From Chilean copper to Argentinian soybeans to Brazilian iron ore, China continues to vacuum up Latin America’s natural resources. China was already South America’s top trading partner before the COVID-19 pandemic. China’s early recovery is helping Latin America recuperate from the coronavirus’ devastating economic blow. Chinese political and economic influence in the region has never been broader; its status has never been higher.
Yet China’s status in Latin America is precarious. If the Biden administration cares enough to make the region a priority, the United States could once again play a leading role in the region’s development.
Why? Because for the first time in 15 years, Chinese development banks last year made no new loans in Latin America. That decision leaves a massive void at the worst possible moment. The pandemic has hit Latin America especially hard. According to the United Nations, economic activity in Latin America will not return to pre-pandemic levels until the end of 2023. To recover faster, the region needs a flood of foreign investment in roads, railways, ports and other infrastructure that would improve productivity and competitiveness.
Until 2016, China had been pouring money into the region, lending a staggering $36 billion in 2010 alone. Even after China began tapering its lending, Latin American governments expected that financing to continue indefinitely. Beijing, in 2017, included the region as “a natural extension” of the Belt and Road Initiative.
That has stopped. For the United States, this not only is an opportunity to compete with China for influence in a strategic battleground — higher lending in Latin America could also help rebuild the U.S. image in there after four years of neglect. Polls indicate that the U.S. image among Latin Americans is already rebounding; investing in the region’s economic recovery would signal a commitment to Latin America and complement the Biden administration’s plans to address democratic backsliding and fight corruption.
In ramping up investment in Latin America, the United States could also demonstrate the shortcomings of Chinese engagement. Though its investments are sought after in Latin America, China has long ignored environmental and labor safeguards in industries ranging from mining to hydroelectric power generation. The Chinese-built Coca Codo Sinclair dam, for example, destroyed acres of forest in Ecuador, led to the deaths of 100 workers and displaced more than 1 million people, many of them indigenous.
Beijing insists it simply follows the environmental policies of host countries, citing its policy of “non-interference.” But in a region with weak governance and inadequate — or unenforceable — standards, China is clearing a low bar. By contrast, the U.S. International Development Finance Corporation, the government agency that funds private projects in developing countries, is congressionally mandated to use “best practices with respect to transparency and environmental and social safeguards.”
U.S. lending would not prop up corrupt human-rights abusers, either. From 2007 to 2017, as Venezuela’s democracy shattered and its economy imploded, its regime received more than $60 billion from China. Rather than reward tyrants, U.S. loans could bolster leaders who defend human rights and democracy, and who use international financing to invest in education and healthcare rather than line their pockets.
China is not abandoning Latin America; the region is too important as a source of natural resources and a market for Chinese manufacturers. But the absence of new Chinese state-to-state loans should catalyze the United States to redouble its support for regional development. The United States can lend money and show that it stands by democratic aspirations and values at the same time — and win applause for doing so.