It was one of those photos that says so much—how Washington’s diplomatic and economic presence has declined in Latin America, a region that the United States has long considered to be its unique zone of influence. In the group shot for November’s Asia-Pacific Economic Cooperation (APEC) summit in Lima, Peru, Chinese President Xi Jinping stood in the front row next to the host president, Dina Boluarte of Peru. Xi was beaming while in the back row, U.S. President Joe Biden cut a distant figure.
Xi had reason to beam. The summit was the unofficial ribbon cutting of a $3.6 billion Chinese-backed mega port in Chancay that will transport Peruvian and many other South American exports to Asia’s hungry markets. The massive infrastructure project marked not only a new stage in China’s decadeslong attempt to win over the Western Hemisphere, but also came at a moment when the United States has failed to match diplomatic and economic rhetoric with action and investment.
Since coming to power in 2013, the Chinese president has visited Latin America six different times across 11 countries. That’s more than the last three U.S. presidents combined made over the same period.
Beyond the visits, though, China has brought real resources to address development opportunities that have long been lacking in the region—and that the United States has failed to recognize for decades.
This is not about China and the United States’ geopolitical contest over Latin America. It is about the political and civil rights of Latin America’s citizens and their economic futures. And if the United States and President-elect Donald Trump want in on that, then the saber-rattling and threats of Trump’s first term won’t cut it. They may even have the opposite effect.
China, on the other hand, has been playing a long game.
When he was appointed the general secretary of the Chinese Communist Party in 2012, Xi was clear that his vision for China was to become a leader of the global south. His Belt and Road Initiative, launched in 2013, and the Global Development Initiative, which Xi announced at the U.N. General Assembly in September 2021, were crafted to project Chinese influence in the developing world. Latin America became one of the main theaters for Beijing’s economic statecraft.
China’s interests in Latin America are primarily driven by its demand for natural resources, yet Beijing has also expanded commercial opportunities in Latin America for Chinese advanced manufacturing exports. China also treats Latin Americans as end-customers for its technological advances, from electric vehicles to digital infrastructure connectivity.
The country’s economic success has been partly built on investing in infrastructure through public finance and state loans. The old Chinese _expression_ about “getting richer by building roads” has driven its foreign development policy, too, with Beijing committed to and promoting the type of infrastructure investments that drove its own economic miracle for Latin America and the global south.
Similarly, poverty alleviation is one of the core policy priorities for Xi domestically, and Beijing has equally extended its focus on poverty alleviation in Latin American countries through efforts to reduce their infrastructural deficits.
For example, the Chancay port will not just help Peru and Chile export copper to Asia—and China, principally. With plans in place to build a rail link to the east, the port will also serve as a major export point for Brazilian agricultural products, metals, and minerals. Peru is also developing a plan to turn the town of Chancay into a major hub to transport visitors to the country’s famous tourist sites, with an airport offering flights to Cuzco, Arequipa, and other locales.
Meanwhile, when Biden visited Peru for the APEC summit, he came bringing a gift of nine Black Hawk helicopters to assist with Peru’s efforts to combat narcotics trafficking. This is important for addressing Peru’s rising crime rates and illicit markets, sure, but still far from a game-changing megaport investment.
Beyond China’s domestic success in reducing poverty, Beijing’s offer of investment in infrastructure as parts of its economic statecraft is filling a long-standing vacuum and responding to people’s declining faith in their democracies to “deliver the goods.”
Latin America experienced a wave of democratization in the 1970s, 1980s, and 1990s. Most countries in the region remain broadly committed to those ideals of political and civil rights as well as accountable government through free and fair elections. According to surveys conducted in 2023 by Vanderbilt University’s Latin America Public Opinion Project(LAPOP), only 59 percent of citizens polled in 23 countries across Latin America and the Caribbean believe that democracy is the best form of government.
But as popular discontent rises concerning democracies’ abilities to address social exclusion and improve on the delivery of public goods such as education and health care, support for democracy has dropped. Also in the 2023 LAPOP survey, only 41 percent of the respondents said they were satisfied with democracy, down from 57 percent 11 years earlier.
With increasing doubts about democracy has come the election of outsider populist autocratic governments of both the left and right, in Argentina, Bolivia, Brazil, Ecuador, Peru, Honduras, and Mexico. While many do not share a political agenda and some have cycled out of power in the anti-incumbent wave that swept the region post-2020, this new crop of politicians has tapped into a growing sense that Latin America’s economic stagnation requires drastic reforms and new partners. There is also a declining popular commitment to human rights and the checks and balances of democracy relative to prosperity and growth. The 2023 LAPOP survey revealed only 35 percent of citizens had confidence in their high courts and just 30 percent felt the same way about their national legislatures.
China’s offer to build large investments and address long-ignored developmental deficits stands in contrast to high-minded rhetoric from the U.S.-led West about democracy, human rights, and accountability.
