China’s power settles in Latin America

For some time almost everything that happens in Latin America has something to do with Chinawarns Alicia García Herrero, a Spanish economist. And it is that the relationship between the two worlds began with the trade of raw materials, when China became the main buyer of the same after putting its economy “on steroids” to protect it from the effects of the global financial crisis in 2008.

“China managed to turn the tables by flooding Latin American countries with its exports of consumer goods and, more recently, also intermediate products, such as machinery, electronic components and many others, making direct competition to the United States and, above all, to a Europe, which for decades has benefited from its world export power”, says García in a column published in the newspaper El País of Spain on May 31, 2023.

In this way, when most of the Latin American countries began to accumulate trade deficits with the Asian giant, it began to develop a second level of economic influence: direct investment.

Despite China’s competitiveness in the manufacturing sector, these companies have not been the ones that have launched production in Latin America, but rather the electricity sector, as well as the search for control of natural resources, explains the specialist.

But beyond direct investment, China’s participation in the construction of infrastructure in the region has been financed with loans from the large Chinese development banks, which have only increased Latin American debt and this time with China. . In fact, in some cases, the accumulation of debt has been so rapid that it has ended in its restructuring, as the case of Ecuador shows.

“Having reached a much broader level of economic relations, we should not be surprised that China has also been able to advance its diplomatic relations with a large part of the region,” he notes.

Political trends in the region are undoubtedly being influenced by China, as confirmed by Lula da Silva’s electoral campaign and his foreign policy. In more general terms, the winds of left-wing populism are getting stronger, with a view to an alternative model of development in which the State plays a more important role.

“While China’s influence may seem unstoppable on its own, the reality is that so much USA like the European Union have made it very easy for them. Both economic blocs have not taken the importance of reaching trade and investment agreements with Latin America seriously enough, and have been losing ground in the region”, says García.

In the case of the United States, the financial crisis has left a dent in citizens’ appreciation of the benefits of international trade. In the European Unionthe lack of an agreement on Mercosur after more than 20 years of negotiations is paradigmatic of the difficulties that member countries have to make necessary concessions.

“It is easy to blame China for our loss of influence in the Latin American region, but the reality is that China has only seized the opportunity we have given it in a way, probably, little conscious but evident in the eyes of the rest of the world”, he concluded.