Is China Threatening U.S. Interests in South America?

By Federico Delgado

The Chinese are coming! The Chinese are coming!

Or so declare a plethora of reports covering the burgeoning presence of China in Latin America. Nowadays it is safe to say the Chinese have indeed arrived - and, in some cases, they even come bearing gifts.

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China is now the second - at worst third - trading partner for a majority of South American nations, including the region's geopolitical and economic powers, like Colombia, Venezuela, Peru and Argentina. It is actually the first for Brazil and is lagging only in the case of Chile. It has been less successful in North and Central America, where it is likewise lagging in regards to Mexico, although it is making inroads into Central America using Costa Rica as its beachhead.

As it happens, China recently gifted a brand new, $300 million stadium to that country and pledged another $30 million to help build a police training academy. There are other examples of bounty for one and all, however. Development and scholarship funds, cultural centers and activities, bond purchases and low-interest (at times even Yuan-denominated) credit lines and loans. China, furthermore, has pumped fairly large amounts of liquidity into the region through its sovereign wealth funds as well as its relatively new membership as a contributing partner in the Inter-American Development Bank.

But with Chinese involvement in the Americas comes worry in the States. This was during President Barak Obama's visit to Brazil, Chile and El Salvador last month. To many voicing such concerns, it is imperative the United States begin to lay out in detail what exactly he meant by his oft repeated promise to forge "new alliances for progress in the Americas." To the more excitable critics, America's diminished role in the region is seen as enabling Chinese influence peddling.

Which is pretty harsh, not to mention overblown and sensational.

United States foreign policy regarding Latin America, starting from the Clinton administration, continued and tweaked throughout the Bush years, has been mostly unchanged for good reason. Foregoing a bloc approach, and placing free trade as the building block of its agenda, the United States has focused its efforts on pursuing interests bilaterally with nations willing to step up to responsible but mutually beneficial partnerships.

Granted, some of those relationships have found an easier working dynamic than others, and there are obviously still serious challenges left to tackle in a macro perspective. But the lower profile has not translated into a diminished capacity for the United States to either broker tricky political scenarios, or, collaborate in spoiling mischievous or dangerous initiatives from unfriendly nations. If anything, it has facilitated such interventions (see Honduras) since it has largely avoided pointless entanglements. This is to the credit of tenacious and professional diplomacy from both the United States as well as several enterprising Latin American nations.

Indeed, the concurrence of interests and subsequent cooperation - from democratic development and security interests to foreign investment and intellectual property rights - has become mature, transformative and at times organic. This is particularly so when those partnerships are embodied by free-trade agreements - and there are more nations in Latin America under such agreement with the United States than in any other region in the world.

Because of all of this the United States is today in a stronger position in Latin America than much of the commentary of declining influence would imply. So why, then, all the hubbub of American decline in the region vis-à-vis the Chinese?

Well, to start with, it is expedient to cast the United States as the embodiment of all that ails the region. It's a highly marketable gimmick that sells very well in Latin America, for both the right and the left, and in both policy and commentary circles. Its allure, however, is exponentially more embellished by China's much touted overtures.

To be clear: billions of dollars and the likes of brand new stadiums are, well, still billions of dollars and a brand new stadium. More importantly, China's involvement in Latin America is very positive for both parties and the United States. After all, it would be unnerving if the world's second largest economy isolated itself and did not seek out global markets - particularly economies as buoyant as Latin America's.

In fact, you could even argue that China is following America's playbook for the last two decades, with one key difference: China is not building on trade but rather toward trade. And, as the United States can well attest, economic dynamics with China are very complicated. For those Latin American nations stepping up to them, the overwhelming majority of whom really like their current account surpluses, there is a very steep learning curve ahead.

And yet there is another peril for China in Latin America which is even more basic. At its core, these relationships are built on patronage. It draws attention, kicks up dust, makes a splash, but like all patronage it is in the end boorish and ersatz and maybe even a little garish. Worse, although the relationships China has established with many Latin American countries could reasonably be described as being one of principal-agent, both sides have differing views as to who occupies which role.

Now take both those fault lines, and consider a last, geopolitically pressing issue for China in the region: there are still several countries in Latin America that recognize Taiwan as a legitimate, independent nation. It is an affair that runs along political fault lines in many cases. It is difficult to ignore, but much more so to change.

What should the takeaway be from all of this? Most certainly not that the United States can be cross-armed when assessing the potential strategic challenge China might pose on a global scale. Nor, for that matter, that it should rest on its laurels in Latin America: it needs to keep deepening those partnerships. Hopefully President Obama will acknowledge the important work his predecessors started rather than give into ill-conceived affectation.

Washington should also recognize the opportunity China's adventures in Latin America present: a chance to study, gain a better understanding and to learn about what soft power looks like to the Chinese. And to hone its own, superior approach: smart power.

Federico Delgado is a political and economic consultant who has worked throughout Latin America with international organizations, investment firms and telecommunication companies.

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