Home Finance Why Deepening Economic Relations Between China and Latin America Threaten US Regional Hegemony

Why Deepening Economic Relations Between China and Latin America Threaten US Regional Hegemony

by internationalbanker

By Nicholas Larsen, International Banker

 

Why is China allowed to conduct imperialism in our hemisphere?” was the question posed to Donald Trump by popular political commentator Tucker Carlson during an August 2023 interview with the former United States president and likely Republican candidate for the 2024 presidential election in November. At first glance, the use of the word hemisphere seems somewhat odd, given the ludicrous notion that one nation can claim to maintain dominion over an entire half of the globe. But with 1823’s Monroe Doctrine controversially laying the foundations for such control to be exerted by the United States over Latin America in the decades to follow, Washington increasingly views China’s rapidly warming relations with Latin America as a threat to longstanding US hegemony over a region it has long considered its “backyard”.

In the early 1800s, the American government under President James Monroe warned against any interference by European colonial powers in the affairs of Latin American states and US territories. “The American continents…are henceforth not to be considered as subjects for future colonization by any European powers,” Monroe stated, seeking to establish wholly separate spheres of influence for the US and Europe, with the territories of the Western Hemisphere falling solely under America’s domain. A policy of non-interference was also established, such that the US would neither involve itself in Europe’s political affairs nor those of the European colonies still present in the Americas.

Despite the initial goal of establishing clear boundaries for both power blocs, the Monroe Doctrine was subsequently invoked to justify much of the US’ economic and military expansionism across the hemisphere, including the conquest and annexation of the northern half of Mexico between 1846 and 1848. 1904’s Roosevelt Corollary stipulated that US interventions in Latin American states were justified to ensure they repaid their debts to international creditors, as well as to prevent any violations of US rights or invite “foreign aggression to the detriment of the entire body of American nations”. After President Theodore Roosevelt declared the US’ right to “exercise international police power in ‘flagrant cases of such wrongdoing or impotence’”, the Corollary preceded numerous invasions of the region, with the likes of Cuba, Nicaragua and Haiti on the receiving end.

Fast forward to the present day, and legislation such as the Monroe Doctrine looks increasingly anachronistic within a globalised world, especially given the deep commercial inroads that major trading nations such as China have made across much of the world, including Latin America. Indeed, the last couple of decades have seen China voraciously expand its economic and diplomatic footprints across the region—from Cuba and Argentina to Brazil and Venezuela. Brazil, for example, has forged increasingly strong ties with China over the last 30 years, with Latin America’s biggest economy designated by Beijing as its first “strategic partner” back in 1993. Brazilian commodity exports, such as iron ore, soybeans and crude petroleum, supported China’s steep economic ascent during the 2000s. By 2022, its annual exports to China had reached nearly $90 billion.

With Luiz Inácio Lula da Silva (popularly known as Lula) coming to power for his second presidential term at the start of 2023, the China-Brazil relationship is set to strengthen further during the next few years. As a founding member of the powerful China-led BRICS (Brazil, Russia, India, China, South Africa) economic group, Brazil, under Lula’s leadership, has been keen to advance even closer economic and diplomatic ties with the Asian superpower, with a fruitful visit to Beijing in April yielding trade agreements worth around BRL 62.5 billion (USD 10 billion) signed by the two countries.

“China’s growing influence in Latin America is reshaping trade dynamics. Brazilian agribusiness and iron ore interests, for example, are becoming heavily reliant on China, their main market,” according to Thiago de Aragão, director of strategy at Latin American public-affairs firm Arko Advice, writing for US-based, Asia-Pacific-focused current affairs publication The Diplomat on December 20. “This trade pattern not only highlights Brazil’s dependence on the Chinese market but also illustrates China’s expanding influence in Latin America, affecting regional trade dynamics and economic policies.”