For a while, investment by development banks and bilateral donors in infrastructure became passé as an engine of development in the West. There were too many examples of white elephants and stories of massive corruption in the sector. Plus, trends shifted development assistance and finance toward support for neoliberal economic and market-based reforms, anti-narcotics efforts and crop replacement, small-scale farmers, judicial reform, civil society, or the formalization of the informal sector—all important, but Christmas tree-like ornaments, far from the core issues of large-scale economic development.
To give some numbers, according to the World Bank, only 14 percent of the roads in Peru were paved as of 2012—which, given the centralization of Peruvian institutions and its capital on the western coast, means that vast stretches of the population in the interior of the country will struggle to deliver goods to market and create economies of scale.
In fact, across eight countries in South America—including Argentina and Brazil—the average number of paved roads in 2012 was only 22 percent. Compare this to the countries of the Association of Southeast Asian Nations, plus China, Japan, and South Korea, which have 55 percent of their roads under asphalt.
In 1996, economics researcher Charles Hulton argued that a full quarter of the growth differential between Latin America and Asia could be attributed to infrastructure and, in turn, public and multilateral investment in infrastructure. According to a 2017 World Bank report, while East Asian and Pacific countries invested on average 15 percent of GDP on infrastructure between 2010 and 2016, in Latin America and the Caribbean over the same period the average was a paltry 3.9 percent of GDP..
Meanwhile, the Inter-American Development Bank’s offerings for investment in infrastructure pale in comparison to that of its competitor in Asia. In 2008, the Inter-American Development Bank (IDB) planned to allocate $12 billion for infrastructure projects in the region by 2010.
In its bilateral assistance to the region, the United States fares little better. The 2018 BUILD Act and Biden’s post-COVID “Build Back Better World” global infrastructure initiative rely on U.S. guarantees and loans to encourage public-private partnerships (PPPs) with a focus on infrastructure.
But in 2021, the World Bank reported that Latin American countries had secured only a little more than $18.6 billion across 56 projects from private investors. That included $15.7 billion that Brazil received in private investment commitments across 36 projects—84 percent of the region’s PPPs for that year—whereas Mexico only received $1.1 billion in PPP investment commitments across six projects.
China has certainly plugged a hole when it comes to these development deficits, but changes are underway in the Chinese economy that may curb its generosity. In the past two decades, China has poured approximately $634 billion into building physical infrastructure worldwide and $419 billion in nonfinancial investments across the developing world. For most governments in Latin America, tapping into Chinese development finance, access to its market, and the arrival of its tourists was seen as a net gain for their economies, and from Honduras to Panama, the subsequent dismantling of diplomatic recognition of Taiwan—a de facto bulwark of U.S. interests—affirmed a shift in sympathies.
Beijing’s spending spree will likely soon come to an end, however, as it grapples with its own economic woes. This presents China with a dilemma: Can it tighten its belt while also maintaining close relations with developing countries?
The ultimate test of Beijing’s economic statecraft is whether it can engage with Latin America and large parts of global south beyond relationships built on financial resources and diplomatic capital. Showering cash on these places is not always guaranteed to win hearts and minds. China must show that it understands what such economies really want—and such wants may change from time to time.
From 2017 to early 2021, the first Trump administration advocated for a return to the Monroe Doctrine as a response to China’s growing influence. In addition to being offensive to many Latin Americans, the administration’s strategy failed to offer anything else to woo governments out of a position of strategic neutrality between the United States and China.
What should be undertaken today is a coordinated effort to work with regional multilateral development banks in region (IDB as well as the Development Bank of Latin America, CAF) to restructure their loan portfolios to prioritize large-scale, cross-border infrastructure projects. Doing so will help fill the shortfall left by China’s likely decline in overseas infrastructure investment, and with it, the progress in trade and socioeconomic development in Latin America.
Expanding the infrastructure offerings by Western multilateral banks will also balance China’s disproportionate role in the sector. Some of this is already underway in the CAF, but the same should occur with U.S. support in the IDB. Other Western countries should also rally their resources and diplomatic leverage to invest as well.
And last, as counterintuitive as this may sound, with China’s investment in infrastructure likely to decline, regional and global development banks—along with the private sector—should look to collaborate with China in these areas and take lessons from Beijing’s experience in developing major infrastructure projects.
The issue of Latin America’s lack of intra- and inter-country infrastructure extends beyond Beijing and the Washington’s geopolitical contest. Improving the region’s woeful infrastructure will not just reduce poverty and inequality in the Western Hemisphere—it can also provide an opportunity for positive collaboration between the West and China, and give the West greater leverage over these investments.
In the case of the new port in Chancay, the Chinese company COSCO Shipping negotiated sole management over the port. This outcome could possibly have been different if there were other partners with real leverage.