Why the U.S. Should Bolster Latin American Investment
Amid the political dramas unfolding in Washington, a notable development in our broader region has gone largely overlooked. In recent years, China has been developing relationships with a number of Latin American governments as they invest hundreds of millions of dollars into critical infrastructure projects throughout the region.
That development is certainly warranted – Latin America needs significant upgrades to its infrastructure. More than 60 percent of roads in the region are unpaved, and more than 20 million people lack access to reliable energy. Yet China’s deep commitment to Latin America is a direct challenge to the United States. Beijing is exerting its influence around the globe and finding opportunities where U.S. influence is absent. This is what is most troubling. In an economic twist on Clausewitz, China is winning by using soft power to achieve political aims.
In 2018, then-U.S. Secretary of State Rex Tillerson warned that Latin American countries were becoming increasingly reliant on economic ties with China. Tillerson noted that China was “using economic statecraft to pull the region into its orbit.” In fact, China has lent some $150 billion to Latin American countries since 2005. Most of the money has gone toward improvements in the energy and mining sectors, among other major infrastructure projects. Chinese influence is starting to yield results. Venezuela, for example, recently began publishing the price of its oil reserves in Chinese yuan rather than the U.S. dollar, long the standard.
A number of countries in the region are already benefitting from China’s Belt and Road Initiative, a long-term plan for increased trade and economic growth with significant foreign policy and geopolitical implications. Although most of the states participating in the program span Asia, Africa, and the Middle East, the number of Latin American participants is expected to grow as China continues to express its willingness to invest in the region.
However, these countries have already started to pay the price for their growing dependence on China. From Venezuelan oil deals to Ecuadorian mining issues, infrastructure development has been conducted irresponsibly, with significant repercussions falling on local populations. As reported by the Washington Post, “many Latin Americans have criticized China for its extensive promotion of Chinese firms, labor, and machinery within state-to-state investment contracts, and its lack of local governance standards, including inadequate environment and labor protections.” Are we surprised? Of course not.
Government officials are starting to think twice when it comes to energy investment, too. On Dec. 11, Mexico announced it will cancel a planned round of bidding on oil exploration concessions. President Andres Manuel Lopez Obrador has said he plans to suspend new bidding for three years until he sees whether private companies are delivering projected investments and production on the country’s already-operational oil fields.
Leaders from Mexico, El Salvador, Guatemala, and Honduras have pledged to work together on regional development, fighting crime and poverty while planning for infrastructure projects to improve living conditions and provide jobs in the region.
But as of late, these countries aren’t receiving the American aid they had long hoped for to help implement these projects. Honduran President Juan Orlando Hernandez expressed regret that prior U.S. commitments for investment in Honduras, Guatemala, and El Salvador have been scaled back since President Donald Trump took office. Although eager to crack down on crime and prevent migration, the United States has been less willing to support the region financially.
For example, under the 2014 Plan of the Alliance for Prosperity in the Northern Triangle, Washington pledged to contribute one dollar for every four invested by Honduras. That commitment has not materialized, and President Trump has redirected efforts toward building a wall on the U.S.-Mexico border.
Instead of stepping back as China steps up, the United States should devote resources and encourage investment in Latin America. Through public-private partnerships, the United States is well-positioned to help countries like Mexico and Honduras modernize their structural foundations and transform them into stronger, more resilient infrastructure networks. It is more than the right thing to do for neighboring countries. It is a geopolitical priority. China should not be scoring wins in our own region.
The potential for aid also extends to the resources needed to power these countries. As the region continues to grow its own infrastructure networks, U.S. energy production can help answer the growing demand in Latin America. In addition, American developers, with strong regulatory, labor, and safety standards, can collaborate with Latin American officials and industry groups to develop a long-term plan with adequate resources.
As an energy-rich nation with decades of experience in extensive infrastructure development and technological advancement, and with a conscientious approach and keen cultural awareness, the United States can play a critical role supporting development in Latin America and fostering real economic opportunities for our neighbors.
James “Spider” Marks is a retired U.S. Army major general. The views expressed are the author's own.