That “influence” has only accelerated in recent years, partly thanks to several countries in the region deciding to sever their formal diplomatic ties with Taiwan. Instead, they have joined the overwhelming majority of nations around the world—the United States and member states of the European Union (EU) included—that officially adhere to the One China principle, contending there is only one sovereign state under the name China, with Taiwan an inalienable part of that China, and that the mainland serves as the sole legitimate government as the People’s Republic of China (PRC). Indeed, only 12 countries in the world now maintain formal diplomatic relations with Taipei City, accounting for just 0.17 percent of the global economy and less than 0.5 percent of the world’s population.

Among the most recent nations to make the switch was Honduras, which, in March 2023, signed a joint communiqué with Beijing to confirm that “Taiwan is an inalienable part of Chinese territory” and, in doing so, commenced official relations with China. By June, Honduras had opened its embassy in Beijing before both nations began negotiations for a free-trade agreement (FTA) just a few weeks later. And although discussions remain ongoing, data published in December by China’s General Administration of Customs (GACC) showed that bilateral trade between the two countries had grown rapidly since March’s rapprochement, surpassing $1.57 billion during the January-October period, a considerable 17.9-percent  year-on-year hike.

Such a trend for the wider region looks set to continue over the coming years, with China having recently surpassed the US as South America’s biggest trading partner. Whether it’s the development of effective COVID-19 vaccines in close cooperation with Cuba, investing in lithium-production projects in Chile or providing billions in financial support for the region’s largest solar farm in Argentina, China’s economic influence across Central America and South America will only expand further as its own economy—which grew at a stellar 5.2 percent last year—continues humming along.

While such developments are sure to please Beijing, they represent yet another source of consternation for Washington, with US policymakers now increasingly citing the Monroe Doctrine as justification for a more visible American presence in Latin America. “Republican presidential candidate Vivek Ramaswamy is calling for the doctrine’s reinvigoration to take aim at China’s growing presence in Latin America and are offering it as a justification for a potential US military attack on criminal organizations in Mexico,” University of Warwick associate professor Tom Long and University of Cambridge assistant professor in international relations Dr. Carsten-Andreas Schulz jointly wrote in a December 16 piece for Foreign Policy magazine. “They are following the lead of former US President Donald Trump, who hailed Monroe on the floor of the United Nations General Assembly, as well as advisors such as John Bolton and former Secretary of State Rex Tillerson.”

Ultimately, the most profound implications of China’s successful advances may be ideological, especially with the likes of Nicaragua, Cuba and Venezuela all operating under strong socialist ideologies and thus the recipients of painful economic sanctions imposed by the US. But with China following a development model that it frequently calls “socialism with Chinese characteristics”, its establishment of close bilateral ties with fellow left-wing governments could go a long way towards undermining the effectiveness of Washington’s regime of punitive economic measures. Indeed, China announced in September that its diplomatic status vis-à-vis Venezuela had been upgraded to an “all-weather” partnership—a title few of Beijing’s trusted partners can claim to hold. The subsequent bumps in trade and economic cooperation that are widely expected to emerge from this development could do much to blunt US efforts to isolate Caracas economically.

It must be noted, of course, that the tides of diplomacy can shift at any time, as Argentina’s recent lurch to the right perhaps most clearly exemplifies. With Javier Gerardo Milei voted in as president by the electorate in November—and with the neoliberal firebrand making unequivocally clear his preference for closer relations with Washington, his distaste for ties with China and his desire for his country to exit BRICS—Buenos Aires’s ties with Beijing look set to become increasingly strained. For its part, China has responded by suspending its $6.5-billion currency-swap agreement with Argentina.

Of the mere 12 nations maintaining ties with Taiwan, four are located in Latin America—Guatemala, Belize, Haiti and Paraguay—and three are in the Caribbean, suggesting that China may not have its way entirely in the region for some time yet. Nonetheless, this potential opposition represents little more than a speedbump on China’s journey towards complete dominance as Latin America’s preferred economic partner.

How the US responds to this trend will prove profound in its relations with China and Latin American states. “Managing the relationship between the United States and China is the diplomatic challenge of the century,” noted the federal United States Institute of Peace in August. “In the case of Latin America, how this challenge is resolved could be the difference between a fragile region conducive to conflict, divided by ideology and polarization, and an economically developed and socially prosperous hemisphere in peace.”

 

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