The US Is Losing Power and Influence Even In Its Own Back Yard

Politically, economically and geopolitically, the sands are shifting in Latin America — and not in Washington’s favor!

If you’re trying to win the hearts of minds of millions of people living in countries neighboring your own, many of which your government has not exactly treated well over the decades, it’s probably not a good idea to call them corrupt. Yet that is exactly what the head of US Southern Command, Admiral Craig Faller, did last week. In an interview with Politico on Friday, he accused China of taking advantage of widespread corruption in Latin America to further its own interests (not that this is something the US would ever do or has ever done):

PRC state-owned and private businesses often exploit pervasive corruption in the region to undermine fair contracting practices and circumvent environmental compliance. A common tactic they use is to provide lucrative pay offs to local officials in exchange for favorable deals.

To be sure, there are legitimate aspects of these activities that provide needed investment to a region still recovering from the impact of Covid-19. It’s incumbent on all of us to forge a way ahead that recognizes the important role [China] can play as part of a rules-based international order.

But here is the friction: The PRC does not seek fair competition based on rules. It seeks to create dependencies, not trusted partnerships. Through its deepening economic ties and coercive influence, Beijing is vying for key support from regional partners on U.N. votes and backing for Chinese appointees to multinational institutions. Ultimately, Beijing wants to create a global system in which authoritarian regimes are viewed as legitimate forms of governance. A system where the rule of law, human rights and free speech are stifled. A system where international norms are manipulated for its own benefit, and it’s happening now.

Obviously, the rules-based system of which Faller speaks is the current one in which the US remains top dog and gets to dictate the rules. By gaining more influence within that system by ramping up its public diplomacy — and in return gaining “key support from regional partners” — the Chinese are breaking not only rules but the spirit of the game, especially if they are paying off local officials in exchange for favorable deals (something the US would never dream of doing).

While Faller may bemoan Beijing’s predilection for authoritarian regimes, the reality is that no country has done more to undermine and ultimately topple democratically elected sovereign governments in Latin America (and elsewhere) than the US. In the past 12 years alone Washington has supported two successful military coups in the region, one in Honduras in 2009, the other in Bolivia in 2019.

Unlike the US, China generally does not try to dictate how its trading partners should behave and what sorts of rules, norms, principles and ideology they should adhere to. What China does — or at least has by and large done over the past few decades until now — is to trade with and invest in countries that have goods — particularly commodities — it covets, including, it now seems, Taliban-controlled Afghanistan.

In Latin America and the Caribbean it has worked a treat. China’s rise in the region coincided almost perfectly with the Global War on Terror. As Washington shifted its attention and resources away from its immediate neighborhood to the Middle East, where it frittered away trillions of dollars spreading mayhem and death and breeding new terrorists, China began snapping up Latin American resources. Governments across the region, from Brazil to Venezuela, to Ecuador and Argentina, took a leftward turn and began working together across various fora. The commodity supercycle was born.

China’s trade with the region grew 26-fold between 2000 and 2020, from $12 billion to $315 billion, and is expected to more than double by 2035, to more than $700 billion. In the last 20 years China has moved from an almost negligible position as a source of imports and destination of exports within the region to become its second trade partner, at the expense not just of the US but also Europe and certain Latin American countries such as Brazil whose share of inter-regional trade has fallen. According to the World Economic Forum, “China will approach—and could even surpass—the US as LAC’s top trading partner. In 2000, Chinese participation accounted for less than 2% of LAC’s total trade. In 2035, it could reach 25%.”

A Case in Point: Peru

When Pedro Castillo was finally named president of Peru after almost two months of delaying tactics by his opponent Keiko Fujimori, one of his government’s first acts was to arrange a sit down with the Chinese ambassador and executives of two of China’s largest mining firms, both with multi-billion dollar interests in Peru. Among the topics under discussion was the option of strengthening Peru’s free trade agreement with the East Asian superpower.

“At present, technical teams of Peru and China are working, through virtual means, on the optimization of the FTA between both countries,” said Roberto Sánchez, Peru’s Minister of Trade and Tourism, adding: “Bilateral relations with China are extremely important”.

China is already Peru’s biggest trading partner and has been since 2014. Around 30% of the Andean country’s exports go to the Asian giant. And that number is growing fast: the volume of Peru’s exports to China increased by 38% year on year between January and March.

Chinese companies have poured just over $10 billion into Peru’s mining sector, according to government data. Peru’s new government has talked about raising taxes on the biggest mining companies, including Chinalco and Shougang Hierro Perú. That has not gone down well in Beijing. Hong Kong-based COSCO Shipping Ports Ltd is also building a huge port in Chancay, just north of the capital Lima, with a total investment of $3 billion. There are also ambitious plans for a transcontinental railway linking South America’s Atlantic and Pacific coasts from Brazil to Chile.

Peru is the second largest recipient of Chinese investment in South America, accounting for 21% of the total dispensed over the past 14 years. The only country to have received more is Brazil, accounting for 47% of all the money invested by the Chinese government and companies in the region. That works out at a total of $66 billion, just under half of which went toward financing energy projects.

Reaping the Dividends of Vaccine Diplomacy

A couple of days after his meeting with the Chinese ambassador and mining executives, Peru’s President Pedro Castillo received the first of two doses of China’s Sinopharm vaccine. He called on the Peruvian people to do the same as the country’s public health authorities prepare to ramp up their inoculation program.

It is an example of how China is reaping the dividends of its vaccine diplomacy, including in Washington’s own backyard…

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