWM have made a series of announcements for new projects in the region, with a particular focus on Brazil. One of the most recent was the production of batteries in the first free trade zone in Manaus.

China’s interest in so-called “new infrastructure” is largely driven by its efforts to improve its own economy, Myers points out. According to her, Beijing emphasizes that future growth, even at moderate rates, will require a greater degree of competitiveness and even dominance of frontier sectors.

According to Myers, the projects are generally smaller in scale than the large, iconic Belt and Road projects in Latin America and tend to carry less operational, financial and reputational risk. “This is important at a time when China is trying to de-risk the initiative,” she assesses.

The boom in large-scale construction financed by Beijing has given rise to important works, such as the port of Chancay in Peru, targeted by several countries in the region, but which has not escaped controversy. In Colombia, the Hidroituango dam, the largest in the country, has been marred by contractual problems with Chinese companies. China’s initiative has also led to an increase in national debt, which has been particularly evident on the African continent, Caramuru adds.

In Brazil, amid excitement over Beijing’s investment promises, the Paraíba Public Prosecutor’s Office (MPPB) launched an extrajudicial procedure to investigate a project proposing the construction of a deep-water port and a futuristic city in Mataraca , on the northern coast of Paraíba. The planned investments would amount to R$9 trillion, which has raised suspicions.

A study conducted by Inter American Dialogue revealed that data on Chinese foreign direct investment in the region has shown a notable downward trend in project announcements in recent years. The decline is attributable to numerous factors, but is at least partly linked to the continued recalibration of investment priorities by the Chinese government and its companies, he concluded. “China is betting on smaller, tech-intensive projects to grow its economy and de-risk its international presence,” Myers points out.

Tendencies towards non-alignment

Analysts agree that countries in the region should maintain a position without automatic alignments. “The situation in Latin America tends to be more pragmatic. If they bring jobs and investments, they will be welcome,” Caramuru says. The diplomat acknowledges that Washington may also try to apply more pressure to distance itself from Beijing, but he does not believe that this will bring great results.

Eurasia analysts share the view and believe that this movement could occur in the future, but they do not see it as anything close. “The tradition of non-alignment is a cornerstone in the foreign policy of Brazil and much of Latin America,” they assess. “American diplomats recognize the great trade ties with China, but will not impose a choice. This was evident with the failure of the attempt to force the exclusion of Huawei from the adoption of 5G”, they recall, citing the 2020 episode in which there was pressure on the fact that Brazil will not adopt the Chinese company’s technology.

“It is clear that initiatives such as the announcement of the construction of a Huawei factory in Brazil, for example, could generate some consternation among Americans, potentially leading to a drop in diplomatic temperatures,” they point out. However, according to experts, such an event would hardly become a watershed in bilateral relations.

“Nations like Peru and Chile exemplify this dynamic by maintaining trade agreements with both China and the United States, demonstrating the region’s ability to balance and sustain political and economic connections with both powers,” they conclude.