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Chinatown, Mexico City, Mexico, 07/12/2018 © Kamira / Shutterstock

US Can No Longer Rely on Its Historic Clout in Latin America

Instead of attempting to undermine China’s Latin America plan, the United States needs to construct one of its own.

On April 12, US Secretary of State Mike Pompeo kickstarted a week of travel to several Latin American countries, where he did not fail to warn of the dangers of a close relationship with China. This message came on the heels of strong US pressure on the Inter-American Development Bank (IDB) to move its annual general assembly from Chengdu, China, just one week before the event was scheduled to take place.

Although the Trump administration was able to sway decision-makers in this instance, China continues to make commercial and diplomatic inroads in Latin America that are quickly eroding the United States’ historical foothold in the region. Instead of attempting to undermine China’s Latin America plan, the US needs to construct one of its own.

China is aggressively seeking to deepen its commercial relationships with Latin America, courting 12 countries to join its global infrastructure investment project, commonly known as the Belt and Road Initiative (BRI). This has resulted in a yearly average of over $10 billion in annual investments in the region over the last five years. Even going back to 2005, China’s Export-Import Bank and Development Bank has lent a cumulative $150 billion to Latin American countries, exceeding amounts provided by the World Bank, IDB and the Andean Development Corporation combined.

Debt Trap

Most of Washington’s criticisms of China’s involvement in the region are based on its checkered lending record. Dubbed “debt trap diplomacy,” China’s lending practices often compound a country’s financial distress, with governments pressured into putting natural resources on the chopping block as collateral. The best known case of debt trap diplomacy in Latin America is Venezuela, which owes China some $20 billion in loans that is now being paid back in oil. Ecuador is also on the hook, now surrendering 80% percent of its oil exports to China to settle its outstanding debt of $6.5 billion.

Although most Latin American governments align closely with the US on many diplomatic issues, most notably on Venezuela, many have shown they can compartmentalize their relationship with China, especially when it comes to money.

Since the Trump administration took over in 2017, US policy toward Latin America has been disinterested at best, and hostile at worst. President Donald Trump postponed visits to the region for nearly two years before appearing at the G20 summit in Buenos Aires at the end of 2018, and his frequent and antagonizing comments regarding immigrants and trade have caused a rift in Washington’s relationship with Mexico and other Central American states.

The United States must reinvigorate its Latin America policy by first re-establishing diplomatic presence in the region. While senior diplomatic posts in regionally influential countries such as Brazil and Mexico remain unfilled, the White House chose to recall top diplomats from El Salvador, the Dominican Republic and Panama over those governments’ decisions to cut ties with Taiwan. Actions like these only serve to isolate and push these countries into a closer relationship with China.

The United States benefits from having predominantly democratic governments south of its border to build consensus on humanitarian, political and diplomatic issues that may arise across the region. There are already instances of China exporting its repressive tactics, with Ecuador employing surveillance methods against its citizens using Chinese software. It is also conceivable that Latin American countries will be swayed to vote more closely with China at the United Nations and other international forums as Beijing propels its diplomatic relationship with the region forward, further eroding US influence on a global scale. Filling senior diplomatic posts in Latin America will put the US in a stronger position to counter these maneuvers.

Nosedive or Resurge

Eager to attract foreign investment, many countries in the region have made a concerted effort to improve their business environments by simplifying tax regimes, establishing trade zones and seeking trade agreements. US companies have benefited from these arrangements, but as the opinion of the United States among the region’s citizens continues to fall, China will quickly become the main benefactor of these opportunities.

The Trump administration’s continued efforts to slash and, more recently, cut off foreign aid to Central America also makes Chinese financing much more attractive. Rather, the United States should seek to double down on its economic aid programs to rival China’s offers. Pursuing trade agreements, such as joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or negotiating a free trade agreement with Brazil, will also help cement strong relationships in the future.

With a promise to increase investment to $250 billion and trade flows to $500 billion in the next six years, China is actively seeking to increase its influence in Latin America. The United States can no longer comfortably rely on its historic clout in the region. In an era where China is becoming a major player on all global fronts, it has never been more vital for the US to have a strong relationship with the states in its own backyard. Whether or not Washington continues to nosedive or resurge will depend entirely on the Trump administration’s implementation of a strong diplomatic and economic regional strategy.

*[Young Professionals in Foreign Policy is a partner institution of Fair Observer.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.